Carbon Tax
CARBON TAX
Singapore implemented a carbon tax, the first carbon pricing scheme in Southeast Asia, on 1 January 2019. The carbon tax provides the 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 is not standalone. It forms part of Singapore’s comprehensive suite of mitigation measures to reduce emissions, create green growth opportunities, and transit 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 rate is set at S$5/tCO2e in the first instance from 2019 to 2023. It applies to direct emissions from facilities emitting 25 ktCO2e or more in a year, covering carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydrofluorocarbons and perfluorocarbons. This covers around 80 per cent of Singapore’s total emissions. The carbon tax does not apply to land transport fuels, for which there already are excise duties to encourage the reduction of their use.
Since the announcement of the carbon tax rate in Budget 2018, we have enhanced our 2030 Nationally Determined Contribution and submitted our 2050 Long-term Low Emissions Development Strategy under the Paris Agreement in March 2020.
As a responsible member of the international community, Singapore will be expected to do more, along with other countries, as climate change issues take on greater gravity.
The Government will therefore review the trajectory and level of the carbon tax, post-2023, in consultation with industry and expert groups. An appropriate carbon tax level is one of the key levers to spur the reduction of our carbon footprint, promote industry innovation and green growth, while maintaining Singapore’s overall economic competitiveness. Up until 2023, the carbon tax level will be maintained at $5/tCO2e as previously announced. This will provide businesses with certainty in the current challenging economic climate.
The Government will announce the outcome of the review at Budget 2022, to provide time for businesses to adjust to any revision in the carbon tax trajectory.
Role of carbon tax in Singapore’s mitigation strategy (Click to download a larger image)