MAS releases fourth GFIT taxonomy consultation paper: Coal phase-out criteria under Singapore-Asia Taxonomy

19 July 2023

On 28 June 2023, the Monetary Authority of Singapore (“MAS”) launched a public consultation on the detailed thresholds and criteria for financing the early phase-out of coal-fired power plants (“CFPPs”) under the Singapore-Asia Taxonomy. The consultation closes on 28 July 2023.

The Singapore-Asia Taxonomy was developed by the Green Finance Industry Taskforce (“GFIT”). GFIT has carried out three phases of taxonomy consultations, and this will be the fourth and final consultation. The Singapore-Asia Taxonomy will be finalised and launched for use after this.

The inclusion of managed coal phase-out under the Singapore-Asia Taxonomy aims to provide a credible standard to increase participation in projects for the early retirement of CFPPs that are aligned with a 1.5°C transition pathway. MAS explains that the early phase-out of CFPPs is critical to the energy transition of the Asia Pacific region, where coal accounts for nearly 60% of power generation and about a third of greenhouse gas emissions, and where CFPPs have relatively long remaining lifespans.

Proposed early coal phase-out criteria

The Singapore-Asia Taxonomy sets Technical Screening Criteria that apply to the CFPP facility (“facility level”) as well as to the CFPP owner (“entity level”). MAS states that the managed phase-out process can be considered aligned with the Singapore-Asia Taxonomy if all the facility and entity level criteria are met.

The Technical Screening Criteria are aligned to global science-based 1.5°C aligned decarbonisation pathways, and takes into consideration other guidance including the ASEAN Taxonomy and the “The Managed Phaseout of High-Emitting Assets” report by the Glasgow Financial Alliance for Net Zero.

Key criteria at facility level 

Under the Technical Screening Criteria, key facility-level criteria for CFPPs include the following:

  • The financial close or final investment decision of the CFPP has been made prior to December 2021.
  • The fair value of the CFPP is positive at the time of the proposed coal transition.
  • The early coal phase-out results in positive absolute emissions savings over the expected total lifetime of the CFPP compared with a case without it. These savings should be independently verified or acknowledged by internationally recognised bodies or programmes.
  • The phase-out of unabated coal combustion at the CFPP is aligned with, or happens earlier than 1.5°C aligned coal phase-out deadlines. In advanced economies, this means the CFPP retires at the latest by 2030, and in other countries by 2040, in line with the International Energy Agency’s Net Zero pathway. For countries that have an earlier national coal phase-out target, that national target should be adhered to instead.
  • Operation duration of the CFPP from the commercial operation date is capped at 25 years.
  • Investments made as part of the early coal phase-out process do not extend the expected lifetime for coal combustion.
  • The CFPP’s generation is replaced one-for-one with a portfolio of clean resources that provides equivalent electricity services within the electricity system, subject to further requirements on clean resources and replacement.
  • The CFPP, at a facility level as a minimum, has a “just transition plan” to mitigate impacts on key stakeholders including workers, electricity customers, and the local community. The “just transition plan” should be designed in line with global best practices devised by internationally recognised bodies, based on the principles outlined in the Paris Agreement and by the International Labour Organisation’s Guidelines, in addition to local laws and regulations. There are also requirements for facility owners in relation to (a) advance notice of the CFPP’s closure, (b) stakeholder consultations and dialogues, (c) environmental and social impact assessments of the CFPP’s closure on its workers, direct supply chain workers, communities, and ecosystem, (d) reporting on and developing plans to minimise adverse impact on communities, (e) developing a worker transition plan that would support relief and reskilling opportunities to affected workers, (f) energy affordability and accessibility aspects of the early coal phase-out, and (g) remediation and reclamation.

Key criteria at entity and system level

A summary of the proposed key criteria at the entity and power system level are as follows:

  • Entity-level criteria: The CFPP owner has an entity-level commitment to no new coal power plant development or procurement globally, beyond their plants that have reached financial close or final investment decision by December 2021. The entity also must have a transition plan which has to reach full alignment to 1.5°C by 2030.
  • Power system-level criteria: If the CFPP is not retired and replaced with a portfolio of clean resources that provides equivalent electricity services, long-term emissions savings should be demonstrated through 1.5°C aligned, science-based power-sector-level decarbonisation commitments and plans at a national or sub-national level, with a boundary entailing the entire power system in which the entity operates.

Key questions on which feedback is sought

In relation to the proposals in the consultation paper, GFIT is seeking feedback on the following issues:

  • Whether any additional issues need to be covered by the criteria.
  • Usability challenges and potential issues with operationalisation of the criteria.
  • Whether there are any loopholes that might lead to perverse outcomes.
  • Whether there is room to increase the level of ambition with regard to any of the criteria.
  • Whether any of the provisions require further guidance, and the type of guidance required.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg and ABS website www.abs.org.sg: