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Budget 2017: Singapore to impose carbon tax on large direct emitters

Finance Minister Heng Swee Keat outlines a tax rate of between S$10 and S$20 per tonne of greenhouse gas emissions. 

SINGAPORE: The Government will introduce a carbon tax on large direct emitters of greenhouse gases (GHGs) such as power stations from 2019. The tax is expected to affect between 30 and 40 emitters currently operating in Singapore.

Finance Minister Heng Swee Keat announced this in his Budget speech in Parliament on Monday (Feb 20). He said that such a system is the “most economically efficient and fair way” to reduce GHG emissions, towards achieving Singapore's commitment to the Paris climate agreement, which it ratified in 2016.

As part of the agreement, Singapore has committed to reducing emissions intensity by 36 per cent by 2030 compared to 2005 levels. It also aims to stabilise its emissions, with the aim of peaking around 2030.

Mr Heng said the Government will consult stakeholders comprehensively and has already started industry consultation. It will start the public consultation process in March. As of now, he said the Government is looking at a tax rate of between S$10 and S$20 per tonne of GHG emissions.

“(The carbon tax) may also spur the creation of new opportunities in green growth industries such as clean energy,” Mr Heng said. “Revenue from the carbon tax will help to fund measures by industries to reduce emissions.”

Mr Heng said the impact of such a tax system would be “modest” on most businesses and households. In a statement, the National Climate Change Secretariat (NCCS) said the proposed tax rate is equivalent to a rise in electricity prices of between 0.43 and 0.86 cents per kilowatt-hour (kWh). This could mean a between 2.1 and 4.3 per cent increase in electricity prices compared to current rates.

It said the average household in a four-room flat typically sees electricity bills of S$72 per month. A carbon tax imposed on power stations could result in an increase in electricity prices for that household of between S$1.70 and S$3.30 per month. As a point of comparison, NCCS said electricity prices have fluctuated by up to 10 per cent between 2010 and 2016.

On large GHG emitters, NCCS said a price signal would incentivise them to factor in the cost of their emissions in their business decisions. The tax will be imposed on large emitters of six GHGs, including carbon dioxide, methane and hydrofluorocarbons.

NCCS said that based on current data, there are between 30 and 40 of such large emitters operating in Singapore, which emit gases equivalent of 25,000 tonnes of carbon dioxide. This translates to emissions produced by the electricity consumption of 12,500 four-room households each year.

According to the World Bank, about 40 countries and 20 cities, states and provinces have implemented some form of carbon pricing, while many others have plans to introduce such systems in future.