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Carbon Tax News: Updates from Singapore, EU, and Malaysia

Last Friday, Singaporean Finance Minister Lawrence Wong announced in his budget speech that the island nation’s carbon tax rate will be increased as part of Singapore’s efforts to reach net-zero emissions by or around 2050. At the moment, the current tax of S$5 per tonne of emissions will continue to be in force until 2023, and will be increased incrementally before reaching a rate of somewhere between S$50–80 per tonne by 2030. This was higher than initial expectations of a carbon tax increase to anywhere between S$10 and S$15 per tonne, with one expert, PwC’s Chris Woo, remarking “if we don’t tax that supply chain, another country will.”

Over at the EU, carbon prices on its emission trading scheme (ETS) have risen beyond expectations over the past year. This has prompted calls for authorities to address design flaws in the ETS, with recommendations from the European Green Party and Potsdam Institute for Climate Impact Research including reforms aimed at curbing excessive financial speculation. Traders are now reportedly becoming wary following the European Commission agreeing to look into ways to make trading activities more transparent.

From Trading Economics (accessed 21 Feb 2022): “EU carbon permits traded close to €90, down from a record €98.5 reached on February 8th, following news that EU lawmakers were mulling key reforms in the bloc’s carbon market, and higher energy output from non-polluting sources.”

In Malaysia, eyes are now on how national policy and regulators will deal with the Sabah state government’s proposal for the National Conservation Agreement (NCA), a 100-year mega carbon asset concession project in collaboration with Singaporean-based company Hoch Standard Pte Ltd. Social media is alight with the purportedly leaked document of the aforementioned agreement, with interesting comments—including remarks on the statement made by the Sabah Deputy Chief Minister just last week—from investigative website Sarawak Report.

On that note, the Sarawak government has also announced intentions to venture into a carbon credit project, with Mambong assemblyman Dr Jerip Susil revealing that the state may pass a legislation allowing for carbon credits trading to take place this year. In the meantime, the Malaysian government has agreed to the development of a Voluntary Carbon Markets to facilitate international carbon credit transactions.

PalmTrack—Mid-Feb Update for the Week

In the last two weeks on PalmTrack, we covered:

  1. Indonesia’s expanded palm oil export permit: The world’s major palm oil exporter has extended its export permit requirement for palm oil product to include other derivatives. Previously only applicable to crude palm oil (CPO), olein, and used cooking oil, the change now means that CPO and its derivatives, crude palm oil and its derivatives, as well as palm kernel expellers will be subjected to the permit.

  2. USCBP findings on Sime Darby: The US CBP on 28 Jan reported that it has “found evidence of all 11 of the International Labour Organization’s forced labor indicators on the Da Wang vessel and Sime Darby Plantation’s palm oil plantations.” PalmTrack has have been closely updating on certified palm oil and find that key market players concur on these problems on supply in key products.

  3. Tankers from Indonesia: Port calls for 24 Jan–6 Feb 2022 (14 days) count, c.80 palm-related tankers, with sample net tonnage c.450k (versus 14D to 23 Jan, c.60 tankers with sample net tonnage c.360k). These two weeks (24 Jan–6 Feb) the share of calls was slightly higher for North Asian, European, and South Asian ports.

  4. Rainfall: 30 days rainfall was est. 100–150mm across central Peninsular Malaysia, and over 200mm above normal up in central area of Sumatra. Typical 30-days rainfall in Jan–Feb is 100–200mm on Sabah, Sarawak, south Sumatra, and across Kalimantan.

  5. Palm Biofuel - Part #2: Resuming our three-part series on palm biofuels, where in Part 1 we explored the USD billions involved and who is more or less committed to spending and paying, we have now turned to the shift to HVO-SAF, waste feedstock and about certification premia for Part 2.

  6. Whither PKE? PalmTrack’s analysis of palm kernel expeller (PKE) market shifts, which point to some struggle for this product.

Khor Reports’ PalmTrack is an independent research service that tracks palm tanker movements and reports trade of palm products (and shipments, upon request) for selected trade routes. It features a forward-looking market topic and sharp analysis every quarter, e.g. palm biofuels issues & opportunities for Jan–Mar 2022. Subscribe now!

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Sime Darby Implements Governance and Operational Changes

Sime Darby has announced in a press release “sweeping changes in governance and operations” in attempt to address forced labour allegations levelled against the company and USCBP findings that resolving the issue would require “significant financial investments” and restructures. Several reforms pledged by Sime Darby are of notable:

  • Reimbursement of recruitment fees. Sime Darby will reimburse some 15,078 foreign workers with an aggregate sum of RM38.6 million. A sinking fund of RM43.5 million to reimburse 19,565 workers will also be set aside. All reimbursements will be paid in lump sum, and current foreign workers will be informed of and receive their monies on 17 February 2021.

  • Ethical recruitment. Due diligence will be conducted regularly on recruitment agents to ensure that they are credible and fully licenced. Monitoring and training will be given to agents selected via open tender processes, and will undergo performance monitoring as well. Agents found to have violated Sime Darby’s zero recruitment fee policy will be prohibited from working with Sime Darby.

  • Structural changes. An ESG scorecard with “clear indicators” has been approved by the Board. A Social Welfare & Services department responsible for the implementation of policies concerning workers’ safety and welfare has also been established. Accordingly, 40 full time Site Safety & Sustainability Officers have been appointed to enforce these policies.