Excerpt of Budget Speech by Minister for Finance Heng Swee Kiat

Reducing Emissions

To improve our living environment, we must also address one of the most pressing challenges the world faces – climate change.

• Climate change is more than just record-breaking temperatures, dry weather or more intense rain.

• As a low-lying island, Singapore is particularly vulnerable to rising sea levels.

  • This is why the Government has invested significantly to improve our infrastructure, including protecting our coasts and critical assets, building a weather-resilient water supply, and redesigning our flood management system.

We must play our part to address the underlying cause of climate change – to make Singapore a more liveable and sustainable city, and as a responsible member of the international community.

Over the years, we have made various efforts to manage our greenhouse gas emissions.

• The Energy Conservation Act was enhanced last year to improve the energy efficiency of our industries.

• We are investing in public transport to make Singapore car-lite, and green-certified buildings have become a hallmark of our urban landscape.

• Our early measures to be a green city have shown results. Singapore produces less carbon emissions per dollar of GDP than most countries. We intend to further reduce our emissions intensity,to make a bigger effort to combat climate change.

To encourage companies to further reduce emissions, I announced last year that we intend to implement a carbon tax from 2019.

• I will proceed with a carbon tax on all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year.

  • It will be levied on the total emissions of each of these facilities.

  • The first payment will be in 2020, based on emissions in 2019.

• The carbon tax will be $5 per tonne of greenhouse gas emissions in the first instance, from 2019 to 2023.

• We will review the carbon tax rate by 2023. We intend to increase it to a rate of between $10 and $15 per tonne of emissions by 2030. In doing so, we will take into account international climate change developments, the progress of our emissions mitigation efforts and our economic competitiveness. (Refer to Annex B.)

The carbon tax will apply uniformly to all sectors, without exemption. This is the economically efficient way – to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction.

• This means our initial carbon tax rate of $5 cannot be directly compared with that in other countries. Jurisdictions with higher headline carbon prices often also have significant exemptions for particular sectors, which lowers their effective carbon prices.

The carbon tax will be levied on major emitters, which account for about 80% of Singapore’s emissions. The remaining 20% is contributed by many other sources of varying sizes. We will study how to account for these emissions, and take action where necessary.

For petrol, diesel and compressed natural gas (CNG), we have excise duties, which already encourage reduction of the use of these fuels, and therefore reduce greenhouse gas emissions.

• Hence, I will not levy an additional carbon tax on petrol, diesel and CNG.

• I will also not increase their excise duties at this point in time, but we will continue to review and adjust them periodically.

The carbon tax will encourage businesses to take measures to reduce carbon 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.

• There will also be new opportunities in areas like sustainable energy and clean technology.

• We have to start preparing early so that industries have more time to adapt.

To give companies and households a strong push in the first five years when we introduce the carbon tax, we will provide more grants and support to help them enhance energy efficiency and reduce emissions.

• We expect to collect carbon tax revenue of nearly $1 billion in the first five years.

• To achieve our goal of reducing emissions intensity as soon as possible, I am prepared to spend more than this in the initial five years, to support worthwhile projects which deliver the necessary abatement in emissions.

• 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. Our agencies will evaluate these rigorously.

• I will set aside funds starting from 2019 to enhance support for companies, including SMEs and power generation companies, to improve energy efficiency.

  • The support for companies will be done through schemes like the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fun(Refer to Annex B.)

  • More support will go to projects that achieve greater emissions abatement, beyond the basic enhancements.

  • The Ministry of Trade and Industry (MTI) and the Ministry of the Environment and Water Resources (MEWR) will share more details at a later date.

For our households, the impact of the carbon tax will be small, at about 1% of total electricity and gas expenses on average.

• Still, to help households adjust, I will provide additional U-Save for three years. Eligible HDB households will each receive $20 more per year, from 2019 to 2021.

• The increase in U-Save will cover the expected average increase in electricity and gas expenses for HDB households arising from the carbon tax. (Refer to Annex B.)

• MEWR will also work with the community to help households save energy, and will announce more details at a later stage.

We have designated 2018 as the Year of Climate Action, to encourage all Singaporeans to fight climate change. The Minister for the Environment and Water Resources will speak more on our other plans to reduce energy use and carbon emissions at the COS.

For full speech, please go to: https://www.mof.gov.sg/budget-archives/budget-2018/