SINGAPORE: Instead of being charged a flat rate, large emitters of greenhouse gases have called for the upcoming carbon tax to be based on whether their emissions meet industry-specific benchmarks.
At a consultation session on Tuesday (Jan 23), 40 companies – including those from the power generation and petrochemical industries – voiced concerns about how the carbon tax might be implemented.
Mr Yu Tat Ming, chief executive of PacificLight, a power generation company, said a benchmark system will give companies more incentive to reduce emissions.
“If it is targeted based on a certain benchmark, it can be more differentiating,” he said. “Any marginal carbon will attract heavier tax. That will encourage industries to take action, to meet the target.”
Likewise, another stakeholder said the tax should be charged based on “how far you are away” from the benchmark. “If you charge a flat tax across all carbons, there is very little incentive and margin to improve energy efficiency.”
The carbon tax, which will be implemented next year, is just one in a range of measures aimed at reducing emissions intensity in Singapore by 36 per cent from 2005 levels by 2030 under the Paris Agreement.
It will target large direct emitters, defined as those that emit 25,000 or more tonnes of greenhouse gases annually. This is expected to affect 30 to 40 emitters operating in Singapore.
The Government is also looking at charging a flat rate of between S$10 and S$20 per tonne of greenhouse gas emissions.
But without the “clear visibility” of a benchmark, Mr Yu said, “we don’t know what we are trying to achieve”.
“How much should we improve in order to enable the Government to achieve the target?” he asked. “Because for any improvement, there has to be an investment made. And as a commercial entity, we need to calculate the return on investment.”
If the tax fails to reduce emissions, another stakeholder added, the Government will end up increasing rates across the board, “pushing us down the path of international un-competitiveness”. Others noted that Singapore’s neighbours do not impose carbon tax.
Environment and Water Resources Minister Masagos Zulkifli acknowledged such concerns, noting that companies want the carbon tax to be implemented fairly and simply, without a “cost burden”.
While the Government has studied various systems, the carbon tax has to “finally nudge our companies to transform towards a low-carbon economy”, he said. “This is not an easy thing to design because we must not kill our competitiveness.”
Fixing the tax price is also a challenge, Mr Masagos noted, given the “inevitable” trickle-down effect on consumers.
“If it is too low, people and industries will not transform – behaviour will not change,” he said. “But if it is too high, industries will just relocate, people will suffer too much.”
Nevertheless, the Government will ensure that companies do not pass the “wrong amount of cost to consumers” by encouraging competition and giving consumers a choice, he said.
As for the companies, Mr Masagos said, the Government will make the process of determining the carbon tax price transparent to them.
“Therefore, we’ll try as much as possible to put as much certainty as we can so that we do not price ourselves out,” he said. "But we have to ensure that the right kind of technology and processes are brought to Singapore, so that it doesn’t add up to more emissions.”
Sustainable Energy Association of Singapore chairman Edwin Khew said it is ready to help the Government identify energy efficiency benchmarks for various emission systems.
“We have a good idea of what the different benchmarks are,” he said. “The thing is whether it fits in with what the Government wants.”
With next month’s Budget announcement on the final details of the carbon tax fast approaching, Mr Khew feels the Government would have had enough time to consider the feedback.
“I think they’ve already gone and done a lot of studies and investigations, so when (Finance Minister Heng Swee Keat) announces what level of carbon tax the industry will be facing, he should have enough to decide,” he added.
“It’s not going to be cast in stone, so something that you can introduce and adjust as you go along, as more information will be coming in to help them adapt to the situation in Singapore.”