SPEECH BY MR S ISWARAN, SENIOR MINISTER OF STATE FOR TRADE AND INDUSTRY, AT THE OPENING CEREMONY OF CARBON ASIA FORUM (CFA) 2008 ON 12 NOVEMBER 2008, AT 9.45 AM, SUNTEC INTERNATIONAL CONVENTION AND EXHIBITION CENTRE

Mr Henry Derwent

President and CEO

International Emissions Trading Association (IETA)

Mr Edwin Khew

Chairman of the Sustainable Energy Association of Singapore (SEAS)

Distinguished guests

Ladies and Gentlemen

I am delighted to be here this morning to open Carbon Forum Asia 2008. This Forum continues to grow from strength to strength. It is the leading trade fair and conference on carbon markets in the Asia-Pacific region and continues to attract excellent participation. Coming after the recent successful completion of Singapore’s inaugural International Energy Week, this Forum provides a good platform for participants to understand with greater depth and nuance, issues pertaining to carbon markets and financing, Clean Development Mechanism (CDM) projects, technology, and regulatory developments in the Asia-Pacific region.

The Global Challenge of Climate Change

Climate change is one of the biggest global challenges we face this millennium. The UN Inter-governmental Panel on Climate Change (IPCC) has assessed that global warming is “unequivocal”, and that it will have a far-reaching impact on sea levels, weather-related disasters, biodiversity, agriculture and water resources, and on our lifestyles and those of our children. It is, therefore, in our profound collective interest that we work towards a solution to sustain the world we live in.

Countries that are parties to the UN Framework Convention on Climate Change (UNFCCC) are now engaged in complex negotiations to develop a global architecture that will foster long-term cooperative action on climate change. After Bali last year, the next Conference of Parties (COP) meeting in Poznan next month will set the stage for even tougher negotiations next year in the run up to Copenhagen at the end of 2009.

Against this backdrop, a new element has come to the fore with the world now facing a global economic slowdown.Governments will have to deal with compelling domestic imperatives and this may adversely affect the process and progress of climate change negotiations.But CO2 emissions that cause the greenhouse effect are a “global commons” problem with serious cumulative consequences if left unabated.It calls for an urgent and collective solution, with all parties playing commensurate roles, even in this period of global slowdown.

Role of Emissions Trading in Addressing Climate Change

Given the magnitude of the task ahead, there is scope for both developed and developing countries, and the private and public sectors to collaborate to tackle CO2 emissions. But, even as we build carbon markets, let us not lose sight of the imperatives that underpin emissions trading.

First, the purpose of emissions trading must be to drive emissions reductions in order to address climate change, and to optimize the allocation of carbon across sectors and countries.

Second, the price discovery mechanism is equally important as it helps governments and industry factor in the cost of the carbon externality in decision-making. We may not converge on a global carbon price any time soon but we are off to a good start as governments review climate change legislation and study how to internalize such externalities.

Third, this has been a useful means for developed countries to supplement their domestic mitigation actions and achieve their Kyoto Protocol targets. The prospect of carbon revenue streams will also motivate industries in developing countries to adopt less carbon-intensive processes. It is encouraging that the international carbon market has grown impressively in the last few years. It was worth some €38 billion in the first half of 2008, an increase of more than 150 per cent [actual figure is 161%] compared to the same period in 2007.

[Reference: The international carbon market is worth €40 billion for the full year 2007.]

The growth of the carbon market in the Asia Pacific has also been significant.There are plans to launch new regional carbon products and exchanges in China, India, Japan, Singapore, Hong Kong and Australia. Private sector financing through the carbon market is critical to mobilise the large sums required for climate change mitigation and adaptation. However, a challenging environment lies ahead of us. The current financial turmoil has resulted in tightening credit around the world.There are mixed views about the prospects for the UNFCCC meetings at Poznan and Copenhagen.However, I am sanguine that renewed political will and realization of the gravity of the challenge, especially in the major economies, will take us closer to a global deal.

The Carbon Market in Asia

Closer to home, Asia is poised to be the largest supplier of Certified Emissions Reductions (CERs) to the global carbon market. According to the UNFCCC, more than 65% of registered CDM projects originated from the Asia-Pacific region as of November 2008. While China and India remain the world’s largest suppliers of CERs, the rest of Asia also has immense potential to explore CDM projects. Many Southeast Asian projects are in the pipeline, but on a relatively smaller scale. These include biofuel and biogas ventures in Malaysia and Indonesia, hydro-electric projects in Vietnam, and wastewater projects from Cambodia. These projects will yield large amounts of CER trades and potential CO2 savings from Asia.

It is imperative that Asia succeed in this endeavour.Current models predict that Asia will contribute up to 45% of the total worldwide emissions by 2050, whilst that from OECD countries will drop to half of Asia’s. The focus in the coming years will be on Asia, where efforts to reduce greenhouse gas emissions will play a pivotal role.

Singapore as Regional Carbon Services Hub

Within Asia, Indonesia, Malaysia, China and India will be key originators of CDM projects. Singapore is well-placed geographically to serve as a bridge to bring these projects to fruition. Singapore is committed to growing our carbon services cluster, and to serve as a regional carbon price discovery centre and trading hub. Our established legal, regulatory and financial institutions, business-friendly environment, and modern infrastructure and communications, are conducive to this endeavour.To encourage offshore trade, companies under the International Enterprise Singapore’s Global Trader Programme involved in emissions trading have been eligible for concessionary tax rates since last year. There are plans to set up the Singapore Mercantile Exchange to trade derivatives in commodities, including futures contract in energy and carbon credits, deepening the commodity trading and risk management infrastructure here.

Through international events like Carbon Forum Asia and the recently concluded Singapore Energy Conference, we aim to attract a vibrant cluster of companies and organisations across the carbon value chain, including project consultants and developers, financial and legal service providers, R&D and educational institutions, traders and fund managers.

Growing the carbon services sector will also help Singapore-based companies undertake emission reduction projects. Currently, Singapore has four CDM projects awaiting UN approval, with carbon credits potentially worth S$235 million. Several more are in the pipeline. To facilitate more firms developing CDM projects, the National Environment Agency recently launched a S$500,000 documentation grant to co-fund the development of Project Design Documents (PDDs).

Conclusion

The carbon market in Asia is still in its infancy and future development will rest on the efforts of industry players like those of you here today. I am very pleased that IETA and Koelnmesse have continued to partner SEAS in Singapore to host this annual conference for the second time. I hope that we can forge a long-term partnership.

On this note, I wish you all a successful conference and fruitful discussions ahead. Thank you.