Speech by Minister for the Environment and Water Resources Masagos Zulkifli on Energy Conservation (Amendment) Bill

Madam Speaker, I beg to move, “That the Bill be read a Second time.”

The Energy Conservation (Amendment) Bill, or EC Bill in short, seeks to introduce a new set of initiatives to improve industrial energy efficiency, enhance our greenhouse gas reporting requirements and revise the Carbon Emissions-based Vehicle Scheme.

International Energy Outlook

Madam Speaker and members of the House, the Paris Agreement came into force last year, less than a year after it was concluded. This was a significant milestone in our global fight against climate change, and for all who seek a sustainable future for our children. To date, 134 countries accounting for over 80 per cent of the world’s total greenhouse gas emissions have ratified the Agreement.

When you strip away its legalities, the heart of this pact is really about energy use and conservation. The International Energy Agency’s World Energy Outlook 2016 projected in its “main scenario” that global energy demand would rise by 30 per cent from now to 2040, with accompanying increases in greenhouse gas emissions. Reducing energy use is thus key to address global warming.

Faced with an increasingly carbon-constrained future, countries and businesses have no choice but to transform the way we produce and use energy. At the same time, this has given rise to new opportunities to grow a greener and more sustainable economy. For example, China is embracing renewables in a big way, while India plans to have nearly 60 per cent of its electricity capacity come from non-fossil fuels by 2027. Leading companies have also come on board. Google has committed to power 100 per cent of its operations with renewables. I visited Shell’s “Make the Future” exhibition last month which showcased innovative ideas to harness energy without emitting more carbon. One such example was a wind turbine that could capture wind energy produced by cars travelling along a highway.

While innovative technologies can supplement our energy needs, Singapore will still have to depend on imported energy, primarily natural gas (which is cleaner than coal and oil), to meet the bulk of our demand. Our energy demand is projected to increase at a compounded annual growth rate of between 1.2 per cent to 1.8 per cent over the next decade. Given our limited land space, we are disadvantaged in our ability to use alternative energy. Nonetheless, we are committed to do our part to protect the environment, and have pledged to improve our emissions intensity by 36 per cent from 2005 levels in 2030, and to peak around the same time under the Paris Agreement.

Singapore’s Response to Climate Change

The Climate Action Plan, which was launched last year, lays out four key strategies to fulfil this commitment, namely:

• improving energy and carbon efficiency,

• reducing emissions from power generation,

• developing and deploying low-carbon technology, and

• encouraging collective climate action.

In Singapore, the industry sector is the largest energy user, consuming about two-thirds of our total energy consumption, and contributing about 60 per cent of our carbon emissions in 2014. Improving energy efficiency, or EE for short, in the industrial sector, is thus key to achieving our climate change goals.

In 2012, we introduced the Energy Conservation Act, or ECA for short. Our main objective was to put in place the building blocks to help the industry develop its capabilities in EE. Under the ECA, 180 energy-intensive companies, accounting for the lion’s share of industrial energy use, are required to implement basic energy management practices such as regular monitoring of energy use, and to appoint qualified energy managers to oversee EE improvement.

I am happy to report that the preliminary results are encouraging. ECA companies have reported an overall EE improvement rate of 0.4 per cent and 0.6 per cent in 2014 and 2015 respectively. This upward trend is in the right direction. However, in order to meet our climate pledge, we need to double or triple the current improvement rates, and achieve 1 to 2 per cent annually, similar to that attained by leading jurisdictions such as Belgium and the Netherlands. It is timely to bring our efforts to the next level.

The EC Bill that my Ministry is proposing, aims to introduce three sets of enhancements to the original ECA. The first, and where the bulk of enhancements are, is on measures to improve our industrial EE. The second set seeks to improve greenhouse gas emissions reporting, and the third deals with the new Vehicular Emissions Scheme. I will elaborate more.

EC Bill Enhancements: Improving Industrial Energy Efficiency

Ensuring Good EE Practices in ECA Companies

We will introduce three enhancements to strengthen EE practices among ECA companies. They are: one, the adoption of structured Energy Management Systems; two, to conduct regular energy efficiency opportunities assessments; and three, to conduct design reviews. Let me elaborate further.

Our analysis of ECA data in 2014 and 2015 showed several areas for improvement. In particular, we found that many companies did not adopt a structured framework to manage their energy use and guide their EE efforts. In addition, EE ambition amongst companies continued to be low.

