China: the new green giant
After the signing of the Kyoto Protocol in 1997, committing governments around the world to reducing their emissions, said Professor Chau, China took the view that the green economy was here to stay, and that the country needed to act fast to stay ahead of it. As a result, it moved very aggressively in clean energy – the energy sector accounts for about 20% of global greenhouse gas emissions – building highly efficient power plants in a variety of renewable sectors and developing the technology to transmit energy over long distances. That allows it to supply other countries – Vietnam, for example, imports 2bn kWh of power from China a year – providing China with opportunities to maintain friendly environment with surrounding countries by supplying them electricity and/or green energy. With the ample supply in clean energy, it could also be an effective way to go against de-coupling, such as preventing certain productions moving to countries like India and Vietnam.
This is an explicit part of China’s national strategy, added Professor Chau: President Xi Jinping stated at a 2018 Apec meeting that green energy was a priority for the future, for instance, while the nation announced in 2021 that it would stop financing new coal-fired power plants overseas. That being the case, every company that wants to flourish in this part of the world needs to ingrain sustainability into its strategy.
The Lion City’s tax bombshell
Small, green, streamlined Singapore might have an entirely different set of circumstances, but its government is equally keen on carbon taxes, having introduced one in 2019. It currently stands at $5 per metric ton, rising to $25 in 2024, $45 in 2026 – and either $50 or $80 in 2028. So if a company produces five million metric tons of carbon dioxide, it pays $25 million now (2023), potentially rising to anything up to $400 million within five years. As a result, a global energy giant has had to sell its refinery operation in Singapore, which was facing a potential tax bill of US$1 billion – in other words, it’s been carbon-taxed out of existence.
Usually countries want to attract big companies to contribute to their economies, so why would Singapore want to reduce its business attractiveness to MNCs. The answer, said Professor Chau, is that carbon taxes are effectively global rather than local. The European Union’s Carbon Border Adjustment Mechanism, for example, means that taxes are payable for the carbon embedded in goods imported into the region, which companies need to report, with mitigation for those that can prove carbon taxes have already been paid on those goods elsewhere.