Green is the new black! Australia and Singapore trailblaze with ‘first-of-its-kind’ Green Economy Agreement

On 18 October 2022 trade ministers in Australia and Singapore signed the Green Economy Agreement (GEA).

Building on the depth and strength of the close bilateral relationship between Australia and Singapore, the GEA elevates the importance of green economy cooperation and contributes to a growing list of bilateral and regional agreements between the two nations. ^[1]

The signing of the landmark agreement follows more than a year of collaboration across government departments, including 13 rounds of negotiations.^[2]

The Department of Foreign Affairs and Trade (DFAT) has flagged that the GEA will “serve as a model for cooperation with other partners to support the regional transition”. The GEA identifies seven priority areas which may be expanded in the future:

1. Trade and investment
2. Standards and conformance assessments
3. Green and transition finance
4. Carbon markets
5. Clean Energy, decarbonisation, and technology
6. Skills and capabilities
7. Engagements and partnerships

 Here, we share our insights on the history, details and promise of the trailblazing GEA.

In the future, we expect to see an increased focus on countries collaborating to deliver practical and scalable solutions to decarbonise towards net zero emissions. We anticipate the GEA could act as a benchmark for other nations in pushing towards a green economy. With a population size of nearly 700 million and rapidly growing energy consumption needs, Southeast Asia will play a vital role in the global effort to reduce greenhouse gas (GHG) emissions and meet the net-zero emissions targets under both the Glasgow Pact and the Paris Agreement. ^[3]

A Brief History

In June 2021, then Australian Prime Minister Scott Morrison and Singapore's Prime Minister Lee Hsien Loong announced negotiations for the GEA as a mechanism to propel the transition of the two nations to new energy economies and drive investments in green sectors. ^[4]

In September 2021, Australia and Singapore released a Joint Vision Statement, officially commencing GEA negotiations and embarking on a shared mission to propel a sustainable future by creating “a world-first agreement that combines trade, economic and environmental objectives”. ^[5]

In October 2021, DFAT started consultations with Australian industry to help ensure the GEA is practical and delivers for Australian business, workers and the environment. ^[6]

In February 2022, Singapore announced that it will aim to achieve net zero emissions by or around mid-century and an intention to continue negotiations with Australia over the GEA. ^[7]

What is it?

The GEA is a first-of-its kind agreement that supports Australia and Singapore’s economic, trade, investment and climate change objectives.

The GEA hopes to facilitate trade and investment between the two countries, remove non-tariff barriers to trade in environmental goods and services, and accelerate the uptake of green technology to reduce carbon emissions. Implementation of the GEA will begin with developing a list of environmental goods and services that could be given preferential trade treatment. ^[8]

The objectives of the GEA are to: ^[9]

1. establish cooperation in targeted areas of common interests that contribute to Australia’s and Singapore’s continuing efforts to develop concrete and credible pathways to advance economic growth whilst ensuring a smooth and inclusive transition to net zero emissions economies
2. explore innovative approaches to effectively address the global challenges of climate change, including by developing and adopting low carbon technologies, renewable energy and decarbonisation solutions
3. adopt arrangements to undertake the development and delivery of practical initiatives under each of the established areas of cooperation, including those that promote trade and investment in the green economy
4. support existing and catalyse new commercial and business opportunities, including by facilitating arrangements to remove non-tariff barriers to trade in environmental goods and services
5. heighten government and business engagement, including by promoting private sector investment and finance in the green economy
6. affirm jointly determined definitions, principles and positions on issues, policies and measures that help facilitate greater integration of green economy activities between Australia and Singapore
7. assist both countries in setting or adopting rules, standards, technical regulations and conformity assessment procedures, that help provide greater clarity and certainty in the green economy operating environment and are consistent with international trade and investment obligations and the rules-based multilateral trading system, including a commitment to risk, science and evidence-based decision-making
8. foster green economy cooperation more broadly across the region, including by utilising the GEA as a pathfinder in setting policies, standards, technical regulations and conformity assessment procedures, measures and approaches that the international community and multilateral organisations could usefully draw on
9. promote the GEA principles, cooperation and initiatives for regional and global policy developments, including in but not limited to the World Trade Organization (WTO), the UN Framework Convention on Climate Change (UNFCCC), the Asia-Pacific Economic Cooperation (APEC), Organisation for Economic Co-operation and Development (OECD), and the International Organization for Standardization (ISO)
10. establish cooperation in targeted areas of common interests that contribute to the nations continuing efforts to develop concrete and credible pathways to advance economic growth while ensuring a smooth and inclusive transition to net zero emissions economies.

The GEA will foster better alignment and convergence of standards and regulations between countries, that improve the interaction and cohesion of systems, strengthen the integration of markets, and reduce potential barriers to trade and investment. The GEA will provide the impetus for the development of cross-border initiatives and policy frameworks to support new green growth sectors and capabilities and catalyse technology development and cooperative projects in the emerging green economy. ^[10]

Examples of target areas for Singapore include:

1. Green goods and services
2. Carbon trading
3. Green finance
4. Low-carbon development (such as renewable energy, hydrogen, and carbon capture and storage projects)
5. Waste management and reduction
6. Greening supply chains.

Why should you care?

The GEA ushers in a new era of ambitious climate action, not only in the Australia-Singapore context, but also globally. As the world increasingly looks towards green energy solutions, individuals and industry stakeholders will need to be ready to take advantage of economic developments and investment opportunities in the green economy.

For example, during official announcement of the GEA, Australia’s Prime Minister Anthony Albanese cited the Sun Cable led Australia-Asia Power Link project — which will be the world’s largest solar farm, battery and undersea cable and first intercontinental power grid, connecting Australia to Singapore to supply renewable power — as an example of what the GEA aims to achieve. ^[11] The project, which is expected to begin construction in 2024 and fully operational by 2027, will inject $8 billion into the Australian economy and provide up to 15% of Singapore’s total energy needs. ^[12]

What’s next?

The GEA is a trailblazing agreement that will hopefully have a ripple effect across the Asia-Pacific and beyond.

The global commitment to reach net zero has driven wide-ranging climate change initiatives, such as energy transition to clean energy sources, carbon taxes as well as the implementation and expansion of carbon trading.

As we look ahead to COP27 in Sharm El Sheikh, one the key focuses will be establishing mechanisms for economic markets to uphold principles of environmental integrity, human rights and transparency.  

Australia and Singapore have paved the way for ambitious action on climate change to keep the Paris Agreement temperature goal within reach. ^[13]