Carbon tax bill passed amid concerns over its impact on competitiveness

Carbon tax bill passed amid concerns over its impact on competitiveness

The Carbon Pricing Bill sets out a framework for implementing the carbon tax, including the measurement, reporting and verification requirements.

The Carbon Pricing Bill sets out a framework for implementing the carbon tax, including the measurement, reporting and verification requirements. The carbon tax will be introduced from 2019 on large direct emitters of greenhouse gases such as power stations, and is expected to affect between 30 and 40 emitters currently operating in Singapore.

SINGAPORE: A bill to introduce carbon tax in Singapore was passed in Parliament on Tuesday (Mar 20).

The Carbon Pricing Bill sets out a framework for implementing the carbon tax, including the measurement, reporting and verification requirements. The carbon tax will be introduced from 2019 on large direct emitters of greenhouse gases such as power stations, and is expected to affect between 30 and 40 emitters currently operating in Singapore.

These large emitters will be charged S$5 per tonne of greenhouse gas emissions from 2019. 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.

Moving the second reading of the bill, Minister for the Environment and Water Resources Masagos Zulkifli pointed out that companies in Singapore reported an energy efficiency improvement rate of 0.8 in 2016, up from 0.4 in 2014 and 0.6 in 2015. But he added that Singapore still has some way to go, as leading jurisdictions like Belgium or the Netherlands achieve annual improvement rates of one to two per cent.

“The carbon tax will incentivise companies to improve energy and carbon efficiency, while giving them the flexibility to take action where it makes business sense,” he said. He added that in a recent consultation session with industry and non-government organisations, many agreed on the need for climate action and supported pricing carbon.

The carbon tax will take the form of a “fixed-price credits based mechanism”, Mr Masagos added. This means that the affected facilities will pay the carbon tax by buying and surrendering carbon credits corresponding to their greenhouse gas emissions, rather than through direct payment. These carbon credits can only be bought from the National Environment Agency (NEA) at a fixed price.

MEMBERS OF PARLIAMENT RAISE ISSUES RELATED TO HOUSEHOLDS, BUSINESSES

Eight parliamentarians spoke on the bill, raising points ranging from the impact of the carbon tax on households, supporting businesses in the change and the impact of the tax on Singapore’s international competitiveness.

MP for Nee Soon GRC Lee Bee Wah noted that with the carbon tax rate of S$5 per tonne, the impact is expected to be small. But she added that there are still concerns about the impact on households.

“This may not seem significant, but with the increase in the price of water and other items, it will all add up,” she said. “One major public concern is how it will affect our cost of living. How can we ensure that businesses are not going to profiteer?”

On support for businesses, MP for Jurong GRC Rahayu Mahzam pointed out that the implementation of the act will “clearly change” the way businesses are run.

Describing it as a “bold and new initiative”, she commended the Government for choosing a “soft start and incremental approach” by imposing a lower tax per tonne of emission at the beginning, and increasing it over time.

But she pointed out that there will be administrative work to be done, mechanisms to be put in place to track emissions, and auditing to be carried out to ensure compliance.

“Given that this is a completely new regime that the businesses are facing, would the Government be providing support, perhaps in the form of business consultancy, to help the affected businesses manage the change?”

Meanwhile, Nominated MP K Thanaletchimi raised concerns that the carbon tax would incur costs that affect industry competitiveness.

“As a small nation that relies heavily on trade and foreign investment, how is the Government going to ensure that the economy remains competitive with the introduction on the carbon tax?” she asked.

CARBON TAX DELIBERATED CAREFULLY AND EXTENSIVELY WITHIN GOVERNMENT

In response to MPs, Mr Masagos noted that the impact of the carbon tax on households is expected to be small, at about 1 per cent of total electricity and gas expenses on average. He added that eligible HDB households will receive additional U-Save rebates of S$20 per year, from 2019 to 2021.

On average, these additional rebates will cover the expected increase in electricity and gas expenses arising from the carbon tax. “We will assess the impact of the carbon tax at a later stage and review the need to extend these rebates,” he said.

He added that the Government will also work closely with the Consumers Association of Singapore and Competition Commission of Singapore to monitor the market for unfair pricing and coordinated price hikes.

On supporting companies, Mr Masagos said the Government is prepared to spend more than the estimated S$1 billion in carbon tax revenue that is expected be collected in the first five years on worthwhile carbon abatement projects. Existing energy efficiency incentive schemes will also be enhanced, he said.

He assured Parliament that in introducing the tax, the Government has been mindful of Singapore’s international competitiveness, given that Singapore is an export-oriented economy.

Concluding, he stressed that the carbon tax has been deliberated carefully and extensively within the Government. It has also made a “concerted effort” to consult and engage the industry.

“The bill is an important step forward, not only in encouraging industry to do their part for the climate but also in readying our economy and strengthening our competitiveness as the world transitions to a low-carbon economy,” he said.

“Companies ignore these realities at their peril.”

Source: CNA/lc

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