SINGAPORE: In a downward revision from the previously announced range of between S$10 to S$20, large emitters in Singapore will be charged S$5 per tonne of greenhouse gas emissions under the carbon tax that will be implemented next year.
This will give the industry more time to adjust and implement energy efficiency projects. Following that, the tax rate will be reviewed by 2023, with the intention of increasing it to between S$10 and S$15 per tonne by 2030.
The review will consider global climate change developments, the progress of Singapore’s emissions mitigation efforts and its economic competitiveness, Finance Minister Heng Swee Keat said in his Budget speech on Monday (Feb 19).
The carbon tax will affect emitters that produce 25,000 tonnes or more of greenhouse gas emissions in a year, he confirmed, adding that the Government expects to collect carbon tax revenue of nearly S$1 billion in the first five years.
The first carbon tax is expected to be paid in 2020 based on emissions in 2019.
“The carbon tax will encourage businesses to take measures to reduce carbon emissions,” Mr Heng said, noting that large emitters account for about 80 per cent of Singapore’s emissions.
“Companies that do so will be more competitive, as more countries impose tighter limits on their carbon emissions and international agreements on climate change like the Paris Agreement take effect.”
The Government is also prepared to spend more than S$1 billion in the first five years to support projects that reduce emissions. As part of this, it will set aside funds from next year to support companies in improving energy efficiency.
This will be done through schemes like the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund, Mr Heng said. In addition, more support will go to projects that achieve greater emissions reductions.
“I urge companies to do their part for a higher quality living environment for all by putting in meritorious proposals for emissions abatement and energy efficiency,” he added.
TO BENCHMARK OR NOT
Large emitters had voiced concerns about how the carbon tax might be implemented amid fears it could affect international competitiveness.
As opposed to a flat rate, many wanted the carbon tax to be implemented based on emissions performance benchmarks for fairness. This system allows those that perform at or better than the benchmark to get free allowances.
However, the Government has decided to implement a credits-based carbon tax uniformly across sectors with no exemptions.
“This is the economically efficient way to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction,” Mr Heng said.
Channel NewsAsia understands that the decision was reached on the basis that each unit of emissions contributes equally to climate change, regardless of whether the emissions came from emitters that perform better or worse than the benchmark.
In addition, determining benchmarks for each sector and ensuring that they are equitable across sectors is a complicated and contentious process.
The development and implementation of benchmarks is also data-intensive and would impose additional reporting and verification requirements on companies, especially for sectors with specialised products.
IMPACT ON HOUSEHOLDS "SMALL"
When it comes to households, the impact of the carbon tax will be “small”, Mr Heng stated, making up about 1 per cent of total electricity and gas expenses on average.
The carbon tax is expected to translate to a rise in electricity prices of about 0.21 cents per kWh, assuming the full tax is passed on to end-users.
To help households adjust, the Government will provide additional Utilities-Save (U-Save) rebates from 2019 to 2021. During this period, each eligible Housing and Development Board (HDB) household will receive S$20 more per year.
“The increase in U-Save will cover the expected average increase in electricity and gas expenses for HDB households arising from the carbon tax,” Mr Heng said.
To that end, a 4-room flat household will get a U-save rebate of S$320 a year after the increase. The same household is expected to pay an additional S$9.70 a year on average in electricity and gas expenses due to the carbon tax.
“MEWR (Ministry of the Environment and Water Resources) will also work with the community to help households save energy, and will announce more details at a later date,” Mr Heng added.