SINGAPORE: While power stations may be the hardest hit by the introduction of a carbon tax in Singapore, the idea is not for them to absorb the cost, but pass it down to large energy guzzlers. Energy experts Channel NewsAsia spoke with said this days after Finance Minister Heng Swee Keat announced that a carbon tax would be implemented from 2019, affecting between 30 and 40 large direct emitters of greenhouse gases (GHGs).
The National Climate Change Secretariat (NCCS) said those emitting gases equivalent of 25,000 tonnes of carbon dioxide a year would be affected. This translates to emissions produced by the electricity consumption of 12,500 four-room households each year.
BIG COSTS FOR POWER GENERATORS
According to data from NCCS, Singapore’s GHG emissions in 2012 was equivalent of 49 million tonnes (MT) of carbon dioxide.
Power generators made up 43 per cent of all emissions, and they could be the ones seeing a dent in their bottom lines. While the Government has yet to work out the details, it said it’s looking at charging between S$10 and S$20 per tonne of greenhouse gas emissions.
Based on market share in electricity production alone, Senoko Energy could end up paying between S$47 million and S$94 million annually, while Tuas Power could cough up anywhere between S$45 million and S$90 million.
PASS DOWN COSTS TO LARGE ENERGY USERS
Adjunct Research Associate Professor Ho Juay Choy from the National University of Singapore’s Energy Studies Institute (ESI) said power generation companies are already operating pretty efficiently. The idea is for power generators to pass on the cost of the carbon tax.
“Close to 95 per cent of electricity is generated from natural gas, which is the cleanest form of fuel. But there are other industries which are very energy intensive and their energy bills would increase with the tax. So if you are an energy intensive industry that uses a lot of energy, the imposition of an extra cost through the carbon tax would hopefully be an encouragement to improve energy efficiency and reduce emissions,“ he said.
Prof Ho said there are still many areas of improvements for such large users of energy, such as through improving their compressed air systems, boilers and other process heat systems. At the same time, he said the government has said it would use the revenue from the carbon tax to provide companies with greater support on energy efficiency improvements.
Head of Nanyang Technological University’s Economics Department, Prof Euston Quah agreed, saying the carbon tax would stimulate action among businesses. “(Firms and businesses) will compare paying the tax against the cost of cutting down emissions using their own technologies. If the cost of cutting emissions by their own technologies is cheaper than paying for the tax, they will then do so,” he said.
CARBON TAX: PROVIDING A PRICE SIGNAL BUT NOT AT EXPENSE OF EFFICIENCIES
Singapore’s carbon tax of between S$10 and S$20 per tonne of CO2 equivalent (tCO2e) is in the range of what other jurisdictions have implemented. Research Associate at ESI, Gautam Jindal cited a report that highlighted that three quarters of emissions with a carbon price, are below the suggested tax level of S$10 per tonne of CO2. But countries like Sweden have imposed taxes of more than S$100 tCO2e, although its power companies do not pay this tax and industries pay half of what is imposed.
Still, Prof Quah said a carbon tax should typically be priced high enough to significantly decrease greenhouse gas emissions. But in the case of Singapore, the price needs to balance effectiveness and competitiveness. “(Our carbon tax) is at the lower end not the higher end (of the scale) compared to countries like Sweden,” he said.
“But that could be a reflection of their society and their mission of moving very fast to a low carbon economy. In our case since we are relying a lot on natural gas, we don’t want to unusually burden the businesses and hurt our competitive position of the economy.”
Prof Quah said many countries are already moving towards carbon pricing, and for Singapore to get into the game early would allow it to fine tune the system, while being able to promote research and development activities and innovation on energy efficient technologies.
MINIMAL IMPACT OF COST BUT CARBON TAX SYMBOLIC OF TAKING ACTION
The Government has said the impact of a carbon tax on households would be modest, something which experts like Prof Quah, Prof Ho and Mr Jindal agree on. The idea of the carbon tax is to change mindsets; that everyone’s action contributes towards the emission of harmful greenhouse gases, and for them to make informed decisions about how they consume energy. Prof Quah added the carbon tax as it stands is “good as a starting point”, but eventually, it would have to reflect realities, with prices becoming higher over time.