The proposed amendments to the EC Bill will thus require ECA companies to adopt a structured Energy Management System, or EnMS for short. EnMS institutes a “plan, do, check, act” framework for companies to constantly re-examine and improve their EE efforts. Senior management will be responsible for setting energy policy and targets, evaluating them and developing action plans. Studies have shown that having a structured EnMS can help companies achieve energy savings of at least 10 per cent to 15 per cent in the first few years. Countries like Japan and those in the EU have already incorporated this practice in their regulations. With this amendment, companies will be required to put in place an EnMS by 2021 or 2022, depending on the size of their facility’s energy consumption.

ECA companies will also be required to conduct regular energy efficiency opportunities assessments, or EEOAs for short. Also known as energy audits, EEOAs involve systematic assessments of energy consumption, and the identification and quantification of potential improvement opportunities. Large companies in the EU, South Korea and India are already required to conduct such assessments regularly. Under the enhanced ECA, companies will be required to submit their first EEOA by 2021.

Many companies have given feedback that the lifespan of industrial equipment can be very long – 30 years or more. Thus, it is challenging to introduce new technologies mid-way as it disrupts their operations. Instead, it is better to identify and incorporate EE opportunities at the start of the project. With this in mind, from 2018, we will require new industrial facilities and major expansion projects to undergo design reviews to incorporate EE measures.

The three key enhancements that I have just detailed are intended to help ingrain good EE practices in companies.

Minimum Energy Performance Standards for Industrial Equipment and Systems

Thus far, ECA data also showed that many companies have focused on harvesting “low-hanging fruits”, or EE measures that have short pay-back periods but provide only low energy savings. Undertaking EE improvements for larger systems such as boilers, chillers and compressed air systems would significantly enhance the savings reaped. The data also showed much room for improvement in the EE of common industrial equipment like motors.

Hence, the Bill will aim to increase the adoption of more energy efficient commonly-used industrial equipment and systems. An existing measure under the ECA is the Minimum Energy Performance Standards, or MEPS for short. MEPS currently covers household appliances and has been successful in raising the energy efficiency of these household products. We will revise and extend MEPS to industrial equipment and systems, starting with motors in 2018. We expect MEPS for motors to translate to some 0.4 MT in carbon abatement by 2030.

Madam Speaker, as a result of these enhancements, we will be raising penalties for several non-compliances to reflect the higher value of industrial goods, and to bring them in line with other legislation. However, I would also point out that the overall benefits of the ECA measures to companies are by far more attractive, including helping them to achieve long-term cost savings and increased competitiveness.

EC Bill Enhancements: Improving our Greenhouse Gas Emissions Reporting Requirements

The second set of enhancements that will be made to the ECA concern the reporting of greenhouse gas emissions. These enhancements aim to strengthen the Quality Assurance and Quality Control processes within our Measurement and Reporting (M&R) requirements, to provide a robust foundation for the future carbon pricing regime.

Large industrial emitters will be required to submit a monitoring plan, and an enhanced greenhouse gas emissions report based on the approved monitoring plan. Companies will also have to compute their emissions data according to standard methodologies determined by the NEA. These will bring our M&R standards in line with international best practices and ensure accurate and robust accounting of their emissions. This will also help companies to better understand and manage their emissions.

EC Bill Enhancements: Revisions to the Carbon Emissions-based Vehicle Scheme

The third set of revisions to the ECA concerns the Vehicular Emissions Scheme, or the VES for short. As I have announced during the recent COS debate, the VES will replace the current Carbon Emissions-based Vehicle Scheme, or the CEVS. Under the CEVS, only carbon dioxide is taken into consideration in determining the emissions level of a vehicle. The VES which replaces it will now consider other harmful pollutant emissions in addition to carbon dioxide. Any label on any motor vehicle model displayed for sale and related promotional materials and advertisements must now include information on the vehicular emissions of the motor vehicle including information on the fuel economy of the motor vehicle. The EC Bill proposes to amend the ECA to extend the labelling and information disclosure requirements related to the VES and to make the relevant amendments to the Road Traffic Act to give effect to the new scheme.

Conclusion

Madam Speaker, and members of the House, let me conclude. The proposed enhancements to the ECA are forward-looking, and aim to guide how we view and conserve precious energy resources. The ECA provides a framework to shape positive choices in the industry, transport and household sectors, to achieve a carbon-efficient and sustainable future. It will also catalyse demand for energy efficiency and clean energy services, which could become the seeds of future growth. I encourage all stakeholders to work with us on efforts to conserve energy, as we seek a sustainable future together.

Madam Speaker, I beg to move.

Source: Ministry of the Environment and Water Resources