New carbon tax will prepare Singapore for ‘low-carbon global future’: Masagos

SINGAPORE — Addressing concerns that the Republic’s new carbon tax will blunt the country’s economic competitiveness, Minister for the Environment and Water Resources Masagos Zulkifli argued on Tuesday (March 20) that the levy will instead strengthen the competitive edge of companies here and prepare them for a “low-carbon global future”.

He also pointed out that the new tax, which will kick in from next year after Parliament passed the Carbon Pricing Bill, could help spur investments and adoption of low-carbon solutions. The World Bank, for instance, has estimated that global demand for green and “climate smart” solutions in the coming years could be worth as much as US$23 trillion.

“China has already made a strategic choice and stated its ambition to transform its economic development and shift towards a low-carbon economy ... To maintain our competitive edge, Singapore companies must also transform,” the minister added.

“Consumers all over the world will soon demand products and services that use the smallest carbon footprint. We must move early.”

In debating the Bill, Member of Parliament Henry Kwek (Nee Soon GRC) and Nominated MP K Thanaletchimi had asked how the carbon tax would affect the competitiveness of the affected industries. Mr Kwek and MP Lee Bee Wah (Nee Soon GRC) also asked about the impact on households and their cost of living.

From next year to 2023, large carbon emitters – defined as those that produce 25,000 or more tonnes of greenhouse gas emissions annually – will be taxed S$5 for each tonne of greenhouse gases emitted. The tax will eventually be increased to between S$10 and S$15 by 2030.

The new laws also require facilities to put in place certain measurement, reporting and verification practices to track their carbon footprint.

The carbon tax will come in the form of a fixed-price credits-based mechanism, where the large emitters will have to pay their carbon tax by surrendering carbon credits. These credits can be purchased at a fixed price from the National Environment Agency throughout the year and have no expiry date.

About 30 to 40 of the largest emitters in the power generation, petroleum refining, chemicals and semiconductor sectors will be taxed, which account for about 80 per cent of Singapore’s emissions.

Mr Masagos gave the assurance that the Government was mindful of the potential economic impact, and had conducted extensive consultations with the industry in designing the framework of the carbon tax.

The initial carbon tax rate of S$5 per tonne of greenhouse gas emissions in the first five years was “decided very carefully” after considering both the country’s economic competitiveness and environmental considerations, he added.

Companies will have time to adjust, such as by upgrading to more energy-efficient equipment. The Government will also review the impact of the carbon tax regularly, taking into account factors such as international developments and Singapore’s progress in meeting its commitments under the Paris Agreement to cut emissions intensity by 36 per cent from 2005 levels, by 2030.

As for the impact on consumers, Mr Masagos reiterated that the impact of the tax on households is expected to be small at about 1 per cent of the total electricity and gas expenses.

Eligible households will receive additional U-Save rebates of S$20 per year between next year and 2021, which will cover the expected increases in expenses.

“We will assess the impact of the carbon tax at a later stage and review the need to extend these rebates,” he added.

The authorities will also work closely with the Consumer Association of Singapore (Case) and the Competition Commission of Singapore to monitor the market for unfair pricing and coordinated price hikes that might be anti-competitive.

To reduce the compliance costs on businesses, Mr Masagos said there is a list of greenhouse gas emissions that are excluded from the carbon tax. These are small emissions sources but also cost more to measure and report when compared to the amount of carbon tax collected.

Six greenhouse gases are covered under the tax: Carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.

Dr Lee and Non-constituency MP Leon Perera also asked about making public the emissions data of large emitters for more transparency. But the minister disagreed with the suggestion, citing how these reports contain commercially-sensitive information.

Wrapping up the debate on Tuesday, Mr Masagos said: “The Bill is an important step forward – not only in encouraging industry to do their part for the climate, but also in readying our economy and strengthening our competitiveness as the world transitions to a low-carbon economy. Companies ignore these realities at their peril.”