Higher carbon tax can spur green transition, but must be calibrated to help S'pore firms stay competitive

SINGAPORE – A higher carbon price will spur large emitters in Singapore to cut their carbon footprint, but adjustments to the country’s carbon tax must be done carefully to give firms time to adapt and stay competitive, said two ministers on Wednesday (Jan 12).

Speaking during a parliamentary debate on Singapore’s green transition, Trade and Industry Minister Gan Kim Yong said the correct carbon price will guide investment decisions and spur companies to decarbonise.

“But it will also come with higher costs for businesses and consumers. We should calibrate and pace the adjustment carefully, to give companies sufficient time to adapt and stay competitive,” he added.

A higher carbon tax will also have an indirect impact on households, he noted.

“The Government will consider how we can help ease the cost increase, especially for lower-income households,” said Mr Gan, citing past schemes such as the U-Save utilities rebates and a programme that provides eligible households with vouchers to offset the cost of energy-efficient appliances.

Singapore’s current carbon tax rate, which will be in place until 2023, is $5 per tonne of emissions. The revised rate for 2024 will be announced during next month’s Budget, which will also indicate what to expect up to 2030.

Nineteen MPs spoke during the roughly five-hour debate on the the private members’ motion, which was moved by six PAP MPs – Ms Poh Li San (Sembawang GRC), Mr Gan Thiam Poh (Ang Mo Kio GRC), Ms Nadia Samdin (Ang Mo Kio GRC), Mr Louis Ng (Nee Soon GRC), Ms Hany Soh (Marsiling-Yew Tee GRC) and Mr Don Wee (Chua Chu Kang).

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The motion urges the Government to enhance green financing, create more green jobs, and strengthen corporate accountability. This, said the MPs, should be done “in partnership with the private sector, civil society and community, to advance Singapore’s inclusive transition towards a low-carbon society”.

MPs who spoke during the debate, including Mr Ng and Ms Foo Mee Har (West Coast GRC), said Singapore’s carbon tax was too low.

Mr Ng, noting that a carbon tax has the “highest potential to reshape incentives and motivate action”, suggested the coverage of the carbon tax be expanded to more firms.

Currently, Singapore’s carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year, covering 30 to 40 large emitters that contribute 80 per cent of Singapore’s greenhouse gas emissions.

“Smaller emitters, those emitting at least 2,000 tonnes of emissions… already have to pay the costs of monitoring and measuring their emissions. Given that any additional compliance costs would likely be minimal, it makes sense for the carbon tax to cover all reportable facilities,” said Mr Ng . “This would, after all, be in the spirit of a whole-of-nation fight against climate change. Emitters, small and large, have a role to play.”

In response, Minister for Sustainability and the Environment Grace Fu said the carbon tax currently covers about 80 per cent of Singapore’s emissions.

“If we include the excise duties on vehicular fuel, more than 90 per cent of our emissions are subject to a carbon price. This coverage is one of the highest in the world,” she said, adding that Singapore will continue to encourage small emitters to track their carbon footprint on a voluntary basis.

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