A bite at the cherry

Though our newsletter focuses on South East Asia, we understand the importance of learning from other countries - as reference or lesson. Sometimes we post about China and Japan as these are SEA’s neighboring countries that have been leading the green economy trend. For instance China has been steadily establishing carbon credit trading rules while Japan is all about transition activities. Today we’d like to highlight a Financial Times’ article: Europe’s ESG funds are investing more than ever in defense holdings, which got us pondering who actually defines ESG. Do check out their short film at the end - it talks about ESG being a big marketing scheme that is here to stay 🥕 

Carbon tax v Cap & trade - which to choose?

🟩 What are they?

Carbon tax: The government sets a tax amount for every 1 ton of GHG emission by companies.

Cap & Trade: The government sets a maximum amount of emission that a company is entitled to emit, and the government sells or issues equivalent permits to the company. Emitters can trade the permits to other emitters.

🟢 Some say carbon tax is better.

The argument is that carbon tax is more cost-effective and generates more revenue compared to the complex and expensive setup of a Cap & Trade system. Additionally, it is easier to administer and can cover a broader range of investment sources.

The revenue generated from a carbon tax can be used by the government to fund climate-related projects instead of going to another emitter. Given its fixed price, a carbon tax may have less inflationary impact on the economy. This is because the variable costs associated with Cap & Trade system, if increased, can drive higher product prices. The price certainty can also drive investment in low-carbon technologies.

💚 Practical application in Asia

Singapore has implemented carbon tax since 2019. Korea, Japan, China have been using Cap & Trade system. The Philippines is considering a low carbon economy bill that focuses on Cap & Trade, so does Vietnam.

While both the Carbon tax and Cap & Trade systems have their merits, the simplicity and efficiency of a carbon tax may make it a preferable option for newly developed carbon markets.

The gift that keeps on giving - In the last newsletter, we reported on Thailand’s reduced tariff on finished cars and components imported by EV makers while they build local factories. Now, Thailand offers individual investors who buy into eligible Thai ESG funds a tax break of up to US$8,586 - a 300% increase from the previous tax deduction.

Additionally, for purchases made from 1 January 2024 to 31 December 2026, the Thai government agreed to shorten the unit-holding period from the previous eight years to just five. 🎁 

Since August 2024, Thai asset management companies offering Thai ESG funds is allowed to invest in shares of listed companies that have been evaluated by providers other than the Stock Exchange of Thailand.

More green waves this way

Ain’t that easy - Early retirement of the Philippines’ coal fleet would cost US$10.6 billion. And this number hasn’t included all costs.

More open access grids - After Vietnam in August, Malaysia allows for direct power purchase between buyers and renewable energy plants from September 2024.

Vietnam, Thailand, Malaysia leads Renewable Energy Certificates issuance - though Singapore’s behind in quantity, it’s top in quality.

No more single use plastics - Malaysia to implement a mandatory Extended Producer Responsibility system by 2026, following a voluntary phase. EPR requires producers to manage and recycle packaging waste throughout a product’s lifecycle.

Had fun riding the green waves? Hit reply, let us know!

Wish you a wonderful day.