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PwC 1

Enabling a

Net Zero world

Exploring corporate decarbonisation ambitions and

aspects of renewable energy procurement and carbon

offsets in Southeast Asia

December 2023

PwC 2

Acknowledgements and

disclaimers

Key authors

“Exploring corporate decarbonisation ambitions and aspects of

renewable energy procurement and carbon offsets in Southeast Asia”

was produced by PwC Singapore.

PwC Singapore

Fang Eu-Lin (Sustainability and Climate Change Practice Leader)

Jennifer Tay (Asia Pacific Infrastructure Leader)

Shawn Wang (Senior Manager)

Rachel Woo (Associate)

We would also like to thank the following industry leaders who provided valuable insights and content

to this report:

Alvin Lee

Regional Head of Puro.earth, APAC

Bryan McCann

Director of Supply, Climate Impact X

Dharsono Hartono

CEO, PT. Rimba Makmur Utama

Guai Ti Howe

CFO, REDEX

Jen Wee Kang

Founder and CEO, REDEX

Nadiya Nair

Strategy & Development Team Lead - Renewable

Energy & Carbon Markets (APAC), ACT Commodities

Nithyanandam Yuvaraj Dinesh Babu

Executive Director, Climate Action Data Trust

Rene Velasquez

Founder, Carbon Exposure Project

Riza Suarga

Chairman, Agraus Resources

Russell Quek

Senior Managing Consultant, South Pole

Zhao Tan

Board Member, REDEX

PwC contributors

Ian Milborrow (Partner, Climate Finance and Net Zero, PwC UK)

Indrie Tjahjadi (Director, PwC Singapore)

Simon Burns (Senior Manager, PwC Singapore)

Srikkanth Ramachandran (Manager, PwC Singapore)

Levine Thio (Senior Associate, PwC Singapore)

Special

acknowledgements

International Emissions

Trading Association (IETA)

Björn Fondén (International

Policy Advisory)

Morgane Kundert (International

Policy Assistant, IETA)

We would like to thank IETA for

their contributions of knowledge

and insights on carbon credits

and the global decarbonisation

landscape. Please note that an

acknowledgment here does not

imply an endorsement of the

views presented in this report.

Acknowledgements

PwC 3

Disclaimer: This report should not be construed as legal, tax, financial or accounting advice, and any

information provided is not intended to be sufficient for you to rely on to make a decision. We recommend that

you consider the appropriateness of the information in this report having regard to your specific

circumstances and obtain independent advice before making any decision.

1Report highlights 04

2The decarbonisation landscape in Southeast Asia 07

3Unpacking Net Zero

2.1 Net Zero ambitions

in Southeast Asia (SEA)

2.2 Corporates are facing pressures

to decarbonise

3.1 Context

3.2 Carbon neutral

3.3 Net Zero

3.4 Actions beyond a company’s

Net Zero targets

3.5 Steps for corporate

decarbonisation

4.1 Why procure

renewable energy

4.2 RECs in the

context of SEA

4.3 Considering REC

procurement

4.4 Ongoing discussions on

RECs

4Exploring renewable energy procurement methods

and renewable energy certificates (RECs) 17

5.1 Why purchase carbon offsets

5.2 Carbon offsetting options

5.4 Considering carbon credits

5.5 Ongoing discussions on

carbon credits

5Exploring carbon offsets 26

5.3 Carbon offset projects in SEA

6Appendix 38

Contents

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PwC1EnablingaNetZeroworldExploringcorporatedecarbonisationambitionsandaspectsofrenewableenergyprocurementandcarbonoffsetsinSoutheastAsiaDecember2023PwC2AcknowledgementsKeyauthorsSpecialacknowledgements“ExploringcorporatedecarbonisationambitionsandaspectsofrenewableenergyprocurementandcarbonoffsetsinSoutheastAsia”InternationalEmissionswasproducedbyPwCSingapore.TradingAssociation(IETA)BjörnFondén(InternationalPwCSingaporePolicyAdvisory)FangEu-Lin(SustainabilityandClimateChangePracticeLeader)MorganeKundert(InternationalJenniferTay(AsiaPacificInfrastructureLeader)PolicyAssistant,IETA)ShawnWang(SeniorManager)RachelWoo(Associate)WewouldliketothankIETAfortheircontributionsofknowledgePwCcontributorsandinsightsoncarboncreditsandtheglobaldecarbonisationIanMilborrow(Partner,ClimateFinanceandNetZero,PwCUK)landscape.PleasenotethatanIndrieTjahjadi(Director,PwCSingapore)acknowledgmentheredoesnotSimonBurns(SeniorManager,PwCSingapore)implyanendorsementoftheSrikkanthRamachandran(Manager,PwCSingapore)viewspresentedinthisreport.LevineThio(SeniorAssociate,PwCSingapore)Wewouldalsoliketothankthefollowingindustryleaderswhoprovidedvaluableinsightsandcontenttothisreport:AlvinLeeNithyanandamYuvarajDineshBabuRegionalHeadofPuro.earth,APACExecutiveDirector,ClimateActionDataTrustBryanMcCannReneVelasquezDirectorofSupply,ClimateImpactXFounder,CarbonExposureProjectDharsonoHartonoRizaSuargaCEO,PT.RimbaMakmurUtamaChairman,AgrausResourcesGuaiTiHoweCFO,REDEXRussellQuekSeniorManagingConsultant,SouthPoleJenWeeKangFounderandCEO,REDEXZhaoTanBoardMember,REDEXNadiyaNairStrategy&DevelopmentTeamLead-RenewableEnergy&CarbonMarkets(APAC),ACTCommoditiesPwC3Contents1Reporthighlights042ThedecarbonisationlandscapeinSoutheastAsia072.1NetZeroambitions2.2CorporatesarefacingpressuresinSoutheastAsia(SEA)todecarbonise3UnpackingNetZero133.1Context3.4Actionsbeyondacompany’s3.2CarbonneutralNetZerotargets3.3NetZero3.5StepsforcorporatedecarbonisationExploringrenewableenergyprocurementmethods4andrenewableenergycertificates(RECs)174.1Whyprocure4.3ConsideringRECrenewableenergyprocurement4.2RECsinthe4.4OngoingdiscussionsoncontextofSEARECs5Exploringcarbonoffsets265.1Whypurchasecarbonoffsets5.4Consideringcarboncredits5.2Carbonoffsettingoptions5.3CarbonoffsetprojectsinSEA5.5Ongoingdiscussionsoncarboncredits6Appendix38Disclaimer:Thisreportshouldnotbeconstruedaslegal,tax,financialoraccountingadvice,andanyinformationprovidedisnotintendedtobesufficientforyoutorelyontomakeadecision.Werecommendthatyouconsidertheappropriatenessoftheinformationinthisreporthavingregardtoyourspecificcircumstancesandobtainindependentadvicebeforemakinganydecision.PwC41ReporthighlightsEnablingaNetZeroworld5PwC51ReporthighlightsReportThereportaimsto:Thispaperexploresthedifferencesbetweenhighlightstheseanditsnuances,andthestepsthat•HighlightthestateofNetZerocompaniescantaketo“Reduce”,“ReplaceTheambitionsinSEA(includingcorporates)and“RemoveorAvoid”carbonemissions.decarbonisationlandscapein•InspirecorporatestoraisetheirReduceinvolvestheSoutheastAsiaambitions,andtocontributefurthertothemitigationofemissionsdevelopmentofdecarbonisationinSEAthroughacompany’sownUnpackingoperations,whichshouldbeNetZero•InformwhatrespectiveemissionthefirstandprimarystepreductionambitionsentailtakenbyanentitytoExploringdecarbonise.renewable•ProvideconsiderationsforcorporatesinenergySEAastheydecarboniseandutiliseReplacesourcesofprocurementRECsandcarboncredits(CCs),emissionsandenergyfrommethodsandincludingunderstandingdevelopingfossilfuelswithgreenerrenewableareas.alternativessuchasenergyrenewableenergy.ThisiscertificatesThedecarbonisationlandscapeincrucialtoreducingScope2(RECs)SoutheastAsia(SEA):Thecriticalemissions.importanceofreducingemissionsinExploringSEAisdrivingbothgovernmentsandRemoveoravoidcarbon-carboncorporatestoact,despitetheuniquethisisalsonecessaryintheoffsetsregionalchallengespresent.overalldecarbonisationjourneytomanagehardtoAppendixAsoneoftheregionsmostimpactedbyabateemissionsormakeclimatechangeanywhereintheworld,aeffortsoutsidecorporates’majorityofcountriesinSEAhavenowbusinessactivities.However,outlinedtheirNetZeroambitions.WhilethisshouldnotbeusedasacountriesinSEAaretakingvarioussubstituteforeitherReduceinitiativestooperationalisetheirNetZeroorReplace.ambitions,significantchallengesremainsuchasitshigherexposuretofossilRECsandCCscanbeexploredtoaidwithfuels.Nonetheless,countriesinSEAarerespectivecommitments.FinancingarisingmakingitsdecarbonisationeffortsfromsuchalsosupportfurtherdevelopmentthroughnewandemerginggovernmentofsuchprojectsinSEA.policies.ItisalsoobservedthattherecanbesignificantpotentialforrenewableWehighlightinthefollowingpageanenergyandnature-basedandoverviewofconsiderationsovertheuseoftechnology-basedsolutionsintheregion.RECsandCCsinSEA.CorporatesinSEAareincreasinglytakingactionondecarbonisationduetovariousreasonsincludingincreasingjurisdictionalandinternationalpressures.UnpackingNetZero:Corporatecommitmentsandambitionsandwhattheymean.Commitmentsthatcorporatesarechoosingtofollowinclude“NetZero”or“Carbonneutral”,andtakingactionsbeyondtheirNetZerocommitments.PwC6EnablingaNetZeroworld6ReportOverview:ConsiderationsovertheuseofRECsandcarboncreditshighlightsThesummarybelowprovidesaone-pageoverviewcoveringthereasonsforcorporatestoThedecarbonise,commonambitionslevelsobserved,corporatedecarbonisationsteps,aswellasdecarbonisationconsiderationsforcorporatestotakeregardingRECsandcarboncredits.landscapeinSoutheastAsiaUnpackingNetZeroExploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixPwC72ThedecarbonisationlandscapeinSoutheastAsia2.1.NetZeroambitionsinSoutheastAsia2.2.CorporatesarefacingpressurestodecarboniseEnablingaNetZeroworld8PwC822.1.NetZeroambitionsinSoutheastAsiaReportAccordingtotheIntergovernmentalPanelInordertoachieveNetZero,countriescanhighlightsonClimateChange(IPCC),inordertolimittakevarioussteps.Theseincludebutareglobalwarmingto1.5°C,greenhousegasnotlimitedtothefollowing:The(GHG)emissionsmustpeakbefore2025decarbonisationandbereducedby43%by20301.ApplymarketmechanismslandscapeinThiswillrequirerapiddecarbonisationaimedatdeliveringemissionsSoutheastAsiaandcollaborationacrossboththepublicreductionssuchascarbonandprivatesector.GiventhescientifictaxesoremissionstradingUnpackingconsensus,manycountriesgloballyschemes(ETS)NetZerohavemadeNetZerocommitments.Over100countrieshavesetNetZeroApplyindustry-relatedExploringtargets,withmosthavingdonesoregulationse.g.energyrenewablebetween2019and20202.efficiencyforbuildings,energyincentivisingtherolloutofprocurementSoutheastAsia(SEA)isespeciallyelectricvehiclesadoptionmethodsandsusceptibletotheworstimpactsofclimaterenewablechange3,andtheregioniscontinuingtoIncentivesforlowenergymakeeffortstodecarbonise4.OfthosecarbonbusinessescertificatesSEAcountrieswhichhavesettargets,most(RECs)didsobetween2020and2022.PlanningforadiverseenergymixwithmoreExploringcleanenergycarbonoffsetsTheprogressofimplementationstrategiesinSEAandotherpartsoftheworldareAppendixhighlightedinTable1.Figure1:TimelineofSoutheastAsiacountriessettingNetZerotargetsMar2020May2021Oct2021Sep2022HalveemissionfromitsLaosThailandIndonesiapeakby2050withaviewNetZeroby2050NetZerobyNetZerobytoNetZeroassoonas2065viableinthesecondhalf2060ofthecenturyUpdateonFeb2022toNetZerobyoraroundmid-centuryUpdatedonOct2022toNetZeroby2050Sep2021Sep2021MalaysiaVietnam,BruneiNetZeroby2050NetZeroby20501CodeRed-AsiaPacific’sTimeToGoGreen(2021),PwCAsiaPacific2SoutheastAsia’sChallengeofDecarbonizingWhileGrowingRapidly(2022),CenterforStrategicandInternationalStudies(CSIS)3IPCCSixthAssessmentReport(2022),IPCC4NetZeroTrackerDatabase(2023),NetZeroTrackerEnablingaNetZeroworld9PwC9Table1:OverviewofdecarbonisationtargetsandinitiativestakenbySEAcountriesandglobalpeers56.ReporthighlightsCountryNetZeroCarbonREtargetsExampleREstrategies/BruneitargetsmechanismsregulationsThedecarbonisationNetZero205030%EnergyWhitePapersetslandscapeingenerationframeworkSoutheastAsiaCambodiaCarbonby2035IndonesiaNeutral2050PowerDevelopmentUnpacking27.7%hydro,MasterPlan2022-20407NetZeroNetZero206017.9%solar,etccapacityby203072023NationalbudgetExploringLaosNetZero2050RenewableEnergyrenewable44%generationbyDevelopmentenergySoutheastAsiaMalaysiaNetZero20308procurementMyanmarearliestbyRenewableEnergymethodsandPhilippines205030%consumptionDevelopmentStrategyinrenewableSingaporeby2025LaoPDRenergyNoNetZerocertificatestargetshave70%capacityNationalEnergyTransition(RECs)beensetby20509Roadmap(NETR)9ExploringNoNetZero11%newcapacityMyanmarEnergyPolicycarbontargetshaveby203010offsetsbeenset(2015),NationalElectricityMasterPlan(2014)10AppendixNetZero2050REmixof35%by2030GreenEnergyAuctionand50%by2050Programme(GEAP)11GreenEnergyOptionProgram4GWofrenewableSingaporeGreenelectricityimportsby2035Plan20302GWpdomesticsolarcapacityby2030ThailandNetZero206530%PowerDevelopmentPlan2018-2037consumptionby203712VietnamNetZero205060%solarandwindSupportmechanismforcapacityby205013developmentofRE2014EUEconomyNet45%mixby2030RePowerEUPlanZeroby2050IndiaNetZero2070500GWcapacityby2030RenewableUKNetZero2050energyinvestmentUSOthercountries70GWsolarPowerUpBritain-EnergyNewby203W14SecurityPlan14ZealandNetZero205080%generationAmerica’sStrategytoImplementedby2030SecuretheSupplyChain(insomestates)foraRobustCleanEnergyTransitionNetZero205050%consumptionby2035ClimateChangeResponse(ZeroCarbon)AmendmentAct201915InprogressofConsiderationstakenNonewsonimplementationsimplementationRenewableenergy(RE)targetsthathavebeenannouncedTargetisconditionaliftheJETPcommitmentcanbemetThailandhasanETSexchangelaunchedandacarbontaxunderconsiderationVietnamhasETSlegalised-PilotCarbonExchangefrom20255Policiesdatabase(2023),IEA10RenewableEnergySituationInMyanmar(2023),Technologyand6ICAPETSMap(2023),InternationalCarbonActionPartnership(ICAP)7PowerDevelopmentMasterplan2022-2040(2022),RoyalGovernmentofInformaticsInstituteforSustainability11GreenEnergyAuctionPrograminthePhilippines(2021),DepartmentofCambodia8JETPInvestmentPlanLaunched;IndonesianGovernmentAimsforSwiftEnergyPhilippines12Thailand-RenewableEnergy(2021),InternationalTradeAdministrationImplementation(2023),JETP13Vietnam’sEighthNationalPowerDevelopmentPlan(2023),PwCVietnam9SummaryoftheNationalEnergyTransitionRoadmap:Navigatingthe14PoweringUpBritain-EnergySecurityPlan(2023),HMGovernment15NewZealand2023EnergyPolicyReview(2023),IEAtransientstage(2023),PwCMalaysiaEnablingaNetZeroworld10PwC10SoutheastAsia’potentialanddecarbonisationeffortsReportSoutheastAsia’scontextUtilisationofRECsandCCsbycorporateshighlightsBasedonPwC’sreports“CodeRed-AsiaTheincreasingprovisionofrenewableenergyThePacific’sTimetoGoGreen”16and“RegionalinSEAcouldalsobenefitcorporatesineffortsdecarbonisationelectricitytradeinASEAN-Theroadaheadtodecarbonisetheiroperations.landscapeintoanintegratedandgreenerelectricitySoutheastAsiafuture”17,SEAneedstoaccelerateitspaceofWiththeregionrequiringcapitalandfinancedecarbonisation.However,SEAisalsofacingtoimproveitsinfrastructureandtechnology,Unpackingitsuniquechallenges.ThesechallengesprivatecapitalandfundingcouldhelptoNetZeroinclude,butarenotlimitedto:harnessandcapitaliseonthepotentialofrenewableenergyintheregion.RenewableExploring1.Dependenceonfossilfuelsenergyprocurementmethodssuchasrenewable2.Risingenergydemandsduetoexpectedrenewableenergycertificates(REC)provideenergybothfinancefortheserenewableenergyprocurementeconomicgrowth18projectsinSEAandactasrecognisedmethodsand3.Unevendistributionofrenewableresourcescertificatesforcompaniestoclaimrenewablerenewable4.AbsenceofregionalelectricitytradingenergyusageandreducetheirScope2energyemissions.certificatesplatforminSoutheastAsia(RECs)Similarly,theappropriateuseofcarbonGiventhecontext,SEAcanbeseentobecredits(CCs)couldbeleveragedupontoExploringrelativelylessadvancedinitsprogressoffurtherdirectcapitalintonature-basedcarbonimplementingdecarbonisationstrategiesandsolutionsandtechnologicalinnovationsthatoffsetsleverscomparedtootherpartsoftheworldcanhelpremovecarbonfromtheduetouniquechallenges.atmosphere,reduceemissionfromexistingAppendixprojectsoravoiditbeingproducedinthefirstplace(formoreinformation,seepage29).Astheglobalvoluntarycarbonmarket(VCM)continuestogrow,currentlyatoverUSD2billion,itisapotentialfinancingtoolforaregionwithvastcarbonoffsettingopportunities21.RenewableenergypotentialFurthermore,countriessuchasMalaysia,Indonesia,andVietnamhaveforestcoverofHowever,SEAdoeshavenotablepotentialinapproximately55%,53%and47%areassuchasrenewableenergyrespectively,providingmanyopportunitiesfordevelopment.Forexample,theprospectsforforestmanagement,afforestation,andwindpowergenerationinVietnamareREDD+projects.significant,withanestimatedpotentialof311GW19.Additionally,VietnamhasalsoAsidefromnature-basedsolutions,someofsurpassedMalaysiaandThailandtoreachthelargestcarboncreditprojectsinthethelargestinstalledcapacityofsolarpanelsregionstemfromemergingtechnologicalinSEA20.solutionstopromotelow-carboninfrastructuresuchasbiomasscookstoves,ricehuskbiocharanddirectaircapture.CountriessuchasthePhilippinesalsoshowAssuch,withthenecessarycapitalandpotentialinwindpower,whichisexpectedtofinance,renewableenergyandcarbonoffsetdrivetheregionalmarketgrowth.projectscannotonlyhelpcountriesinSEAtoConcurrently,governmentshavealsobegunreachtheirnationaltargets,butcorporatestotopreparestrategicplanstopursueleverageandharnesssuchfinancingoptionsrenewableenergy.Forexample,Cambodia'stodecarbonise.Againstthatbackdrop,thisPowerDevelopmentPlanaimstohavereportaimstoexploretheuseofrenewabletwo-thirdsofthecountry'spowerderivedfromenergyprocurementandcarbonoffsetsandrenewableenergyby2030.Asawhole,therespecifically,thenuancesofRECsandcarbonaregrowingopportunitiesforSEAtoenhancecreditsandgiveconsiderationtotheroleofrenewableswithinregionalenergyoperationalisethepotentialuseofRECsandmixesandinturndeliverdecarbonisation.carboncreditsforcorporatedecarbonisation.16CodeRed-AsiaPacific’sTimeToGoGreen(2021),PwCAsiaPacific19ASEANRenewables:OpportunitiesandChallenges(2023),IEA17RegionalelectricitytradeinASEAN-Theroadaheadtoanintegratedand20WhycompaniesshouldconsiderSoutheastAsiafortheirrenewableenergygreenerelectricityfuture(2022),PwCSingaporeprojects(2023),SingaporeEconomicDevelopmentBoard18SoutheastAsia’sGreenEconomy:CrackingtheCode(2023),Bain&21SoutheastAsiancountries’ambitionsforvoluntarycarbonmarket(2023),CompanyReccessaryEnablingaNetZeroworld11PwC112.2CorporatesarefacingpressurestodecarboniseReportInrecentyears,therehasbeenincreasingThisincludescorporateaccountabilityforhighlightspressureandabrighterspotlightonGHGemissions,effortstodecarbonisetheircompaniestodisclosetheirsustainabilityoperationsandsettingtargetsfortheirTheandclimatechangeeffortsandinitiatives.environmentalperformance.CompaniesaredecarbonisationTheevolvingreportingstandardsandbeginningtotakestepsinpursuitoflandscapeincompliancelandscape,madeupofdecarbonisationandrespondtothesevariousSoutheastAsiastandardssuchasthosefromtheTaskforceexternalandinternalincentivesandforClimate-relatedFinancialDisclosurespressures.Unpacking(TCFD)andtheInternationalSustainabilityNetZeroStandardsBoard(ISSB),areensuringThetablebelowprovidesasummarycompaniesarebeingheldincreasinglyofthemostcommonreasonswhyExploringaccountableinthisarea.corporatesdecarbonise.renewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixTable2:Reasonsforcorporatestodecarbonise22ReasonstoDescriptionInternalordecarboniseexternalExternalNationalorNationalorregionalregulationswhichrequireacompanytoreduceregionalemissions,useacertainamountofrenewableenergyorotherExternalcompliancedecarbonisationregulations.ExternalDisclosureRequirementstodisclosesustainabilityinformationmayputacompliancecompanyinapositionwheretheyareincentivisedtodecarbonise,Externalforexample,needingtodisclosedecarbonationtargetsandefforts.InternalSupplychaincomplianceBusinesscustomersofacompanywhomaywanttodecarboniseInternaltheirsupplychaineithervoluntarilyortocomplywithregulationsStakeholdersuchastheEU’sCarbonBorderAdjustmentMechanism.pressureThereisincreasingpressurecomingfrombusinesscustomers,Initiativesinvestorsandinternalstafftodecarbonise.(RE100orSBTi)AcompanymaywanttopurchaseRECsandcarboncreditsintomeettargetssetbyinitiativessuchastheRE100orSBTi.Assuch,Voluntarycareshouldbetakentobefamiliarwithwhatisallowedundersuchsustainabilityinitiatives.ambitionAcompanymayhavetheirownambitionstobemoresustainableandtodecarbonise.ThismayalsoincludethedesiretosupporttheunderlyingprojectsgeneratingRECsandCCs.22PwCanalysisEnablingaNetZeroworld12PwC12WithinSEAtherehavebeenanincreaseofcorporatessettingdecarbonisationtargets,however,notalltargetsarevalidatedorbasedontheSBTi,suchisrepresentedintheReportfigurebelow.Formoreinformationondecarbonisationtargets,refertothenextsection.highlightsFigure2:Statisticsofthetop50-listedcompanies’(bymarketcapitalisation)decarbonisationThetargetsinselectedSEAcountries23.decarbonisationlandscapein80%SoutheastAsia60%Unpacking40%NetZero20%Exploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendix0%IndonesiaMalaysiaPhilippinesSingaporeThailandVietnamDecarbonisationtargetsDecarbonisationtargetsbasedOtherdecarbonisationverifiedbySBTionSBTibutnotverifiedtargetsInternationalpressures-SpotlightontheEUCarbonBorderAdjustmentMechanism(CBAM)TheCarbonBorderAdjustmentMechanismTherefore,CBAMmayhaveakeyimpacton(CBAM)isacarbontariffoncarbonintensivecertainproductsfromaffectedcompanies.InproductswhichwillrequireEUimporterstoaddition,therecanbepressurestoreporttheGHGsreleasedduringproductiondecarboniseanorganisation’ssupplychainofspecificresourcesandin2026.From1emissions,ofwhichsuppliersresideinSEA.October2023,CBAMhasenteredintoeffect,startingwithatransitionalphasethatrunsFigure3:ExportvalueofCBAM-relevantuntiltheendof2025.commoditiestotheEU,basedon2019tradedataSEAeconomies’dependenciesonEU$1200exportsrangefrombetween8and25%24.Theeffectsofsuchregulationscouldhavea$1000significantimpactoncertainSEAcountriesandindustries,andserveasadrivertoUSDmillion$800decarbonise.$600ThecountriesofSEAmostaffectedbyCBAMareVietnam,Indonesia,andThailand$400largelyduetotheexportofplastic,iron,chemicals,andaluminumtotheEU25(more$200informationonCBAManditsimpactsonSEAcanbefoundinAppendixC).$0IndonesiaThailandVietnamAluminiumCementChemicalsFertilizerIron&steelPlasticsandarticlesthereof23SustainabilityCountsII-StateofsustainabilityreportinginAsianPacific(2023),PwC24TheObservatoryofEconomicComplexity(2023),MIT25Trading-off:ExploringthepotentialimplicationsoftheEU’snewCarbonBorderAdjustmentMechanismforSoutheastAsianeconomies(2023),NewClimatePwC133UnpackingNetZero3.1.Context3.2.Carbonneutral3.3.NetZero3.4.Actionsbeyondacompany’sNetZerotargets3.5.StepsforcorporatedecarbonisationEnablingaNetZeroworld14PwC143WithnationalNetZerotargetsbeingset3.3.NetZeroinSEA,itisalsoimportanttounderstandReportthevarioustypesofcommitmentswhichNetZeroatagloballevelinlinewiththehighlightscompaniessettoestablishtheirParisagreementreferstoabalanceofdecarbonisationambitions.carbonsourcesandsinkstoachieveThetemperaturegoals29(formoreontheParisdecarbonisation3.1Contextagreement,seeAppendixA).landscapeinNetZerotargetsforbusinessesrequireSoutheastAsiaThissectionexplorestheprimarythemtofirstreducecorporateGHGcommitmentsacompanycanmake,emissionsatapacealignedwiththeParisUnpackinghowoffsetsareappliedtosuchgoalsby2050,andthentackleresidualNetZerocommitments,aswellasthenuanceemissionswithcarbonoffsets.withinrelevantterminology.ExploringSomecompaniesmayadditionallychooserenewable3.2.CarbonneutraltoalignwiththeSBTi.TheSBTicontainsitsenergyownrequirementsforachievingtheNetprocurementCarbonneutraliscommonlyunderstoodZerobasedontheNet-ZeroStandard.methodsandwhereanorganisation’semissionsareAccordingtotheStandard,companiesmustrenewable“balanced”or“neutralised”bypurchasinganusepermanentcarbonremovalandstorageenergyequivalentvolumeofemissionsoffsets26.toneutralisethefinal<10%ofresidualcertificatesCorporatecarbonneutralitycommitmentsemissionsthatmustbeeliminatedaftera(RECs)mainlyonlytakeintoconsiderationofcarboncompanyhasachieveditslong-termtargetdioxideemissionsbutmayincludeotherandcutemissionsby>90%30.ExploringGHGemissions.Additionally,coveredInotherwords,SBTitargetsdonotcarbonbusinessactivitiesshouldincludeScope1,recognisecarbonoffsetsascountingoffsets2,andmayincludeScope3emissions(fortowardsinterimtargets,andonlyallowformoreinformationonScope1,2,and3removalsoffsettingtocounterbalanceAppendixemissions,pleaserefertopage16).residualemissions.AscarbonneutralitymaybeachievedwithoutnecessarilyhavingreducedemissionsbyamountsconsistentwithreachingNetZeroatagloballevel27,thepursuitofcarbonneutralitydoespresentapotentialriskofconcealingtheneedformoreambitiousdecarbonisationefforts.Assuch,companieswhowishtosetcarbonneutralitycommitmentsshouldstilldecarbonisetheiroperationstothebestoftheirability.Arecentstudy28showsthatitisusuallythecase,ascompaniesthatarematerialusersofcarboncreditsdecarbonisetwiceasfastasthosewhodonot.26AchievingCarbonNeutrality(2020),CarbonOffsetGuide29WhatisNetZero?(2023),UniversityofOxford27Net-ZeroJargonBuster-aguideforcommonterms(2021),SBTi30TheCorporateNet-ZeroStandard(2023),SBTi28Corporateemissionperformanceandtheuseofcarboncredits(2023),MSCIEnablingaNetZeroworld15PwC153.4.Actionsbeyondacompany’sNetZerotargetsReportWhiledecarbonisingatapacealignedwithInaddition,otheractionsfromcorporatesthathighlightstheParisAgreementiscritical,companiescancontributetothepursuitofglobalNetareoftenalsoencouragedtoavoiddelayingZero,outsideofacompany’sownNetZeroThecriticalinvestmentsintoclimatesolutionscommitment,includethepurchaseofRECsdecarbonisationwhichareavailabletoday31.Thepurchaseofasinvestmentstofurtherrenewableenergylandscapeincarboncreditscanbeseenasameansofdevelopments,ratherthanthembeingusedSoutheastAsiatakingfurtheractionbeyondcorporateleveltoreduceScope2emissions.NetZeroambitions.UnpackingNetZeroExploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixTable3:SummaryofcommitmentambitionlevelsandtheuseofRECsandcarboncreditswithinthecommitmentsCarbonneutralNetZeroActionsbeyondacompany’sNetZerotargetDiagramrepresentationEmissionsreducedEmissionsreducedEmissionsneutralisedOffsetsforresidualemissionsAdditionaloffsetsScope1Scope2Scope3DefinitionEmissionsproducedbyCompaniescommittoreduceCompaniesfundorpurchasecompanyactivitieswillbeScope1,2,and3GHGemissionscarbonoffsetsinadditiontotheirbalancedbyanequivalenttoasclosetozeroaspossible.NetZeroefforts.volumebeingremovedfromtheatmosphere.ThisappliestoScope1,2,andpotentiallyScope3emissions.RECsCanbeusedtobalanceoutCanbeusedtoreplaceScope2CanbepurchasedtoachieveNetScope2emissionsemissionsZerocommitmentsunderScope2aswellastoaidfurtherCanbeusedtobalanceoutCanbeusedforresidualrenewableenergydevelopment.emissionsemissionsbutnottobeusedtoprogressreductionofScope1,2CanbepurchasedtocompensateCarbonor3emissionsinaccordancewithanorganisation’sunabatedcreditstheNet-ZeroStandardemissions,andtocontributetobeyondthat.31TheEvolvingVoluntaryCarbonMarketPaper(2023),IETAPwC16EnablingaNetZeroworld16Report3.5StepsforcorporatedecarbonisationhighlightsThefollowingarestepscompaniescantaketowardsdecarbonisation:ThedecarbonisationStep1:Step2:Step3:landscapeinReduceReplaceRemoveoravoidSoutheastAsiaOftenreferredtoasThenextstepistoreplaceAfterreducingandreplacing,Unpackingmitigation,thisactivityisorsubstitutebyreplacingcorporatescantackletheNetZeroessentialtogettingtoNetelectricitypurchasedwithresidualemissionsforthoseZero.MitigationactionsarerenewableenergysourcesemissionsthatarehardtoExploringmeasuresthatprevent,orotherlow-carbonabate.Insuchcases,carbonrenewablereduce,oreliminatesourcesalternatives(e.g.replacingoffsetssuchascarboncreditsenergyofemissionswithinaelectricitythatisreliantonmaybeusefultooffsetanyprocurementcompany’sbusinessactivitiesfossilfuelswithlow-carbonresidualemissions.methodsand(e.g.ensuringminimalsourcesisanothermethodrenewablecoolantleaksorimprovingtodecarboniseandreduceAdditionally,carboncreditsenergyefficiencyofoperationstoScope2emissions).arekeyinstrumentstofundingcertificatesreduceenergyuse).Thiscarbonoffsettingprojects(RECs)shouldbethepriorityinaTherenewableenergy(moreinformationoncarboncompany’sdecarbonisationmethodsasrecognisedbyoffsettingprojectscanbeExploringstrategy.theRE100(pleaserefertofoundonpage27).carbonpage18formoreoffsetsCompaniesareresponsibleinformation)includeAlthoughcarbonoffsetsarefor,andexpectedtoaccountself-generation,physicalusefulinstrumentsinaAppendixfor3typesofemissions:powerpurchaseagreementscorporate’sdecarbonisation(PPAs),virtualPPAs,journey,theyshouldnotbe•Scope1:Directemissionscontractswithsuppliers,andusedasasubstituteforeithersuchascarbondioxideenergyattributecertificatestheReduceorReplacestage.emittedbyapower(EACs)(whichincludeAsdiscussedinsection3.3,generatorusedbytheRECs).Formoretheyshouldnotbeusedtocompany,emissionsfrominformationonthevariousreachacompany’sNetZerogasleaksfrompipes,orrenewableenergytargets.emissionsfromprocurementmethods,non-electricfleetvehicles.pleaserefertopage19.Thisreportwillanalysethenuancesandprovideguidance•Scope2:IndirectOtherexamplesincludeonhowdecarbonisationcanemissionsthatcomefromreplacingdieselwithbeaidedthroughtheuseofenergypurchasedandbiodiesel,orhighGlobalRECsandCCs.usedsuchastheWarmingPotential(GWP)equivalentenergyfromGHGgaseswithlowerorelectricityusage.zeroGWPgasestodecarboniseandreduce•Scope3:EmissionsnotScope1emissionstoo.producedbythecompanyitself,butemissionsfromitsvaluechainsuchasthosefromitssupplierstomakematerialsneededforproducts,andfromitsproductsafterbeingpurchased.PwC174Exploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)4.1.Whyprocurerenewableenergy4.2.RECsinthecontextofSEA4.3.ConsideringRECprocurement4.4.OngoingdiscussionsonRECsEnablingaNetZeroworld18PwC184SEAisaregionwithpromisingrenewableenergypotential32.Somesuggestthatoneofthegreatesthurdlestorealisingthispotentialisalackofbankableprojectstofinance33.Assuch,itReportappearsthatsecuringadequatefinancingisanecessaryprerequisiteifSEAisgoingtohighlightseffectivelytransitionitssupplyofenergytowardsrenewables-andinturn,acceleratethepaceofdecarbonisationwithintheregion.Thedecarbonisation4.1.Whyprocurerenewableenergy4.1.2.ApplicationofrenewablelandscapeinprocurementmethodsundertheSoutheastAsia4.1.1.WhataretheRE100andSBTi,RE100andtheGHGProtocolSBTi?UnpackingTheRE100technicalcriteriaaremostlyanNetZeroTheRE100andtheSBTiarebothinitiativesinterpretationoftheGHGProtocolCorporateavailableforcompaniestojoin.DoingsoStandardScope2accountingguidance,ExploringcanincreasethecredibilityofNetZerowhiletheSBTisimilarlyusestheGHGrenewabletargetsandclimatechangedisclosures.ProtocolScope2QualityCriteriatoenergydeterminethequalityofRECs.procurementmethodsandRE100Thethreesetsofstandardsandcriteriarenewablecrossreferenceeachother.ForenergyTheRE100isaglobalcorporaterequirementsonreportingrenewableenergycertificatesrenewableenergyinitiativewiththegoalprocurement,theGHGProtocolshouldbe(RECs)ofgettingtheworld’smostinfluentialreferenced.ForeligibilityofRECs,thebusinessestocommitto100%RE100shouldbereferenced.Exploringrenewableenergyandreachthistargetcarbonby2050.RE100isaimedatlargerTheprocurementmethodslistedinTable4offsetscorporations,howevercompanieswitharerecognisedbytheGHGprotocol,RE100smallerconsumptionarealsoeligible,andtheSBTi.Appendixundercertainconditions.FortheserenewableenergyinstrumentstoSBTibeeligibletoreportScope2reduction,theymustmeetcertaincriteriaandbereportedTheSBTi’sobjectiveistohelpaccordingtotheGHGProtocol.companiescreateeffectiveGHGemissionreductionpathwaysandTheRE100recommendsrenewableprovideconfidenceintheeffectivenessenergyprocurementmethodsthatofcompanydecarbonisationstrategies.providemoredirectsupporttonewgeneration.HoweveritisrecognisedthatTheSBTi’sNet-ZeroStandardwastheseoptionsmaynotalwaysbedevelopedtoprovideastandardisedandavailableforacompany.robustapproachforcorporateslookingtosetNetZerotargetsalignedwithREprocurementoptionswithmoreclimatescience.Itcontainsguidance,directsupporttoprojectsshouldbecriteria,andrecommendationstoexploredfirst.ThefollowingsectionssupportcorporatesinsettingprovideinformationonandaNetZerotargets.guidetotheprocurementofRECsinthecontextofSEA,oftenwheresuchoptionsmaybeunavailable.32RenewableEnergy:TheTop-PriorityforSoutheastAsiatoFullyBlossom(2023),RenewableEnergyInstitute33SoutheastAsiannationsfacegrowingenergysecuritychallengesandneedtoacceleratetheircleanenergytransitions(2022),IEAEnablingaNetZeroworld19PwC19Table4:Comparisonofrenewableenergyprocurementmethods343536ReportSelf-generationContractwithPhysicalPPAVirtualPPARECshighlightsgreenelectricityproductsThesupplierdecarbonisationlandscapeinDescriptionREprocuredThisisprojectAtypeofApurelyfinancialRECsareSoutheastAsiafromanon-sitespecificandiscontractbetweentransactioncertificatesthatoroffsiteprojectdescribedasanacorporatewhereapermitaclaimtoUnpackingownedbythearrangementbuyerandcorporatebuyerhavingNetZerocorporatebuyerwherebythegeneratorasassumesmarketconsumedthemselves.supplierpurchasedfromriskrelatedtoelectricitywithExploringprocuresfromon-siteprojectsthesaleofatheattributesrenewablespecifiedownedbythirdgenerator’sconveyedbytheenergyprojectsonpartiesoroff-siteelectricityandREC.procurementbehalfoftheprojectswherereceivesRECs.methodsandcorporatebuyer.thereisadirectThereisnorenewableItisoftenline,oroff-sitephysicalenergyadvertisedasagrid-connectedelectricitycertificates“greentariff”.REgenerationtransmittedwith(RECs)projects.thecontract.ExploringcarbonoffsetsAppendixUpfrontYesNoNoNoNocapitalinvestmentOngoingLikelycostCostpremium,LikelycostLikelycostCostpremiumexpendituressavingoverthetariffmayoffersavingoverthesavingovertherelativetolifeoftheprojectsavingslifeofthelifeoftheincumbentcontractcontractelectricityoptionTermofOperationallifeMonthly,MultiyearMultiyearVaries,commitmentofinstalledmultiyearforsignificanttechnologygreentariffflexibilityLevelofriskProductionriskLowtomediumBasisriskiftheprojectisinaNoprojectlevelforrisk,littlecontroldifferentregionrisk,contractcorporationdurationriskTransactionMediumtohighLowMediumHighLowcomplexitySupportsHighHighHighMediumMediumregionalREdeploymentActiveorActiveActiveActiveActivePassivePassiveKeyRelevantDiscloseBundledThevintagemustbe“reasonablyrequirementsemissionstobeemissionfactorcertificatescanclose”(claimedthesamecalendaraccordingtoreportedasthatappliestoallbeclaimed.yeartheyaregenerated).TheyaretheRE100Scope1.energydeliveredAudittrailoronlyrecognisedtobeclaimediftheandGHGElectricityandmethodofothercertificateisgeneratedinthesameProtocolconsumedfromcalculation.mechanismsaremarketastheywillbeclaimed.projectisnotneededtoreportedasdemonstratenoScope2.doublecounting.Basicriskisthepotentialriskthatcanarisefrommismatchesinahedgingposition.Tenureistypicallybetween10to20yearsMoreonreportingREprocurementandRECscanbefoundonpage25.FormoreinformationonthevariousREprocurementmethodsaccordingtotheRE100,seeAppendixB.34GreenPowerProductOptions(2023),U.S.EPA35GreenPowerSupplyOptionsComparisonTab(2023),U.S.EPA36PoliciesforEnablingCorporateSourcingofRenewableEnergyInternationally(2017),NationalRenewableEnergyLaboratory(NREL)EnablingaNetZeroworld20PwC204.2.RECsinthecontextofSEARECMarketBoundariesbasedontheSingaporeStandards(SS)673Report4.2.1.RECmarketboundarieshighlightsTheSingaporeStandardsCouncil(SSC)RECmarketboundariesbasedandEnterpriseSingaporelaunchedtheTheontheRE100“SingaporeStandard673:CodeofdecarbonisationpracticeforRenewableEnergylandscapeinAccordingtotheRE100,claimstouseofCertificates,”asetofvoluntaryrulesforSoutheastAsiarenewableelectricitymustbebasedontheRECsecosysteminSingapore.ThegenerationoccurringinthesamemarketstandardwascreatedduetothegapUnpackingasthelocationitistobeusedin.AmarketbetweenthenumberoflargelocalandNetZeroforrenewableelectricityreferstoanareamultinationalconsumersandinwhich:Singapore’sfinitelandspace.ItservesExploringasaframeworktoallowSingaporeanrenewable•ThelawsandregulatoryframeworkbuyersofRECsareferencetofollowenergygoverningtheelectricitysectorarewhenitcomestousingRECsprocurementconsistentbetweentheareasofprocurementforScope2NetZeromethodsandproductionandconsumption.fulfillment.SS673isintendedtorenewablefacilitateconsistencyintheproduction,energy•Electricitygridsaresubstantiallytracking,management,andusageofcertificatesinterconnected,indicatingalevelofRECsformakingrenewableenergy(RECs)systemwidecoordination.claimsinSingapore.ItisnotacustomerrecognitionprogrammeliketheRE100.Exploring•Utilities/suppliersrecogniseeachcarbonother’senergyattributesandaccountDuetothelimitedsupplyofREinoffsetsforthemintheirtradeofenergyandSingapore,theSS673allowsRECsenergyattributes.buyerstouseSoutheastAsianRECsAppendixtomatchtheirelectricityThemarketexceptionsaretheUSAwithconsumption.Inthisway,whilenotCanadaandthesinglemarketinEurope.meetingRE100requirements,itenablesAsofDecember2022,SEAdoesnotRECsbuyerstodotheirparttosupportmeetthecriteriatobeconsideredaREprojectdevelopmentinthesinglemarket.In2022,RE100heldaneighboringcountries.TheacceptablepublicconsultationaroundchangestothemarketboundariesarethosefromtheRE100technicalcriteriawhichincludedaUNGeoschemeforSoutheastAsia,proposaltorecognisephysicalwhichincludesallASEANmembersprocurementofrenewableelectricityandEastTimor.acrossamarketboundaryundercertainconditions.Inresponsetothelimitedinterconnectionbetweennationalgridsandcontractsfortradeofenergy37andenergyattributesindevelopmentbetweentherelevantcountries,theproposalforSEAtobeconsideredtobeasinglemarketwasultimatelywithdrawn.However,RE100willcontinuetostudydevelopmentsinkeymarketswhichcouldeventuallygivecompaniescredibleclaimstouserenewableelectricitygeneratedoutsideofthosemarkets.“SS673isanalternativeframeworktotheRE100rulesenablingSingaporecompaniestoprocureRECsandmakesustainabilityclaims.ItactsasapracticalwayforSingaporecompaniestofinanciallysupporttherenewableenergyindustryinSoutheastAsia,sendingaclearmarketsignalformoreREprojectstobebuiltintheregion.”JenWeeKang,REDEX37RegionalelectricitytradeinASEAN-Theroadaheadtoanintegratedandgreenerelectricityfuture(2023),PwCSingaporeEnablingaNetZeroworld21PwC214.2.3.RenewableenergypotentialinSoutheastAsiaReporthighlights4.2.2.RECsmarketlandscapeIthasbeensuggestedthatSEAcountrieshaveinSEAthepotentialtomeettheirgrowingenergyThedemandwithrenewablesandcut75%oftheirdecarbonisationAllRECmarketswithinSEAarecurrentlyenergy-relatedemissionsby205039.Additionally,landscapeinvoluntary,withtheexceptionoftheestimatessuggestthatreducedenergycostsSoutheastAsiaPhilippines38.ThePhilippineshasitsownarisingfromtheincreaseduseofrenewablesPhilippineRenewableEnergyMarket(REM).ItcouldsaveuptoUSD160billionby2050,whileUnpackingisintendedtobeafacilityformandatedcostsavingsrelatedtoavoidedhealthandwiderNetZeroparticipantstocomplywiththeRenewablenegativeenvironmentalimpactscouldbeasPortfolioStandards(RPS)throughtradeoflargeasUSD1.5trillion.ExploringRECs.RPSisamarket-basedpolicythatrenewablemandateselectricitysupplierstosourceanSoutheastAsiaalsohaspotentialindevelopingenergyagreedportionoftheirenergysupplyfromrelatedmanufacturingcapacity:growingSEAprocurementeligibleREresources,contributingtothesolarphotovoltaiccells,batteries,andelectricmethodsandgrowthoftheREindustryinthecountry.two-wheelerindustrieshasanestimatedrenewableEntitieswithspecificREgenerationfacilitiespotentialofUSD90to100billioninrevenue40.energycanalsoparticipateinREMvoluntarily.certificates4.2.4.HowareSEAcompanies(RECs)SomecountriesinSEAhaveestablishedtheirprocuringrenewableenergy?ownnationalregulations,instrumentsandExploringissuersregardingRECs.AspartoftheirSBTicommitments,itcanbecarbonobservedthatcompaniesfromSEAhavetakenoffsetsMalaysiahasestablisheditsownnationalstepstoprocurerenewableenergy.MalaysianRECs(mRECs),whicharebasedonAppendixtheInternationalRenewableEnergyWithinSingapore,Singtel41andCityCertificates(I-REC)standardsandmanagedDevelopmentsLimited(CDL)42havefollowedundertheirregistry.So-calledmRECsarenotthebestpracticeofonlypurchasinglocalRECsavailabletobetradedbutaremeanttobewithinSingapore,whereSingtelhasstatedthatredeemed/retiredbyendcustomersdirectlytheywillonlypurchaseinternationalRECsifalongwithrightsclaimedtotherenewableotheroptionsareexhausted.Singtelhasalsoenergygenerated.signedaPPAtoaccountfor13%ofitsdatacenterenergyconsumptionwhileCDL43hasWhileThailanddoesnothaveitsownnationalinstalledonsitephotovoltaicpanelspoweringRECcreditsormarkets,theyhavemadestepspartsoftheiroperations.StarHubhasalsoinestablishingalocalI-RECissuer:ElectricitysignedavirtualPPAin2022tosecureGeneratingAuthorityofThailand(EGAT),whilerenewableenergyforthenext13years44.TheyothercountriessuchasSingapore,Indonesia,additionallypurchasebothlocalSingaporeVietnam,andLaosusetheGreenCertificateRECsandRECsgeneratedfromsolarCompany(GCC)astheirI-RECissuer.photovoltaicsinVietnam,howevertheinternationalRECshavenotbeencountedSingaporeasdiscussedintheprevioustowardsStarHub’sScope2reductionintheirsection,launchedtheSS673toprovidealocal2022report45.frameworkforRECpurchase.InIndonesia,GoTo46wasamongthefirstMoreinformationonRECtradingwithinSEAcompaniestosupporttheIndonesiancanbefoundonpage23.government’seffortsinacceleratingthetransitiontorenewableenergybypurchasingRECsfromIndonesia’sstate-ownedutilitiescompany.Additionally,someoftheiroperationsutilisesolarpanelstogeneratesupplementaryenergywithmoreprojectssuchasthistobeaddedovertime.AyalaLand47hasanumberofpropertiesinthePhilippineswhichhavesignedpowersupplyagreementsandpurchasedRECsimprovetheratioofrenewableenergyintheirenergymix.38RenewableEnergyCertificates(RECs)inSixAPECSoutheastAsiaEconomies(2023),AsiaPacificEnergyResearchCentre39ASEANCanCoverTwoThirdsofEnergyDemandwithRenewables(2022),IRENA40RenewableEnergyManufacturinginSoutheastAsiaCanGenerate$90Billionto$100BillioninSustainableRevenueby2030(2023),ADB41Ourpurposedrivenjourney-SustainabilityReport2023(2023),Singtel42ZeroinonPositiveImpact-Integratedsustainabilityreport2023(2023),CDL43Acceleratingrenewableenergysolutions(2022),CDL44StarHubNamedWorld’sMostSustainableTelcoon2023CorporateKnights’Global100(2023),Starhub45SustainabilityAnnualReport2022(2022),StarHub46OneEcosystemOnePurpose-2022SustainabilityReport(2022),GoTo47EnrichingCommunitiesForGenerations-IntegratedReport2022(2022),AyalaLandEnablingaNetZeroworld22PwC224.3.ConsideringRECprocurementStepR2:DeterminethequantityofrenewableenergyrequiredReportInthefollowingparagraphs,wesummarisehighlightspotentialconsiderationsforcorporatesthatwishAftertheselectionoftherenewableenergytype,toutiliseRECsforpartoftheirmitigationthenextquestionforcompaniestoreflectonisThestrategy.howtodeterminethequantityofrenewabledecarbonisationenergytoprocure.ThequestionsbelowhelptolandscapeinStepR1:UnderstandthetypesofsetthebasistodeterminethequantityandSoutheastAsiarenewableenergyprojectstoprocurenatureofrenewables:UnpackingThereareseveraltypesofrenewableenergy•WhatisthedesiredoutcomeoftherenewableNetZerosourcessuchaswind,solar,geothermal,etc.energyprocurement?ToachieveScope2Companiesmayprocurefromdifferenttypesofemissionstargets?Exploringprojects,dependingonavailability,cost,andrenewablegridconnectivity.•Forcompanieswithoperationsinmultipleenergylocations,howmuchrenewableenergyisprocurementWindSolarGeothermalrequiredineachlocation?Istheresufficientmethodsandrenewableenergypotential/RECsavailablerenewableFactorssuchaspotentialrisks(andthusifinthatlocationandhowmuchisthepriceforenergytheyarewidelyrecognised)shouldalsobeRECsandrenewableenergyprocurementincertificatesconsideredwhenchoosingarenewabledifferentlocations?(RECs)energysource.