As Parliament approves higher carbon prices, some MPs fear business toll but others want heftier emissions tax

SINGAPORE — Parliament on Tuesday (Nov 8) voted to sharply increase the tax on carbon emissions over the next five years but not before some Members of Parliament (MPs) flagged concerns that the plan could mean Singapore will have Asia's highest carbon prices.

They argued that these higher carbon prices, part of Singapore's push to reach zero emissions by 2050, would hurt business competitiveness, especially for the large, economically significant petrochemical industry here.

But Workers' Party (WP) MPs argued instead that the tax will still not be high enough, being that they are below internationally proposed levels.

Over nearly four hours, more than 10 MPs debated an amendment to the Carbon Pricing Act in Parliament that would raise the tax on carbon emissions from the present S$5 per tonne of greenhouse emissions to S$25 in 2024 or 2025 and again to S$45 in 2026 or 2027.

The Government's target is to reach between S$50 and $80 by 2030 as it strives to reach net zero emissions by 2050.

The amendment Bill was passed after the WP failed to get the President’s recommendation to several proposed changes to the Bill, which was needed under the Constitution because they would have fiscal implications.

The House voted down the WP’s other proposed changes that did not require the President’s recommendation.

The debate also saw a heated exchange between Minister for Sustainability and the Environment Grace Fu and WP MP Jamus Lim over whether there should be flexibility in carbon pricing to account for the economic situation.

Nominated MP (NMP) Janet Ang raised concerns over potential “carbon leakage”, where companies shift their operations to countries where there are less stringent rules or taxes on emissions.

Singapore, being the only country in Southeast Asia with a carbon pricing regime, could face such a risk of having its competitiveness impacted, said Ms Ang, who sits on the boards of various firms and institutions including Sistic.com and Singapore Press Holdings Limited.

“This is especially so as the large emitters are key contributors to Singapore’s GDP (gross domestic product) and Singapore’s position as an important node in the global value chain of those industries and their eco-systems,” she said.

NMP Mark Chay and Mr Gan Thiam Poh, MP for Ang Mo Kio Group Representation Constituency (GRC), likewise questioned how Singapore’s competitiveness would be affected and how the Government would help.

In response, Minister of State for Trade and Industry Low Yen Ling said that the legislation provides a transition framework which will give eligible companies an allowance to offset a portion of the carbon tax they have to pay.

These allowances are meant to help large emitters manage their near-term impact on business competitiveness and mitigate the risk of carbon leakage.

On the other side of the debate, WP’s Louis Chua and Associate Professor Lim, both MPs for Sengkang GRC, said that while they supported the move to raise prices, there is room to do more.

Mr Chua noted that World Bank-supported High Commission on Carbon Prices proposes that US$50-US$100 (S$70-S$140) is needed by 2030, the Organisation for Economic Cooperation and Development gives a central estimate of €120 (S$168) and the London School of Economics and Political Science’s Grantham Institute suggests US$145 (S$203).

Assoc Prof Lim pushed for a S$58-S$133 range, which he had first suggested when Parliament debated a climate change motion in January this year.

To that, Ms Grace Fu said that as the Minister for Sustainability and the Environment, even as she would like to raise the carbon tax as high as possible, the Government has to take into account the economy and Singapore’s attractiveness as an investment and business hub.

“We will stick with this, but we will take your suggestions into consideration.”

TAX ALLOWANCE CONCERNS

Some MPs also had reservations about the tax allowances that will be given to large emitters, which include the energy, chemicals and electronics sectors.

Mr Louis Ng, MP for Nee Soon GRC, noted that green groups have raised concerns about this and asked that the Government consider naming all companies that receive such allowances.

“Every allowance erodes the coverage of our carbon tax and reduces the urgency to go green. Every allowance weakens the effectiveness of the carbon tax,” he said.

One of the WP’s proposed amendments was to limit the extent of the allowances to a max of 33 per cent of the carbon tax payable down from the Bill’s 50 per cent.

WP’s Leon Perera, MP for Aljunied GRC, said this would give a stronger nudge for large emitters to move towards greener business models. 

He also suggested creating a public registry listing disclosing the companies that receive allowances and the Government’s reasons for giving those allowances.

Fellow party member He Ting Ru, MP for Sengkang GRC, asked for a similar registry listing companies’ use of international carbon credits to offset their emissions.

In response, Ms Low said that these allowances will not give companies a “free pass” because the Government, after all, is accountable to its commitment to cut its emissions to 60 million tonnes of CO2 equivalent in 2030. 

She added that in time, the Government will also release aggregated information on the amount of allowances provided but noted that further disclosures might inadvertently divulge commercially sensitive information.

Pressed by Mr Perera for more transparency about the allowance process and which companies receive them, Ms Fu said: “The line of questions that some Members have given seems to suggest that we have something to hide… There’s really no need.”

What the Government wants is for public officers to be able to engage companies confidently, while keeping in mind the obligation to maintain confidentiality since these companies may be competitors of each other, she said.

“Hold us accountable, eventually, for our overall performance,” she said. “Let us run an effective, flexible, nimble system so that we can really catch the wind and be as as effective as we can in developing a new economy.”