As announced by Minister for Finance Mr Lawrence Wong at Budget 2022, Singapore will raise our climate ambition to achieve net zero emissions by or around mid-century. To enable the transition to a low-carbon future, we will raise the carbon tax levels progressively from 2024. This will support our climate ambition and secure a greener and more sustainable living environment for future generations, while being economically competitive in a low-carbon future.
Carbon Tax in Singapore from 2019 - 2023
Singapore implemented a carbon tax, the first carbon pricing scheme in Southeast Asia, on 1 January 2019. The carbon tax provides a broad-based price signal to encourage companies to reduce their emissions, yet gives them the flexibility to take action where it makes the most economic sense. The carbon tax forms part of Singapore’s comprehensive suite of mitigation measures to reduce emissions, create green growth opportunities, and transition to an energy-efficient low-carbon economy. To maintain a transparent, fair, and consistent price signal across the economy, the carbon tax is applied uniformly to all sectors including energy-intensive and trade-exposed sectors, without exemption.
The carbon tax level is set at S$5/tCO2e in the first instance from 2019 to 2023, to provide a transitional period to give emitters time to adjust.
Updates to Carbon Tax Post-2023
To achieve our climate ambition, the carbon tax will be raised to $25/tCO2e in 2024 and 2025, and $45/tCO2e in 2026 and 2027, with a view to reaching $50-80/tCO2e by 2030. This will provide a strong price signal and impetus for businesses and individuals to reduce their carbon footprint in line with national climate goals.
The revised carbon tax trajectory is critical in enabling the pace of transformation needed to achieve our raised climate ambition and make the economy- and society-wide transition to a low-carbon future. This early action provides certainty and impetus for businesses to plan their transition. This also helps businesses to be competitive in a low-carbon future, by enhancing the business case to invest in low-carbon technologies and carbon markets, and ensuring new investments and economic activities are aligned with a low-carbon future.
The Government does not expect to derive additional revenue from the carbon tax increase, in this decade. The revenue will be used to support decarbonisation efforts and the transition to a green economy, and cushion the impact on businesses and households.
Use of International Carbon Credits
In addition, as announced at Budget 2022, companies may also 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.
A transition framework will also be introduced to give existing emissions-intensive trade-exposed (EITE) companies more time to adjust to a low-carbon economy. To help maintain business competitiveness in the near term and mitigate the risk of carbon leakage, existing facilities in EITE sectors will receive transitory allowances for part of their emissions. To continue to spur decarbonisation efforts and energy efficiency, the allowances will be determined based on efficiency standards and decarbonisation targets. The transition framework is not applicable to new facilities.
Consultations with relevant stakeholders on the support measures, transition framework, and the framework for the use of carbon credits are currently ongoing. Details will be shared in 2023, ahead of the implementation of the revised carbon tax framework in 2024.
On the international front, we have also enhanced our 2030 Nationally Determined Contribution (NDC) and submitted our 2050 Long-term Low Emissions Development Strategy (LEDS) under the Paris Agreement in March 2020. Singapore will also continue to contribute to international climate action. In alignment with the Glasgow Climate Pact signed at COP-26 in November 2021 which requests countries to update LEDS to achieve net zero “by or around mid-century”, industry and citizen stakeholder groups will also be consulted on a proposed net zero year before making a formal revision of our LEDS.