•HowmuchelectricitycanbeprocuredthroughExploringdirectrenewableenergyprocurementandcarbonhowmuchoftheremainingelectricitydoestheoffsetscompanywishtopurchaseRECsfor?AppendixForexample,Singtel52hastakeninitiativestoincreasedeploymentofonsiteandoffsiteREasConcernsthatlargedamsandwellasRECpurchasestoprogresstowardstheirSBTi1.5°Cambition.ConsideringtheREreservoirscancausesignificantprocurementpotentialindifferentoperatinglocations(SingaporeandAustralia),SingtelHydrodamagetotheenvironmentandadopteddifferentstrategiesfortheREpowerprocurementinSingaporeandAustralia.ecosystemsurroundingthem48.InSingapore,wherelocalrenewableenergysupplyandonsiterenewableenergyislimited,NuclearConcernsregardinghealthrisks,SingtelislookingtodevelopaportfolioofRECsandexploreimportedREinthecomingyears.Inaccidents,andlong-termimpactdueAustraliawheretherenewableenergypotentialtoradioactivenuclearwaste49.islarger,Singteliscommittedtohave100%oftheirelectricityrequirementsinAustraliabackedDespitethis,nuclearandhydropowerdoesformbyrenewableenergysourcesbyend2025.InSingtel’sREprocurementstrategy,thepriorityisanotableportionoflow-carbonelectricityonsiteREfollowedbyoffsiteREandthenuseRECinSingaporeorlarge-scalegenerationgenerationandcollectivelyprovidecertificates(LGCs)inAustraliaforremainingScope2emissiongaps.three-quartersofgloballow-carbongeneration50.HydropowerinparticularisasignificantsourceofenergywithinSoutheastAsia51.SuchimpactsshouldbeconsideredwhenselectingrenewableenergysourcesforRECs.IfRECsarebeingpurchasedtoreducemarket-basedScope2emissions(formoreinformationonmarket-basedreportingseepage26),companiesaretakingthefollowingfoursteps:LocationA’semissionin2023(tCO2e)EmissionforlocationAActualemissionRECsrequiredin=ElectricitylocationA(#/MWh)=consumption(MWh)forEmissionsEmissiongapforlocationAGridgaplocationA(tCO2e)/GridemissionfactorofemissionfactoroflocationA(tCO2e/MWh)TargetlocationA(tCO2e/MWh)emissionStepA:ConductaStepB:ApplyaStepC:CalculatetheStepD:ARECrepresents1MWh.surveyoftheelectricityconversionofMWhintodifferencebetweenThedifferenceinStepCcanbeconsumptioninMWhCO2equivalentswiththeemissioncalculatedconvertedbacktoMWhusingtheforthegivenyearforemissionfactoroftheunderStepBandtheemissionfactorusedinStepB.differentlocations.locationwheretheRECistargetScope2Thenumberfoundistherequiredgeneratedforthegivenyear.emissions.amountofRECtoreachthecompany’sScope2target.RE100andSBTirequireRECstobecalculatedforeachlocationindividualduetorestrictionofcrossborderRECpurchase.48Whyaren’twelookingatmorehydropower?(2021),MIT51ClimateImpactsonSouthandSoutheastAsianHydropower(2021),IEA49TheNuclearDebate(2022),WorldNuclearAssociation52Ourpurposedrivenjourney:SustainabilityReport2023(2023),50NuclearPowerinaCleanEnergySystem(2019),IEASingtelPwC23EnablingaNetZeroworld23ReportStepR3:UnderstandRECstandardshighlightsThetwomainregistriesinSEAforRECsaretheI-RECandTradableInstrumentforTheGlobalRenewables(TIGR).I-RECwasestablishedin1982andisobservedtobemoredecarbonisationwidelyusedglobally,whiletheTIGRwaslaunchedbyXpansiv(APX)in2017.landscapeinSoutheastAsiaWhilesomebuyersmaypreferI-RECduetoitsvolume,bothregistriesarerecognisedbyglobalinitiativesandstandardssuchastheRE100,GHGProtocolandtheCDP.UnpackingNetZeroStepR4:ChoosetheRECplatformExploringWithinSEA,thereisavarietyoflocalandinternationalplatformsavailableonwhichtotraderenewableRECs.Theseincludebutarenotlimitedto:energyprocurementFigure4:Non-exhaustivemapofRECplatformsmethodsandrenewable・GoNetZeroisaRECsenergyplatformbasedincertificatesSingaporesetupby(RECs)SembcorpIndustries.Exploring・IndonesiaClimatecarbonExchange(ICX)isanoffsetsIndonesianmarketthatisaplatformforRECsandotherAppendixclimaterelatedmarkets・REDEXoffersservicestomanageRECsmadeforbothbuyersandsellersglobally.・REMisthePhilippineRenewableEnergyMarketmanagedbythePhilippineRenewableEnergyMarketSystem(PREMS).・SPGroupRECMarketplaceisaRECsmarketplacebasedinSingaporeoperatedbySPGroup.・TNBXisasubsidiaryofTenagaNasionalBerhad(TNB)andisaMalaysianmarketplacewheremRECsareeligibletobepurchased.OnechallengenotedintheregionisthelackofstandardisationandtransparencyofRECmarketsystemsasdifferentplatformsusevaryingstandardsandregistrieswithinasinglecountry.EnablingaNetZeroworld24PwC24ReporthighlightsThedecarbonisationlandscapeinSoutheastAsiaUnpackingNetZeroExploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixStepR5:PurchaseandretireRECsAccordingtotheRE100TechnicalcriteriathecompanyshallretirethecertificatesitRECscanonlyhaveoneowneratanypurchases,orthecertificatesshallbepointintimeandeachhasauniqueserialretiredbyutilitiesorsuppliersonbehalfnumbergeneratedontheregistrytoofthecompany.Retailproductsshallbeidentifyandtrackit53.Bypurchasingandcertified,orsalesshallotherwiseberetiringaREC,theownercanclaimtheverifiedbyathirdpartytoensurethesoleuseofthatgreenpower.PurchasedaccurateandexclusivedeliveryofRECsare“retired”byoronbehalfofthecertificatesaswellasanexclusivepurchaserinatrackingsystemtoavoidclaimontheattributes.WherecertificatesmultipleownershipofaREC(thisisdonearepurchaseddirectlyandcertificationtoavoiddoublecounting,orclaimingoftheprogrammesarenotusedoravailable,environmentalbenefitbymorethanoneexclusiveclaimsmustotherwiseentity).Forexample,awindprojectbeverified.generatesRECsthatareissuedtotheprojectowner.WhenaRECissold,theCorporatebuyerscanclaimuseofRECistransferredtothepurchaserwhodefaultdeliveredrenewableelectricityif,maythenchoosetoresellorretiretheandonlyif,anequivalentamountofREC,theprojectownermayalsobeableRECsisretiredbytheutility/supplier.toretiretheRECforthepurchaser.BeforeCorporatebuyerswishingtoclaimuseofaRECisretired,itcanberesoldmultiplerenewableelectricitymustseekrelevanttimes(withtheexceptionofmRECsininformationfromtheirutility/suppliertoMalaysia).OnceaRECisretired,itcannotjustifytheirclaims.besoldortransferredagain.Toensurethisandavoiddouble-counting,manyplatformshavebeguntoimplementblockchaintechnology54.53RenewableEnergyCertificates(2022),U.S.DepartmentofEnergy54Theblockchainandenergyattributetracking(2019),RECSInternationalEnablingaNetZeroworld25PwC25StepR6:DiscloseRECsReportTable5:NonexhaustivelistofsustainabilityreportingstandardswithREChighlightsreportingrequirementsTheStandardReportingRECsdecarbonisationlandscapeinGHGProtocol55RECsandotherrenewableenergyprocurementmethodscanbeSoutheastAsiausedtoreducemarket-basedScope2emissions.However,bothlocation-andmarket-basedemissionsshouldbereported.UnpackingNetZeroOtherdetailsthatshouldbedisclosedinclude:•Dataonemissionfactorhierarchyusedforcalculations.RegionalExploringrenewableorsubnationalemissionfactorsshouldbeprioritised.Iftheseareenergyunavailable,nationalproductionemissionfactorssuchasthoseprocurementfromtheInternationalEnergyAgency(IEA)canbeused.methodsand•Energygenerationfeatures(e.g.:technologytype,facilityageorrenewablefacilitysiting,theenergygeneration’srelationshiptosupplierenergyquotas,etc.)certificates•PolicyregardingwhetherRECsaretreatedasoutput,inventory(RECs)orintangibles•GHGpoliciesforaccountingfortheircomplianceobligation(ifExploringapplicable)andanypotentialfinesandpenalties.carbonoffsetsAppendixInternationalPercentageofrenewableenergyinenergymixandtheirFinancialReportingprocurementmethodsmustbedisclosed.ThestandardrequiresStandards(IFRS)location-basedScope2reporting,whilemarket-basedreportingisS256optional.GlobalReportingDetailsofrenewableenergyfuelsourcesuchasthetypeofactivity,businessunitorfacilityandthelocatedcountrywheretherenewableInitiative(GRI)energyprocurementisbeingclaimedmustbedisclosed.Standards57SS67358DisclosetheoriginoftheRECorrenewableenergyprocurement,thetypeofrenewableenergy,modeofrenewableelectricityprocurement,andverificationofclaims.StandardshighlightthebestpracticeforuserssuchasusingRECswithinthesamemarketboundaryinwhichtheyoperateandconsumeelectricityAccordingtotheGHGProtocol,thelocation-basedmethodcalculatesemissionsbasedontheemissionsintensityofthelocalgridareawheretheelectricityusageoccurswhilethemarket-basedmethodcalculatesemissionsbasedonelectricitythatcorporateshavepurposefullychosen.Emissionfactorsunderthemarket-basedmethodmaybederivedfromthechosenelectricitysource(s)includingthosefromrenewableprocurementmethodssuchasRECs.4.4.OngoingdiscussionsonRECsTheSBTihasopenedaCallforEvidenceontheEffectivenessoftheUseofRECsinCorporateClimateTargetswiththeaimofhelpingthecorporateclimateactionecosystemunderstandwhetherdifferentinstrumentscancrediblydrivedecarbonisationandsupportcorporateemissionsreductionclaims59.ThefutureofRECswilllikelybeinfluencedbytheoutcomeoftheCallforEvidence.Assuch,newsfromtheSBTiinregardstoRECsshouldbecloselymonitored.55Scope2Guidance(2015),GHGProtocol56DisclosureStandard:Industry-basedGuidanceonimplementingClimate-relatedDisclosures(2023),IFRS57GRI302:Energy2016(2018),GRIStandards58NetSingaporeStandardlaunchtosupportmanagementanduseofRenewableEnergyCertificates(2021),EnergyMarketAuthoritySingapore59TheSBTiopensCallforEvidenceontheeffectivenessofEnvironmentalAttributeCertificatesinClimateTargets(2023),SBTiPwC265Exploringcarbonoffsets5.1.Whypurchasecarbonoffsets?5.2.Carbonoffsettingoptions5.3.CarbonoffsetprojectsinSEA5.4.Consideringcarboncredits5.5.OngoingdiscussionsoncarboncreditsEnablingaNetZeroworld27PwC275“Carbonoffsets”and“carboncredits”areoften5.1.Whypurchasecarbonoffsetsusedinterchangeably,astheenvironmentalReportimpactsofpurchasinghigh-qualitycarbonCarbonoffsetsareoftenpurchasedtocomplyhighlightscreditsaresynonymouswiththeenvironmentalwithnationalorregionalrequirementssuchimpactsofitscarbonoffset60.Broadly,tooffsetascarbontaxesandemissiontradingsystems.TheistorefertothecorporateactionofreducingHowever,carbonoffsetscanalsobedecarbonisationandavoidingemissionsthroughfundingcarbonusedvoluntarilyascompaniessettheirlandscapeinoffsetprojectssuchasfromthepurchaseofambitions,forexample,NetZero.SoutheastAsiacarboncredits.CarbonoffsetprojectsaredevelopedtoenabletheoffsetactionandcanDespitetheirpotentialtoharnessbothUnpackinggeneratecarboncredits.Carboncreditsarenature-basedandtechnology-basedNetZerothetradableinstrumentsverifiedbysolutions,SEAcarbonmarketsaregenerallygovernmentsorindependentcertificationlessdeveloped61.AsdiscussedintheExploringbodieswhichmaybepurchased,tradedorprevioussections,financingcarbonoffsetrenewableclaimed.OnecreditrepresentsonetonneofprojectscanhelptoenablethedevelopmentenergycarbondioxideequivalentofGHGemissionsofcarbonmarkets.procurementreducedorremoved.methodsandrenewableCorporatesmaybeimpactedbycompliancemarketsrequirementsinjurisdictionstheyenergyoperatein,orparticipateinthevoluntarymarkets.certificates(RECs)Whatdoesacompliancemarketmean?ExploringCompliancemarketsresultfromnational,regional,orinternationalpolicyorregulatorycarbonrequirementsthatrequirecompanies,andnationalandsubnationalgovernmentstoaccountoffsetsfortheirGHGemissionsbylaw62.Atnationalandregionallevels,compliancemarketsoftenincludecarbonpricingwhichisusedtoshifttheburdenofemissionsontothosewhoareAppendixresponsibleforit.Globally,thetwomaincarbonpricinginstruments63arecarbontaxesandETS,sometimesreferredtoascap-and-tradesystems,whichcapthetotallevelofGHGemissionsofdefinedsectors.Thisallowsforindustrieswithloweremissionstoselltheirextraallowancestolargeremitters,creatingsupplyanddemandandestablishesamarketpriceforGHGemissions.Thissystemdoesnothaveadeterminedprice,howeverthereisahigherconfidenceonoutcome.Ontheotherhand,carbontaxesarewherethepriceofcarbonisdefinedbyataxrateonGHGemissions.UnlikeforanETS,theemissionsreductionoutcomeforcarbontaxisnotpredefined.Ataninternationallevel,Article6oftheParisAgreementsetsupaframeworkforcooperationbetweencountriesinimplementingtheirnationallydeterminedcontributions(NDCs),forexamplethroughthetransferofInternationallyTransferredMitigationOutcomes(ITMOs)whichcanbeusedtolinkcompliancemarketsacrossborders.BylinkingdomesticETSswithother,andallowingforhigh-qualityoffsetsauthorisedunderArticle6,countriescanreachtheirclimatetargetsatlowercost,enablingforhigherambitionintheirNDCs.Whatdoesavoluntarymarketmean?Theglobalvoluntarycarbonmarketisdefinedasthevoluntarypurchasebycorporates(orothernon-stateactors)ofverifiedcarboncreditstocompensateforacompany’semissions.Creditscanbeprocuredeitherover-the-counter(OTC)orthroughExchanges(e.g.ClimateImpactX(CIX)).Article6andthepotentialconvergenceoftheglobalvoluntarymarketandinternationalcompliancemarketisdiscussedonpage36.60WhatisaCarbonoffset?,CarbonOffsetGuide61Roadtonetzero:StateofthevoluntarycarbonmarketinAsia(2023),ClimateActionDataTrust62TheVCSincompliancemarkets,Verra63CarbonPricing,TheWorldBankEnablingaNetZeroworld28PwC285.2.Carbonoffsettingoptions“SoutheastAsiaReportTheproceedsfromcarboncreditsareusedtofinancecarbonoffsethasdemonstratedhighlightsprojects.Theseprojectsgeneratingcarboncreditsarelabelledasithaspotentialfor“additional”.Thisindicatesthattheseinitiativeswouldnothavecarbonremovals,Thematerialisedwithouttheincentiveandfinancialsupportfromespeciallyindecarbonisationcarboncredits.nature-basedlandscapeinsolutions.ThereSoutheastAsiaCompaniesmayusecarboncreditstoachievetheirdecarbonisationisalsopotentialtargets.Fromtheperspectiveofacompany,carboncreditscanbeintheUnpackingusedforresidualemissions,oractionsbeyondNetZeroambitions.technology-basedNetZeroForexample,companiessuchasGooglepurchasecarboncreditstosector:theregionmeettheiroffsetcommitments.Insteadofpurchasingcarboncredits,hasquitealotofExploringcorporatesarealsogettingincreasinglyinvolvedinearlystageupsidefromrenewableinvestmentsofcarbonoffsetprojects.Analternativeoptionmaybiomassforenergyalsobetofundcarbonoffsetprojectsthroughdirectinvestmentbiocharandprocurementfromcorporates.bioenergywithmethodsandcarboncapturerenewableThefollowingsectionswillfocusoncarboncreditsandprovideandstorageenergyinformationandaguidetotheirpurchaseanduse,consideringthe(BECCS)andcertificatescomplexityofthislandscape.directaircapture(RECs)hasalsobeen5.3.CarbonoffsetprojectsinSEAdiscussedalot.”ExploringcarbonSoutheastAsiahassignificantpotentialtodevelopcarbonoffsetAlvinLeeoffsetsprojectsandbeasupplierofcarboncredits,givenboththeregion’sPuro.earthlargespreadoftropicalrainforestsandmangroveswhicharebothAppendixnaturalcarbonsinks64.Thereisalsosignificantpotentialwithintechnology-basedsolutions.AccordingtoVerra’sprojectdatabase,oneofthemostcommontypesofprojectswithinSEAinthisregardarebiogascookstoves.Theseprojectsareaimedatrepurposinggreenhousegasesfromlandfillsandothersources,usingthemtofuelcookstovesforrurallocations.64IPCCSixthAssessmentReport(2021),IPCCEnablingaNetZeroworld29PwC295.4.ConsideringcarboncreditsGeneralcharacteristicsofcarboncreditsReportStepC1:UnderstandthecharacteristicshighlightsofcarboncreditstopurchaseCarboncreditscanbeclassifiedgenerallyintwodifferentways:TheBeforecorporatesdecidetoconsidercarbondecarbonisationcredits,thefirstquestiontheyshouldaskis•Technology-basedornature-basedlandscapeinwhattheywanttoachievefrompurchasing•Avoidance/reductionorSoutheastAsiacarboncredits.Isitforcompliancerequirementsortofulfillavoluntaryremoval/sequestrationUnpackingambition?Doesitalignwiththecorporate’sNetZeroownsustainabilitygoals?InordertoaddressFigure5:Overviewofcarboncreditthesequestions,itmaybeusefulforcharacteristicsExploringcorporatestounderstandthedifferentrenewablecharacteristicsofcarboncreditsavailable.Nature-AvoidedNature-basedenergyThishelpstoidentifyhowcarboncreditscanbasednaturelosssequestrationprocurementbeusedandhowinvestmentsintocarbonmethodsandcreditscanalignwithsustainabilitygoalsTechnology-Technology-Technology-renewableandinformcorporatesaroundwhatimpactbasedbasedbasedenergytheywouldliketo,andcanreasonablyavoidance/redremovalcertificatesaspiretomake.Beyondmeetingtheuction(RECs)compliancerequirements,thisalsoallowscorporatestoarticulatetheirsustainabilityExploringvisionmoreclearly,withthecarboncreditscarbonpurchasedpotentiallycontributingtotheiroffsetssuccessfuldelivery.AppendixAsaresult,morecorporatesarenowdemandingdifferentiatedtypesofcarboncreditswhichdemonstrateco-benefitssuchAvoidance/reductionRemoval/sequestrationasbiodiversityconservation,jobscreation,etc.thatarealignedwiththeirownTable6:Descriptionofthesustainabilitygoals.characteristicsofcarboncredits65InadditiontotheinformationtypicallyDescriptionprovidedoncreditsbyregistriesandtradingplatforms(forexample,projecttype,AvoidedLimitsthelossofnaturesuchemissionreductions,creditingperiod,etc)naturelossasforestsandpeatlandsthatcorporatescannowaccessdetailaroundstoreandsequestercarbon.certifiedSustainableDevelopmentGoalsProjectsoftenhavehigh(SDG)impacts,etc.Thisallowsuserstoco-benefitsfornatureandselectthetypeofcreditstheywouldliketosociety.purchase,inamoreinformedmanner.Technology-Reducesemissionsfrom“Integrityshouldnotmerelybeabasedcurrentsourceswhichdonotbuzzword.Rather,companiesinpursuitofintegrity,shouldavoidance/redhavethefinancialincentiveorunderstandandadoptadefensiblepositioninselectingprojectsanductionregulatoryrequirementtothereneedstobeanunderstandingonwhythedecisionismade."decarbonise.ProjectsoftenRussellQuek,haveco-benefitssuchasSouthPoleimprovinglivelihoods65TaskforceonScalingVoluntaryCarbonMarkets(2021),ICVCMNature-basedUsesnaturetosequestersequestrationmorecarboninthebiosphere,includingreforestationandrestoringsoil,mangroves,andpeatlands.Technology-Removesanduses/storesbasedCO2fromtheatmospherewithremovalthehelpofmoderntechnology.EnablingaNetZeroworld30PwC30Forcarboncreditstobeconsidered“highbelistedontheirregistries(formorequality”,thereareemergingstandardstoinformationonVerraandtheGoldStandard,Reportwhichmarketactorscanrefer.refertopage33).highlightsPerhapsthemostsignificantarethe10CoreThisremainsarapidlyevolvingandoftenTheCarbonPrinciples(CCPs)oftheIntegritychallengingareatocontendwith,bothfordecarbonisationCouncilfortheVoluntaryCarbonMarketstandardsettersandthepurchasersoflandscapein(ICVCM).Moredetailsonthesecanbecreditsalike.SoutheastAsiafoundintheboxbelow.Forexample,someindustrycommentatorsUnpackingThenewCCPsaimtoprovideclarityaroundareoftheviewthattherequirementsoftheNetZerowhatintegrityofsupplyinthevoluntaryCCPsmaybetoostringent,whichcouldriskcarbonmarketshoulddenote.TheICVCM,limitingthegrowthofsupplyinthevoluntaryExploringviaitsCCPs,ishopingtoprovideacommoncarbonmarket66.Forothers,alackofrenewablereferencepointaroundwhichtheentireintegrityinthemarket,perceivedorreal,energymarketcancoalesce.Inpursuitofgreatercouldhaveanegativeeffectontheappetiteprocurementmarketintegrity.ofbothsuppliersandbuyersofcreditstomethodsandengagewithit.renewableAtpresent,manycarboncreditsarecertifiedenergythroughstandardssuchasVerra’sVerifiedEnsuringstandardsremaincognisantofthecertificatesCarbonStandard(VCS)ortheGoldneedforbothintegrityandflexibilityina(RECs)Standard.ThesespecifyrequirementsthatrapidlydevelopingspaceappearstobetheprojectsdeliveringcreditsmustadheretoinobjectiveofthewidervoluntarycarbonExploringordertomarketecosysteminthecomingyears.carbonoffsetsAppendixThe10CCPs,finalisedbytheICVCMin2023,representaglobalbenchmarkforhigh-integritycarboncreditsthatsetrigorousthresholdsondisclosureandsustainabilitydevelopment.Theprinciplesareasfollows67:Effectivegovernance:Tracking:TheuseofTransparency:effectiveprogramaregistrytouniquelyComprehensiveandgovernancetoensureidentify,recordandtracktransparentinformationtransparency,toensurecreditsareonallcreditedmitigationaccountability,continuoussecureandunambiguousactivitiesareprovidedimprovementandoverallandaccessiblequalityofcarboncreditsRobustindependentAdditionality:theGHGPermanence:GHGthird-partyvalidationemissionsreductionorreductionsorremovalsandverificationremovalshallbearepermanent,oradditional(wouldnothavemeasuresareinplaceoccurredintheabsencewherethereisriskofoftheincentivecreatedreversal.bythecarboncredit)RobustquantificationNodoublecounting:SustainableofemissionreductionsReductionorremovalsaredevelopmentbenefitsandremovals:onlycountedonceandsafeguards:SocialMeasurementsaretowardsachievingtargetsandenvironmentalrobustlyquantifiedorgoalssafeguardswhilehavingabasedonapositivesustainableconservativeapproachdevelopmentimpactContributiontowardsNetAfurtherexplanationofthe10CCPscanbefoundonZerotransition:AvoidtheICVCMwebsite.practicesortechnologiesthatareincompatiblewithTheassociatedAssessmentFrameworksetsarobustachievingglobalNetZeroandachievableframeworkaimedtoraisestandardsacrossvoluntarycarbonmarketstoaconsistentlevelofquality68.ProgrammesandcategorieswhichmeetthecriteriaoftheAssessmentFrameworkaregiventheCCPlabelwhichisdesignedtobuildtrustinthevoluntarycarbonmarket.66ResponsefromtheGoldStandardFoundationtotheIntegrityCouncilfortheVoluntaryCarbonMarket’sConsultationonitsdraftCoreCarbonPrinciples,AssessmentFrameworkandAssessmentProcedure-27September2022(2022),GoldStandard67TheCoreCarbonPrinciples(2023),ICVCM68AssessmentFramework(2023),ICVCMPwC31EnablingaNetZeroworld31ReportWithinSEA,SingaporeandIndonesiahavesetupdomesticcarbonpricinginstruments.highlightsIndonesiahashistoricallycontinuedtobeanexporterofcreditsandhasrecentlysetuplimitationsontheirexport,whileSingaporeisanimporterofArticle6alignedcarbonThecredits.Someoftheregulationsregardingthecurrentlandscapearediscussedbelow.decarbonisationlandscapeinCarbonCreditsinSingaporeCarbonCreditsinIndonesiaSoutheastAsiaCarboncreditsareallowedbeusedtoRegulationsinIndonesiahaveUnpackingoffsetupto5%ofthecostoftaxableestablishedthatanycarboncreditsNetZeroemissionsinSingapore69.ThegeneratedfromitsforestrysectorwillbeInternationalCarbonCredits(ICC)claimedorrecordedaspartofExploringFrameworkwasintroducedin2021toIndonesia’sNationallyDeterminedrenewablesupportthedevelopmentofcarbonContribution(NDC)70.Theprovisionmayenergymarketsbyenablingthedemandandalsobeappliedtothevoluntarymarket.procurementsupplyofhigh-qualitycarboncreditstomethodsandbematched.ItwillbealignedwithInregardstothepowersector,coal-firedrenewableArticle6oftheParisAgreement,powerplantswillbesubjecttoaenergyenablingSingaporetocooperatewithcap-and-tradeschemewhilerenewablecertificatesothercountriestosupportrespectivepowerplantsmaygeneratecarbon(RECs)climatetargets.creditsissuedthroughtheemissionsoffsetschemewheretheycanbetradedExploring7principlesweredeveloped:withinthelocalframeworkoronthecarbonvoluntarycarbonmarket.offsets1.Notdouble-counted2.AdditionalCarboncreditsmustdemonstrateAppendix3.Realaccuracy,credibilityandtransparency4.Quantifiedandverifiedandwillbereviewedbyaccredited5.Permanentverifiersandvalidatorsagainst6.NonetharmqualificationssetbytheMinistryof7.NoleakageEnvironmentandForestry(MoEF).FurtherdetailsanddefinitionscanbeInternationalcarbonregistriesarealsofoundontheMinistryofSustainabilityrecognisedaslongastheyareunderanandtheEnvironment(MSE)website.agreementonMutualRecognitionwiththeMoEF(withvintagepasttheyear2021).Atpresent,regulationsallowforverifiedIndonesiancreditstobetradedinternationally,however,therehavebeendiscussionsonlimitingtheexportsofsuchcreditsasapossibleconcept.69SingaporeSetsOutEligibilityCriteriaforInternationalCarbonCreditsUndertheCarbonTaxRegime(2023),MinistryofSustainabilityandtheEnvironment70Indonesia’sCarbonPricing:UnderstandingtheBasicRegulatoryFramework(2023),PwCIndonesiaPwC32StepC2:DeterminethequantityofWhendecidingthetimeframe,companiescarboncreditsrequiredmayconsiderrequirementsforthenextyear,Reportbutadditionallythoseforthenext3-5yearshighlightsAcentralquestionprospectivebuyersoftobuildamulti-yearportfolio.Inordertodocarboncreditscanaskthemselvesis:so,companiesneedtoestimatetheThe“howmanycreditsdoIneedtomeetmyprojectedemissionstounderstandthedecarbonisationchosenobjectives?”.Tohelpanswerthis,quantityofcarboncreditsrequiredforthelandscapeinthefollowinglinkedquestionsshouldbenext3-5years.Havingmulti-yearportfoliosSoutheastAsiaconsidered:tendtosecurethebestpricesinacomplexandever-evolvingmarket.Unpacking•Whyarethecreditsbeingpurchased?NetZeroTocomplywithcarbonregulations?ToHowever,iflevelsoffamiliaritywiththeoffsetresiduals?Tosupportthecarbonvoluntarycarbonmarketarelow(er)-Exploringoffsetmarket?Ortosendaninternalpotentiallythecaseforthosecompaniesthatrenewablepricesignal,incentivisingfurtherhavejuststartedtheirsustainabilityjourney-energydecarbonationefforts?itmaybeprudenttobeginwithspotprocurementpurchases,consideringthedifficultyofmethodsand•Whatisthedesiredoutcomeoftheestimatingfutureemissionsaswellasrenewablecarboncreditpurchase71?Toachievefeasibilityoflongtermbudgeting.energycarbonneutrality?Tosupportrenewablecertificatesenergydevelopment?(RECs)•Projects,suchascookstoves,haveExploringdirectimpactsonruralcommunities.carbonHowwouldsimilarconsiderationsofoffsetscommunityimpactaffectthecompany’schoiceofcarboncredits?AppendixAssumingacompanyhasmeasureditsemissions,settargets,andcompletedorplanneddecarbonisationeffortswithinitsbusinessactivities,thenextstepfollowingconsiderationofthequestionsistodecidethetimeframetoworkwithin72.71Settingupasuccessfulgreenenergyprocurementstrategy(2023),DNV72DefinitiveBuyer’sGuidetoCarbonCredits(2023),ThalloEnablingaNetZeroworld33PwC33StepC3:UnderstandverifiedcarboncreditsReportThereareanumberofrecognisedverificationentitiesinthemarkettoday,withsomehighlightsstandardsrelevanttoSEAincludebutarenotlimitedto:Verra,GoldStandard,andPuro.earth.Thereare,however,otherstandardssuchastheAmericanCarbonRegistry(ACR),ClimateTheActionReserve(CAR)andothers.decarbonisationlandscapeinTable7:ComparingthestandardssuchasVerra,GoldStandard,andPuro.earthSoutheastAsiaGoldStandardPuro.earthVerraUnpackingNetZeroNotabilityFocusesontheUNFocusesoncertifyingThelargestcertifier,AvailabilitySDGswhereprojectcarbonremovalhavingcertifiedExploringmustprovidelastingtechnologyprojectsapproximatelythreerenewablesocial,economic,andquartersofallcarbonenergyenvironmentalbenefitscreditsprocurementmethodsandGloballyrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixGloballyGloballyGoldStandardPuro.earthVerraTheGoldStandardensuresPuro.earth’saimistoTheVCSisacarbonoffsetthatprojectsbenefittheirensurethatwhencarbonprogrammedevelopedandneighboringcommunities.Itremovalismostneeded,runbyVerra.Itisbroadlywasdevelopedwithafocusonthetechnologywillexistatsupportedbythecarbonoffsetprojectsthatprovidethenecessaryscale.offsetindustry(projectlastingsocial,economic,andPuro.earthcoversarangedevelopers,largeoffsetenvironmentalbenefits.Foraofmechanismsandbuyers,verifiers,andprojecttobeverifiedbythetechnologiessuchasprojectsconsultants)andGoldStandard,itmustdirectlyremovingcarbonisactiveglobally.demonstrateaclear,directdioxidefromthecontributiontosustainableatmosphere,andindirectlydevelopment,definedasutilisingmechanismsmakingademonstrable,appliedtoagricultureandpositiveimpactsonatleastforestrybiomassresiduethreeUNSDGs.whichhasalreadytrappedcarbonfromtheatmosphere.ClimateActionData(CAD)TrustInDecember2022,theIETA,theWorldBankandtheGovernmentofSingaporeannouncedthelaunchofCADTrusttomaximisetransparency,minimisetheriskofdoublecountingandenhancetheoverallintegrityofthecarbonmarkets.CADTrustisanopen-sourcemetadatasystemtoshareinformationaboutcarboncreditsandprojectsacrossdigitalplatforms,easingfutureintegrationofmultipleregistrysystems.Itisnowintheprocessofconnectingvariouscarboncreditsregistries.Theaimistoprovidefreepublicaccesstoitsinformationinaharmonisedanduser-friendlyformattoallowprivatecompanies,non-governmentalorganisations(NGOs)andgovernmentstousethisforbenchmarking,doublecountingriskcheckingandcompliancereporting,etc.EnablingaNetZeroworld34PwC34ApplyingcareanddiligenceReportCarboncreditscanplayakeypartinthejourneytowardsglobalNetZero.TheirhighlightsimpactinsupportingemissionreductionsandcarbonremovalprojectswillbecomemoreandmorevisibleascompaniesandcountriesreachtheirlimitsinreducingemissionsThewithintheirownoperationsandneedtoremoveresidualemissions.decarbonisationlandscapeinHowever,thisdoesnotexempttheconceptandsystemfromscrutiny.TherehavebeenSoutheastAsiaconcernsovertheuseofcarboncredits,withgreenwashingclaimsmadefromvariousangles73aswellasconcernsregardingnegativeimpactsonlocalcommunities.UnpackingNetZeroAssuch,whilethepurchaseofcarboncreditsisgenerallyencouragedtoaidprogresstowardsglobalNetZero,corporatesshouldstillapplytheirduediligencetoensurehighExploringqualitycarboncreditsarebeingpurchased.Thiscanbedonebythoroughlyresearchingrenewableprojects,whatprojectsstandfor,andwhatco-benefitsprojectscanbring.energyprocurementInthefaceofsuchscrutinycompaniessuchasUnileverdiscussintheirClimatemethodsandTransitionActionPlanhowtheyarechoosingtoonlyuseoffsetsforresidualemissionsrenewableafter203974.Ontheotherhand,Googleiscontinuingtopurchaseoffsetsbuthastakenenergymeasurestoensureonlyhigh-qualityoffsetsarepurchasedthroughactionssuchasitecertificatesvisitsandresearchingday-to-dayoperationstoperformduediligenceasmentionedin(RECs)theirCollaborationsandDueDiligencepaper75.ExploringTheseexchangesnowalsoallowtradingofcarbontokenisedcarbonwhichisarepresentationoffsetsofacarboncreditthatisstoredonablockchain.TokenisedcreditsretaintheAppendixsameinformationandcharacteristicsofthecarboncredit,includingvintage,projectStepC4:Decideonthecarboncreditstypeandallassociateddata.AsofprocurementmethodsSeptember2023,25.4millioncreditshadbeentokenised,representingabout2%ofDependingontheneedsofcompanieswhocurrentmarketsupply.Thistokenisationwouldliketobuycarboncredits,thetwooffersbenefitssuchasincreasedmostcommonmethodsusedarethroughverifiability,improvedliquidity,andtraditionalOTCtradingandexchanges.enhanceddatareporting76.BuyerslookingforcarboncreditsmaystillBuyersshouldlearnandunderstandthewanttobuycreditsthroughtraditionalOTCdifferenttypesofcreditsavailablebeforetradingwhichprovidesmoredetailsandgoingintotokenisedproducts.Purchasesinsightsaboutprojects’co-benefitswhereoftokenisedcarboncreditsthroughcryptoalignedwiththeUNSDGs,communitywallets,andtheuseofembeddedimpactsandotherattributes.Thiscanbeapplicationinterfaces(APIs)topurchasedonewithserviceproviders(intermediaries)carboncreditsalongsideonlinetranslationordirectlywithprojectdevelopers.suchashotelandflightbookingsarebecominganewnorm.Withmoreexchangesestablishedrecentlyintheregion,suchasClimateImpactX,Whendeterminingwhichvoluntarycreditcorporatebuyerscanalsochoosetoprocureprocurementmethodsaremostapplicable,viaexchangeswithoutintermediaries.severalqualitiesinparticularshouldbeCarbonexchangesarestructuredasastockconsideredandchecked:andcommoditytradingplatforms.Usingthemcaneasetheprocessofprocurement•Theroleofcarbonoffsetsinaandofferbettertransparency,deepercompany’sdecarbonisationstrategyliquidityandfasterpricediscovery.Theyalsoallowscorporatebuyerstoperformspot•Thelevelofinformationdisclosuretrading,andbuyfutures,optionsand(suchasco-benefits,etc.)onthederivativesofenvironmentalcommodities.carboncreditsdisplayed•Ifcorporatesdecidetobuyviaexchanges,thefunction,availableproductsanduserfriendlinessoftheexchanges73Greenwashingoranetzeronecessity?ClimateScientistsoncarbonoffsetting(2023),TheGuardian74ClimateTransitionActionPlan(2021),Unilever75Google’sCarbonOffsets:CollaborationandDueDiligence(2011),Google76TokenisedCarbon101(2023),IETAEnablingaNetZeroworld35PwC35StepC5:PurchaseandretirecarboncreditsReportRetiringcarboncreditsreferstotheprocessoftakingacreditoffthemarketforever,nottohighlightsbetradedorswappedagain.Retirementisrequiredforacarboncredittobeclaimedtoreduceemissions.Thiscanusuallybedoneonthetradingplatformorexchange.ThedecarbonisationStepC6:DisclosecarboncreditslandscapeinSoutheastAsiaUnpackingNetZeroExploringrenewableenergyprocurementmethodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixTable8:NonexhaustivelistofsustainabilityreportingstandardswithcarboncreditreportingrequirementsStandardReportingcarboncreditsIFRSS277Anentityshoulddiscloseitsplanneduseofcarboncredits.DetailsoftheTCFD78specificcarboncreditsusedthatshouldbedisclosedinclude:GRIStandards79•Theextenttowhich,andhow,anynetGHGemissionstargetsrelyontheuseofcarboncredits•Whichthird-partyscheme(s)willverifyorcertifythecarboncredits•Thetypeofcarboncredit,whethertheprojectisnatureortechnology-basedandwhethertheoffsetisachievedthroughcarbonreductionorremoval•Anyadditionalfactorsnecessaryforusersofgeneralpurposefinancialreportstounderstandthecredibilityandintegrityofthecarboncredits.ThiscanincludeassumptionsregardingpermanenceoradditionalityBestpracticealsoincludesdisclosingsimilardetailsaboutcarboncreditsthathavealreadybeenusedbytheentity.GHGemissionsrelatedinformationsuchascarboncreditsusedshouldbedisclosedwithinthecontextoftargetsettingandtheuseofcarbonoffsetstoachievesaidtargets.Inregardstotransitionrisks,theimpactsofregulationchangessuchascarbonpricingonthecompany,andthereforetheuseofcarbonoffsets,shouldbedisclosed.EmissionoffsetssuchascarboncreditsshouldbedisclosedseparatelyfromScope1,2and3GHGemissions.Anexplanationifoffsetsareusedwithintheorganisation’stargets,includingthetype,amount,criteriaorschemeofwhiletheoffsetsarepart.77Climate-relatedDisclosures(2023),IFRS78GuidanceonMetrics,Targets,andTransitionPlans(2021),TCFD79GRI305:Emissions2016(2018),GRIStandardsEnablingaNetZeroworld36PwC365.5.OngoingdiscussionsoncarboncreditsReportTheconvergenceofthevoluntaryandcompliancemarkethighlightsTheglobalvoluntarymarketisexpectedtoArticle6.4establishesanewcreditingTheincreasinglyconvergewiththeinternationalmechanismunderthesupervisionofandecarbonisationcompliancemarketduetotheimplementationinternationallyappointedUnitedNationslandscapeinofArticle6oftheParisAgreementanditsFrameworkConventiononClimateChangeSoutheastAsiaeffectsonstakeholdersoftheVCM.Article6(UNFCCC)“Article6.4MechanismallowscountriestovoluntarilycooperateinSupervisoryBody”,andisbymanyreferredUnpackingachievingtheiremissionreductiontargetssettoas“CDM2.0”.Thecreditingmechanism,NetZerooutintheirNDCs80.Thismeansthat,underwhichisstilltobecomeoperational,willhaveArticle6,countriescantradecarboncreditstospecificmethodologies,standards,andExploringhelpothercountriesmeetclimatetargets.verificationprocesseswhichprojectrenewabledevelopersmustfollowinordertoissueenergyWithinArticle6,Article6.2providesacredits.Thesecredits,caninturn,dependingprocurementframeworkwherecountriescanworkwitheachontheauthorisationstatusbythehostmethodsandothertoreachtheirclimatetargetsandcountrybeusedforvoluntarypurposesortorenewableincreaseambitionthroughvoluntarychannelresults-basedclimatefinanceenergycooperation78.Toensurethatthereisno(mitigationcontributionunits(MCUs)),aswellcertificatesdoublecountingwhencountriestransferascompliancepurposes(Article6.4Emission(RECs)carboncreditsinternationally,countriesneedtoReductions(A6.4ERs),ITMOs).authorisetheuseofcredits(ITMOs)towardsExploringNDCsand/orOtherInternationalMitigationWithcountriesoperationalisingArticle6,therecarbonPurposes(OIMPs),andapplycorrespondinghasbeenmorediscussionaroundtheoffsetsadjustmentsintheiremissionsbalance.ThisisaccountingpracticeswherethereisanafundamentaldifferenceascomparetooverlapwiththeVCM.TheArticle6rulebook,AppendixpreviousapproachesinthevoluntarycarbonagreedatCOP26inGlasgow,clarifiesthatmarketortheCleanDevelopmentMechanismtherecanbenodoublecountingofunitsby(CDM)setupundertheKyotoProtocol.theapplicationofcorrespondingadjustmentsforauthorisedITMOsusedtowardsNDCsorDuetotheapplicationofcorrespondingOIMPs(suchastheCarbonOffsettingandadjustments,hostcountriesneedtocarefullyReductionSchemeforInternationalAviationconsiderwhattypesofprojectsand(CORSIA)whichisdiscussedfurtheronthecooperativeapproachestheyarewillingtonextpage).IntheVCM,carboncreditsengageandauthorisetoselltoothercontributetotheemissionsavoidance,internationalbuyers,astheycannotcountreductionorremovalinthehostcountry,thoseemissionsreductionstomeettheirownwhichcansupportthatcountryinreachingNDC.WhilstseveralbilateralagreementsanditsNDC,butunlessauthorisedunderArticleanumberofprojectshavealreadybeen6.2forNDCuse,wouldnotbecountedinitiatedunderArticle6.2,negotiationscontinuetowardstheNDCinthecountryoftheattheinternationalleveltoclarifyremainingacquiringcompany.issuesandbuildcapacityamongcountrieswhowishtoparticipateundertheframework.Thereisanactivediscussionregardingtheuseofvoluntarycarboncreditsunderthe“ThecomingyearswillbepivotalinframeworkofArticle6,andhowcompaniesshapingthefuturedirectionofcarboncanmakeclaimsdependingontheauthorisationstatusofcredits.Whilstitismarketsasnationsrefinetheirclimateimportanttoavoiddouble-countingandensureintegrityinthemarket,itremainsclearstrategiesandArticle6frameworks.thatvoluntaryunits,withoutahostcountryauthorisationunderArticle6,willcontinuetoUltimately,wewillseeanincreasingplayanimportantpartintheVCMtofinanceclimateaction.convergencebetweenvoluntaryandcompliancemarkets.”BjörnFondén,IETA80WhatyouneedtoknowaboutArticle6oftheParisAgreement(2022),TheWorldBankEnablingaNetZeroworld37PwC37GlobalevolutionofqualityandpriceIn2022,companiesboughtjust155millioncarboncreditsonthevoluntarymarket,ReportGroupsliketheIntegrityCouncilfordown4%from2021duetofearsofhighlightsVoluntaryMarkets(ICVCM),Internationalreputationalriskfrompurchasinglow-qualityCarbonReductionandOffsetAlliancecredits78.ThisisaconcerningtrajectoryforThe(ICROA)andtheCarbonCreditQualitythemarket,however,manywithinthedecarbonisationInitiative(CCQI),aswellasratingagenciesindustryarehopefulthatdemandwillreturn.landscapeinlikeBeZeroandSylvera,areworkingonSoutheastAsiacreatingastandardiseddefinitionofhigh-Inabidtointroducegreatercertaintyaroundandlow-qualitycredits81.whathigh-integrityuseofcarboncreditsUnpackingamountsto,theVoluntaryCarbonMarketsNetZeroIETAbelievesthatasingleglobalcarbonIntegrityInitiative(VCMI)waslaunchedpricewouldbeeconomicallyefficient,butshortlyafterCOP26.ItservesasanExploringnotpoliticallyfeasible.Multiplecarboninternationalnon-profitorganisationwitharenewablepricesmayalsobenecessarytoprovidemissiontoenablehigh-integrityvoluntaryenergytherightsignalstodifferentsectorsandcarbonmarkets82.TheVCMI’srecentlyprocurementactivities.Assuch,thecomplexityofreleasedClaimsCodeofPracticedetailsmethodsandmultiplecarbonpricesindifferentcountrieshowcompaniescanensuretheiruseofrenewableandsectorswillneedtobeacceptedasthevoluntarycarboncreditsarecredibleandareenergynorm.ThelackofglobalpricesshouldnotalignedwiththeParisAgreement.Again,thecertificatesbeanexcuseforinaction.objectivehereremainsonstrikingabalance(RECs)betweenensuringintegrityinthemarketDemandprojectionswithoutsettingprohibitivelyhighbarrierstoExploringentryforwould-bepurchasersofcredits.carbonAstheworldmovestowardsNetZero,offsetsremovalprojectscouldplayanincreasinglyCORSIAisaglobaloffsettingschemewhereimportantroleincarbonmarkets(currentlyairlinesandaircraftoperatorswilloffsetanyAppendixonlyaround10%ofcreditsarefromgrowthinemissionsabove2020levels83.Itremovalprojects).iscurrentlyinit’spilotphasehowever,demandfromtheaviationindustryisThepriceofcarboncreditscouldbeexpectedtoincreaseduetothemandatoryexpectedtogrowduetoincreasingoffsettingwhichwillbeimplementedindemandfromcorporateandcountrybuyers202784.astheymovetowardstheirNetZerotargets.AnotherreasonfortheincreaseinItisevidentthatthecarbonmarketispriceisthedownturnincheapsupply,undergoingsubstantialchange,involvingnotpartiallyduetoanincreasedneedforjustthevoluntary,butcompliancemarketashigh-qualitycarboncreditsforcountriestowell.Despitetheuncertainty,therearealsoachievetheirNDCsandhigherscrutinyofsignsthatbothqualityanddemandforcreditsinthevoluntarymarket.carboncreditswillincreasetomatchneedsatnational,international,andcorporatelevels.81FiveNeed-to-KnowsAbouttheFutureoftheVoluntaryCarbonOffsetMarkets(2023),BloombergNEF82About,VCMI83CORSIAexplained,AviationBenefitsBeyondBorders84WhatisCORSIAandhowdoesitaffectyourairline?(2023),SouthPolePwC386AppendixAppendixA.-DefinitionsAppendixB.-RenewableenergyprocurementmethodsAppendixC.-FurtherinformationonCBAM,CSRDandEUDRAppendixD.-HighlevelecosystemmapEnablingaNetZeroworld39PwC39AAppendixA.-DefinitionsReportKyotoProtocolParisAgreementhighlightsTheKyotoProtocoloperationalisedtheAccordingtheUNFCCC,theParisTheUNFCCCbycommitting37industrialisedAgreementisalegallybindinginternationaldecarbonisationcountriesandeconomiestolimitandreducetreatyonclimatechangeadoptedin201686.landscapeinGHGemissionsinaccordancewithIt’sgoalisto“holdtheincreaseintheglobalSoutheastAsiaindividualtargets85.Oneoftheimportantaveragetemperaturetowellbelow2°CelementsoftheKyotoProtocolwastheabovepre-industriallevels”andpursueUnpackingestablishmentofflexiblemarketefforts“tolimitthetemperatureincreasetoNetZeromechanismssuchasInternational1.5°Cabovepre-industriallevels.”EmissionsTrading.ExploringImplementationoftheAgreementrequiresrenewableAnimportantelementoftheKyotoProtocoleconomicandsocialtransformation,basedenergywastheestablishmentofflexiblemarketonthebestavailablescience.Since2020,procurementmechanismswhicharebasedonthetradecountrieshavebeensubmittingtheirNDCs.methodsandofemissionspermits.WhilecountriesmustEachsuccessiveNDCismeanttoreflectanrenewablemeettheirtargetsprimarilythroughnationalincreasingambitionscomparedtotheenergymeasuresundertheProtocol,theyarepreviousversion.certificatesofferedadditionalmeanstomeettheir(RECs)targetsbywayofmarket-basedFormoreinformation,refertotheOverviewmechanisms:oftheParisAgreementbytheUnitedExploringNationsFrameworkConventiononClimatecarbon•InternationalEmissionsTradingChangewebinarseriesoffsets•CleanDevelopmentMechanism•Jointimplementation(JI)AppendixFormoreinformation,refertotheOverviewoftheKyotoProtocolbytheUnitedNationsFrameworkConventiononClimateChangewebinarseries85WhatistheKyotoProtocol?