The Australia-Singapore Green Economy Agreement (GEA) could serve as a global model by addressing critical transition challenges.
- Australia and Singapore have signed a bilateral agreement called The Green Economy Agreement (GEA), which builds on prior accords between the two.
- The agreement aims to combine efforts to accelerate the transition to net zero by both countries.
- Hailed by the two countries as “first of its kind”, the agreement could expand to include other countries in Asia that are facing transition challenges.
Australia and Singapore have signed an agreement to jointly tackle their respective transitions to net zero. The GEA is an extension of their existing comprehensive strategic partnership (CSP) on several fronts, including trade, defence, and people movement.
Developing transition finance solutions would appear to address multiple areas of cooperation that are part of the GEA. The economies of both countries are dominated by hard-to-abate sectors, which are prime targets for transition to net zero. The success of the GEA could also demonstrate the power of cooperation in solving global climate change problems.
The GEA is the sixth pillar in the Australia-Singapore CSP
By joining forces to tackle climate change Australia and Singapore are extending their existing relationship. The GEA is viewed by both as an extension of the Comprehensive Strategic Partnership (CSP) and identifies five pillars, or areas of cooperation. These included deepened trade, defence, people movement, science and innovation and the digital economy.
The Singpaore -Australia free trade agreement (SAFTA) signed in 2003 has liberalised trade between the two countries. The follow-up CSP was signed in 2016, and deepened their relationship on trade, defence, people movement, science and innovation and the digital economy.
A GEA Action Team (GAT) will be formed to implement joint initiatives. This will consist of trade ministry personnel from both nations, and will be co-chaired by senior officials on both sides. Several areas of cooperation have also been prioritised, many of which go beyond bilateral issues or problems.
Joint areas of cooperation could address global net zero challenges
Many of the priorities the bilateral GEA aims to address are global in nature. Of these the adoption of standards, establishing carbon markets, developing clean energy and decarbonisation technologies, and mobilising green finance stand out as being salient. They are also challenges being faced by countries globally, in executing their own net zero strategies.
The GEA encourages the use of international sustainability standards where possible. It also calls for recognising standards developed by each of the two countries, where global standards fall short. Facilitating trade by reducing barriers, however, appears to the main goal here.
On carbon markets the GEA seeks to align with Article 6 of the Paris agreement. This is particularly relevant since the Australian government has sought to ban the use of international credits by its heavy polluting industry. On the other hand, Singapore has already signed agreements with Gold Standard and Verra to allow domestic companies the use of international carbon credits in their decarbonisation plans.
Developing transition finance modalities would appear to address the other two important priority areas in the GEA.
Transition finance is the need of the hour in Asia
Transition finance is increasingly being seen as vital to help high emitting sectors align with the Paris agreement goals. This is particularly relevant to the economies of Singapore and Australia, which are dominated by hard-to-abate sectors.
The Monetary Authority of Singapore (MAS) has highlighted the need for transition finance in helping achieve global net zero targets, especially in Asia. The GEA calls for exploring cross-border financial alternatives to green and transition finance.
Central banks can play a pivotal role in this regard. As the supervisor of banks and financial institutions, they could also set guidelines for transferred assets, which are key risk factor in achieving decarbonisation in hard-to-abate sectors, like oil and gas.
Solving the world’s problem needs more cooperation
Developing solutions to global problems like climate change will require global cooperation. Bilateral and multilateral agreements between countries, and within trading blocs, may provide the best chance at doing so. Fostering economic and social growth, while achieving transition to net zero is both the challenge and the reward for successful partnerships.
Investing in energy transition is of the utmost need in the developing world. A survey of large asset owners and managers found that more can be done to accelerate global decarbonisation plans. Research from Standard Chartered also showed that financing emerging markets’ transition to net zero by developed markets appears to be the most efficient option available.
