1. What is the role of the carbon tax in Singapore’s mitigation strategy?
The carbon tax forms part of our comprehensive suite of mitigation measures by providing a broad-based price signal across the economy. The revised carbon tax level and trajectory is aligned with our climate ambition to reach net zero by or around mid-century. This will also accelerate the economic transformation necessary to transition to a future-ready green economy by enhancing the business case to implement energy efficiency improvements and other emission reduction solutions. This ensures the long-term viability of business investments and activities in a carbon-constrained world.
2. Who is covered under the carbon tax?
The tax is applied on facilities that directly emit at least 25,000 tCO2e of greenhouse gas (GHG) emissions annually and includes six GHGs that Singapore is currently reporting to the United Nations Framework Convention on Climate Change (UNFCCC), namely carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6). Singapore will also start reporting a seventh GHG, nitrogen trifluoride (NF3) by 2024. As such, we intend to include NF3 as a taxable gas at a suitable juncture.
We will continue to consult industry and will provide sufficient transition period for the inclusion of NF3. Details on when it would be covered by carbon tax will be announced in due course.
In all, the carbon tax currently covers 80% of our total GHG emissions from about 50 facilities from the manufacturing, power, waste, and water sectors. Facilities in other sectors would also indirectly face a carbon price on the electricity they consume as power generation companies are expected to pass on some degree of their own tax burden through increased electricity tariffs. When we account for fuel excise duties that incentivise reduction of transport emissions, the overall coverage rises to about 90%.
3. How are emissions-intensive trade-exposed (EITE) sectors determined? Why is there a need for the transition framework for EITE sectors?
Emissions-intensive trade-exposed (EITE) sectors face a higher risk of carbon leakage, where companies in these sectors may respond to higher carbon prices in Singapore by shifting their operations and emissions to locations with less stringent climate policies or carbon prices. This could result in job losses without benefitting the climate. As the Government raises the carbon tax, we are mindful of the impact on competitiveness for companies in the EITE sectors which typically employ a substantial number of Singaporeans. Examples of EITE sectors include Chemicals, Electronics and Biomedical Manufacturing sectors, while non-EITE sectors include domestic-oriented sectors like power generation and waste management.
The transition framework therefore seeks to support existing companies in EITE sectors as they transition towards lower-carbon operations and minimise the impact on Singapore’s near to medium term competitiveness. We also recognise that existing investments were made amidst a different operating context and there are near-term challenges in transitioning to low-carbon operations (e.g. decarbonisation technologies need time to mature). New investments will not qualify for the transition framework.
Under the framework, transitory allowances are provided for part of companies’ emissions, based on efficiency standards and decarbonisation targets. Such frameworks are also found in other jurisdictions with carbon pricing regimes. We are currently consulting affected companies on the framework. The details will be finalised by 2023, ahead of the increase of carbon tax level in 2024.
4. Which other countries or jurisdictions have implemented carbon pricing?
Singapore is not alone in pricing carbon. About 79 jurisdictions (45 national and 34 sub-national jurisdictions) have implemented carbon pricing. In 2021, these jurisdictions account for roughly 21.5% of global greenhouse gas emissions. A few of these jurisdictions such as Finland, Norway and Sweden have implemented carbon pricing as early as the 1990s. Other jurisdictions within the region that have announced plans to price carbon and introduce new carbon regulations include Indonesia and Brunei.
5. What does our carbon tax measures under the Singapore Green Plan mean for individuals?
Our strategies for climate action, including the carbon tax, take into account the needs of all stakeholders, including the low-income and the vulnerable.
Under the whole-of-nation Singapore Green Plan 2030, we have designed our range of adaption and mitigation measures to be inclusive and equitable. These measures support the building of a city in nature, an energy reset and a transition to a green economy, build a resilient future for all, and to minimise the adverse effects that climate change could have on the economy, society and our daily lives.
For example, the Government has been improving the liveability of our public housing estates through novel ways of weaving greenery into our estates and towns, which reduces temperatures while improving air quality. HDB flats are also designed to maximise cross-ventilation, thereby reducing reliance on air-conditioning which is a large contributor to household utility bills. Another initiative is the introduction of energy-efficient centralised cooling systems in new HDB towns to support cooling. Coupled with the 10-year HDB Green Towns Programme’s initiatives, energy consumption is further reduced as towns become cooler. These sustainability initiatives ensure that the impact of climate change on all residents are minimised.
The Government also provides support to help households reduce their emissions. Since December 2020, the Government has introduced incentives such as e-Vouchers ranging from $25 to $150 in value under the Climate Friendly Households Programme to support lower-income households in purchasing more energy efficient and climate-friendly appliances. These e-Vouchers can be used to purchase appliances such as 3-ticks water efficient shower fittings (inclusive of installation costs if required) and energy efficient and climate-friendly refrigerators. With the adoption of these appliances, households are able to do their part for the environment by reducing their energy and water consumption while saving costs in the long run.
To help households adjust to the impact of the carbon tax on their electricity and gas expenses, eligible HDB households are given an additional $20 GST Voucher – U-Save on top of the regular U-Save rebate each year from 2019 to 2021. Eligible households living in smaller HDB flats benefit more as they receive a larger quantum of U-Save rebates, and typically have smaller annual utilities bills.
6. How would the Government ensure that consumers are not over-charged by electricity retailers passing on more than 100 per cent of the carbon tax to consumers?
Today’s electricity retail market is competitive and discourages retailers from raising their electricity rates excessively. Nevertheless, EMA will continue to ensure fair and efficient conduct of market players. Government agencies will also work closely with the Consumer Association of Singapore (CASE) and Competition & Consumer Commission of Singapore to monitor the market for unfair pricing and coordinated price hikes which are anti-competitive.
7. Will companies be able to use international carbon credits to offset their carbon tax liabilities?
We will continue to financially support businesses’ decarbonisation efforts through existing schemes like Resource Efficiency Grant for Energy (REG(E)) and the Energy Efficiency Fund (E2F). Companies may surrender high quality international carbon credits to offset up to 5% of their taxable emissions from 2024. This will cushion the impact for companies that are able to source for credible carbon credits in a cost-effective manner. This will also help to create local demand for high-quality carbon credits and catalyse the development of well-functioning and regulated carbon markets.
We will continue ongoing consultations with relevant stakeholders on the framework for the use of carbon credits. Details will be shared in 2023, ahead of the implementation of the revised carbon tax framework in 2024.
8. Why are we allowing carbon tax liable facilities to offset only up to 5% of their emissions using international carbon credits from 2024?
We have set a limited quantum to ensure that the industry continues to prioritise domestic emissions reduction, while providing an additional decarbonisation pathway for hard-to-abate sectors that may find it challenging to significantly cut emissions in the short to medium term. We will continue to financially support businesses’ decarbonisation efforts through existing schemes like Resource Efficiency Grant for Energy (REG(E)) and the Energy Efficiency Fund (E2F). We will review the percentage of verified emissions that can be offset using carbon credits in conjunction with future carbon tax reviews, to provide flexibility for hard-to-abate sectors, while maintaining the incentive for the industry to decarbonise.