(2023),UNFCCC86TheParisAgreement(2023),SouthPoleEnablingaNetZeroworld40PwC40BAppendixB.-RenewableenergyprocurementmethodsaccordingtotheRE100TechnicalCriteria87ReporthighlightsB.1.Self-generationAtrilateralPPAmaybeadvertisedasa‘retailPPA’,‘sleevedPPA’,ora‘third-partyPPA’.TheSelf-generationinvolvescorporatebuyersThegenerationmaybeissuedwithEACs,decarbonisationowningtheirownprojects.Projectsmightbewhichcorporatebuyerscanusetoclaimuselandscapeinon-siteoroff-site,onthegrid,orentirelyofrenewableelectricity.IfEACsarenotSoutheastAsiaoff-grid.Corporatebuyersmustretainenergyissued,corporatebuyersmusthaveattributestoclaimuseofrenewablecontractsthatgivethemcredibleclaimstoUnpackingelectricity.ThismeanscorporatebuyerscansupporttheirclaimstouseofrenewableNetZeroconsumedirectlyfromtheirprojects,retainelectricity.theattributes,andclaimuseofrenewableExploringelectricityorcansellenergytothegrid,B.3.VirtualPPArenewableretaintheattributes,andclaimuseofenergyrenewableelectricity.ThegenerationmaybeAvirtual/financialPPAisapurelyfinancialprocurementissuedwithEACs,whichcorporatebuyerstransactioninwhichacorporatebuyermethodsandcanusetoclaimuseofrenewableelectricity.assumesmarketriskrelatedtothesaleofarenewableThegenerationmayberequiredtoreceivegenerator’selectricityandreceivesenergyenergyEACs.IfEACsarenotissued,corporateattributes.Thiscanbedonethroughacertificatesbuyersmusthavecontractsthatgivethemcontractfordifference,wherethegenerator(RECs)credibleclaimstosupporttheirclaimstouseexchangestheriskofsellingtheproject’sofrenewableelectricity.generationtothewholesalemarketataExploringvariableratewithafixed-pricecashflowcarbonB.2.PhysicalPPAagreedwiththecorporatebuyer.Theoffsetscorporatebuyerthereforeoff-takesmarketAphysicalPPAisacontractbetweenariskthegeneratorwouldbeexposedtobyAppendixcorporatebuyerandageneratorforthesellingpoweratthefluctuatingwholesalesupplyofrenewableelectricity.Itcanenergyprice,andinreturnisentitledtothecharacterisepurchasesfromon-siteprojectsenergyattributes.BecauseafinancialPPAisownedbythirdparties,off-siteprojectstoonlyafinancialinstrument,thecorporatewhichthereisadirectline,oroff-sitebuyermuststillseparatelyprocureelectricitygrid-connectedprojectsandtypicallyusesaforitsoperations.Itisthereforeaformoflong-termcontract.PhysicalPPAsdonotunbundledprocurement.AfinancialPPAcannecessarilyneedtobebilateralbetweentheserveasahedgeforfluctuatingelectricitycorporatebuyerandthegenerator.Acosts,andsomecorporatebuyersmaybilateralPPArequiresthecorporatebuyertorealiseafinancialbenefitfromusingthem.Aalsotakeresponsibilityfortheoff-takeofthefinancialPPAtypicallyusesalong-termpoweritself,includingmanagingthemovingcontract.ThegenerationmaybeissuedwithandschedulingofthepowertothecorporateEACs,whichcorporatebuyerscanusetobuyer’sload,orintothewholesalepowerclaimuseofrenewableelectricity.IfEACsmarket(iftheprojectisgrid-connected).Thearenotissued,corporatebuyersmusthavecorporatebuyermayneedtobelicensedtocontractsthatgivethemcredibleclaims(seebeabletodothis.Alternatively,atrilateralSectionFive:Credibilityofclaims)tosupportPPAcaninvolveanadditionalpartywhichistheirclaimstouseofrenewableelectricity.responsiblefortheoff-takeofthepowerfromtheproject.Thisthirdpartyisoftenanelectricitysupplier.87RE100TechnicalCriteria(2022),RE100EnablingaNetZeroworld41PwC41RenewableenergyPPAsinSEAB.4.ContractswithsuppliersReportInthecontextofrenewableenergy,theAproject-specificcontractwithasupplierhighlightsPPAsigningframeworkhadnotbeendescribesanarrangementwherebytheestablishedinmanySEAcountriesuntilsupplierprocuresfromspecifiedprojectsonTherecently.InMalaysiaandthePhilippines,behalfofthecorporatebuyer.Often,thedecarbonisationsigningaPPArequiresparticipationinsupplierholdsaPPA.Thecontractmaybelandscapeinrelevantprograms88.InIndonesia,PPAsadvertisedasa‘greentariff’,hascompleteSoutheastAsiacanonlybesignedwiththenationaltransparencyregardingtheenergyattributespowercompanyPerusahaanListrikinthesupply(meaningthecorporatebuyerUnpackingNegara(PLN),whichissimilartogreenalwaysknowsexactlywhichspecificprojectsNetZeroleasing.Asof2022,VPPAsareonlytheyarepurchasingfromthroughtheirapplicabletorooftopsolarinThailandelectricitysupplier),andtypicallyusesaExploringandVietnam.Itisworthmentioningthatlongercontractlength.ThegenerationmayrenewableVietnamisworkingwiththeUnitedbeissuedwithEACs,whichcorporatebuyersenergyStatesAgencyforInternationalcanusetoclaimuseofrenewableelectricity.procurementDevelopment(USAID)onapilotPPAThesuppliermaytransfertheEACstomethodsandthatwillrunfrom2022to202489.Ifthecorporatebuyersorotherwiseredeem,retire,renewablepilotprogrammeworkswell,itwillbeorcancelthemonbehalfofcorporatebuyers.energyexpandedintoanationalrenewableIfEACsarenotissued,corporatebuyerscertificatesenergyschemein2025.Thisiscurrentlymusthavecontractsthatgivethemcredible(RECs)themostcomprehensivePPAclaims(seeSectionFive:CredibilityofprogrammeamongthefiveSoutheastclaims)tosupporttheirclaimstouseofExploringAsiancountries.renewableelectricity.carbonoffsetsIngeneral,SEAcountriesemploysimilarAretailcontractwithasupplierdescribesanrenewableenergyprocurement‘off-the-shelf’arrangementwithanelectricityAppendixmethods,primarilyusingtheunbundledsupplierforthesupplyofrenewableI-REC;whilethePPAsystemsarestillelectricity.Thecorporatebuyerusuallypaysbeingdevelopedandpiloted.However,aper-kilowatthourpremiumthroughanduetothegrowingconcernsoveradditionallineitemontheirmonthlyelectricity"greenwashing"inEuropeandtheU.S.,billfortherenewableelectricity.ThiscontractI-RECsmaybereplacedbylargepowermaybeadvertisedasa‘greenelectricitypurchaseprogramsinthefuture.product’,haslesstransparencyregardingtheAccordingtoBloombergNEF,amarketenergyattributesinthesupply,andtypicallyresearchfirm,theCPPAssignedinAsiausesashortercontractlength.Thesupplierhavesurgedoverthepasttwoyears.Asmayvarytheprojectsfromwhichenergyenvironmentalawarenessrises,accessattributesaresourcedthroughouttheto"real"renewableenergywillbethecontract.ThegenerationmaybeissuedwithtoppriorityforinternationalbrandsEACs,whichcorporatebuyerscanusetoseekingtoexpandtheiroperationsandclaimuseofrenewableelectricity.Theestablishsupplychainpartnerships.suppliermaytransfertheEACstocorporateTherefore,thedevelopmentofbuyersorotherwiseredeem,retire,orcancelSoutheastAsia'srenewableenergythemonbehalfofcorporatebuyers.IfEACsmarketsandmechanismswillbecriticalarenotissued,corporatebuyersmusthaveinshapingtheinternationalsupplychaincontractsthatgivethemcredibleclaimstodeploymentforthenextdecade.supporttheirclaimstouseofrenewableelectricity.88USAIDVietnamLowEmissionEnergyProgram(2019),USAID89RenewableEnergyinSoutheastAsiaandGlobalCarbonMarketTrend:2022Recap&2023Outlook(2023),ReccessaryPwC42EnablingaNetZeroworld42ReportB.5.EACsandRECshighlightsRECsareatypeofEACs.EACscanbepurchasedalone,separatefromtheunderlyinggenerationtheyareissuedto,andseparatefromcorporatebuyers’procurementofTheelectricityfortheiroperations.CorporatebuyerscanpurchaseEACstopairwiththeirdecarbonisationconsumptionofpurchasedgridelectricity.ThispermitsaclaimtohavingconsumedlandscapeinelectricitywiththeattributesconveyedbytheEACs.TheEACsmustbeissuedtoSoutheastAsiagenerationlocatedinthesamemarketforelectricityastheelectricitysupplybeingdecarbonizedbythecorporatebuyer.ApurchaseofrenewableelectricitygeneratedinoneUnpackingmarketcannotbeequatedtoitsconsumptioninadifferentmarket.EACscanbeprocuredNetZerothroughshortorlong-termcontracts,withvaryingdegreesofprojectspecificity.EACsaresometimesprocuredthroughbrokersandtradingplatforms,makingfortransactionsthatareExploringlesscomplexthanthoseinotherprocurementtypes.UnbundledEACscanonlyeverrenewablepresentanadditionalcostontopofcorporatebuyers’separateelectricitypurchases.Thisisenergyakeypointofdistinctionbetweenlong-termcontractsforunbundledEACsandfinancialprocurementPPAs,whichcansometimesrealizeafinancialbenefit.methodsandrenewableenergycertificates(RECs)ExploringcarbonoffsetsAppendixEnablingaNetZeroworld43PwC43CAppendixC.-FurtherinformationonCBAM,CSRDandEUDRReporthighlightsCBAMiscurrentlyinitstransitionalperiodForitsimpactonSEA,CBAMisestimateduntil2026andfullyphasedintoapplytotopossiblyleadtoannualforgonerevenueThe100%ofScope1,2and3emissionsbyofaroundUSD830millionforexportersofdecarbonisation2034.steel,aluminiumandplastics,equivalenttolandscapein0.6%ofitsannualGDP.ThailandandSoutheastAsiaTheregulationreplacesfreeallocationasIndonesiacouldeachpotentiallyfacetheprimarytooltoprotecttradeexposedannualrevenuelossesofaroundUSD500Unpackingsectorsagainstcarbonleakage90.Itrequiresmillion,0.2%and0.1%oftheirGDPNetZeroEUimporterstoreportGHGreleasedduringrespectively.production,Scope1and2,ofspecificExploringproductsincludedaluminium,cement,iron,OtherEUregulationsincludetheEUrenewablesteel,fertiliser,hydrogenandelectricityCorporateSustainabilityReportingenergyproducedoutsideoftheEU.OnceCBAMDirective(CSRD)andtheEUDeforestprocuremententersintoforcein2027,importerswillneedRegulation(EUDR).TheCSRDinvolvesmethodsandtoacquireandsurrendercertificatesanincreaseofsustainabilityreportingandrenewablecorrespondingtotheGHGassociatedwithwillonlyapplytonon-EUcompaniesthatenergyimportsfromoutsideoftheEU.CBAMareconnectedtotheEUmarketinwayscertificatesrelatedeconomicrisksaredifficulttosuchasownershipofasubsidiaryinthe(RECs)measure.TheextenttowhichacountryisEU91.TheEUDRontheotherhand,likelyaffectedbyCBAMdepends,besidesrequiresproducersandcompaniestradingExploringtheEUETSpriceandthestringencyofintotheEUspecificagriculturalandnaturalcarbonCBAM,primarilyonexportingcountries’resourceproductstoprovidedetailedoffsetsexposure,i.e.thevolumeofaffectedexportsevidencethatthelandgoodsweregrowntotheEU.Exposurealone,however,doesonhadnotbeendeforestedpast2020.Appendixnotsaymuchaboutpossibleeconomicrisks.Suchregulationsarechallengingastheprocessofverifyinglanduserightsandplantationregistrationcertification,letalonegatheringgeolocationdata,isprotracted,complexandslowinmanypartsofSoutheastAsia92.90Trading-off:ExploringthepotentialimplicationsoftheEU’snewCarbonBorderAdjustmentMechanismofrSoutheastAsianeconomies(2023),NewClimate91TheimpactoftheEU’sCorporateSustainabilityReportingDirectiveonbusinessesinAsia(2023),Linklaters92EUdeforestation-freerule‘highlychallenging’forSEAsiasmallholders,expertssay(2023),MongabayEnablingaNetZeroworld44PwC44AppendixD.-HighlevelecosystemmapDHighlevelecosystemmap–carboncreditsReportSupplyIntermediariesPurchasehighlightsProjectStandardsandThird-partyBuyersThedevelopersregistriesauditorsdecarbonisationRole:landscapeinARpoplee:ndixD.-HRiogleh:levelecosystReomle:map•PurchasecarbonSoutheastAsiaDesign/develop•SetstandardsforConductthird-partycreditstooffsetUnpackingcarbonoffsettheirownNetZeroprojects(bothcarboncreditquality,assessmentstoemissions,ornature-basedandemissionswithinExploringtechnology-based)incertify,andissueprovidetheirbusinessrenewableconsultationwithactivities.Forenergystakeholders,andcredits,andtrackindependentexample,procurementpotentiallysellcompaniesmethodsandcarboncredittocertifiedcreditprojectsconfirmationthatregulatedbyrenewablebuyerscap-and-tradeenergyandcreditissuanceandprojectsareinlineregulations,andcertificatesbuyingcreditsof(RECs)retirementwithagivengoodwillExploring•Eachregistryhasaliststandard.carbonoffsetsofapprovedverifiersAppendixthatverifytheoffsetBroker/retailersactionsprojectdeveloperscarryout.•TrackandtransfertheRole:ownershipofcarbon•Offerarangeofcreditsbetweenthecreditsandservicesoriginalowners,thatreducetimefinancialintermediaries,takentodirectlyandbuyersengageprojectCarbontradingdevelopersplatforms•SomecompaniesprovideaRole:combinationofMarketplaceswhereprojectdevelopmentverifiedcarboncreditsandretailingarelisted,bought,andsoldHighlevelecosystemmap–RECsSupplyIntermediariesPurchaseGeneratorsStandardsandIssuerBuyersregistriesRole:Role:Role:GenerateelectricityRole:ResponsiblefortheTopurchaseRECsfromrenewable•Setsstandardsforregistrationoftofulfilsustainabilityenergysourcesproductiondevicecommitmentsandsuchassolar,renewableenergyownersandtheirdecarbonisewind,biomass,andattributetrackingthatrespectivebusinessactivitiesgeothermalpowercanbeeasilyproductiondevicesimplementedsothatinacountryorconsumersinallregionregionscanaccessinternationallyRECtradingrecognised,tradableplatformsandreliableRECs.•TrackandtransferRole:RECs,andenableMarketplaceswheredeveloperstoRECsarelisted,generate,verify,andbought,andsoldsellRECsPwC45ContactusFangEuLinSustainabilityandClimateChangePracticeLeaderAPCentreofSustainabilityExcellencePwCSingaporeeu-lin.fang@pwc.comJenniferTayAsiaPacificInfrastructureLeaderPwCSingaporejennifer.c.tay@pwc.comShawnWangSeniorManager,SustainabilityandClimateChangePracticePwCSingaporeshawn.yx.wang@pwc.com©2023PwC.Allrightsreserved.Thiscontentisforgeneralinformationpurposesonlyandshouldnotbeusedasasubstituteforconsultationwithprofessionaladvisors

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