Nurul Amillin Hussain.
A carbon tax on emissions of greenhouse gases (GHG) will be implemented in 2019, as announced on the 20th of February in the 2017 Budget, delivered by the Minister of Finance, Heng Swee Keat. This move towards carbon pricing follows other policy initiatives to reduce Singapore’s emissions intensity to 36% below 2005 levels by 2030, a target pledged under the 2015 Paris climate change pact.
This is not the first time the issue of carbon pricing has cropped up in Singapore’s agenda. In the 2016 Climate Action Plan, the Government said that carbon pricing was being studied as a method to enhance energy efficiency across industries.
What is carbon pricing?
Carbon pricing is a market-based method aimed at reducing emissions by charging emitters. The charge imposed on emitters is called a carbon price, which is the amount that must be paid for the right to emit one tonne of carbon dioxide into the atmosphere. There are 2 kinds of carbon pricing – a carbon tax, or cap-and-trade, which allow emitters to purchase permits to emit carbon dioxide.
Using carbon taxation to manage GHG emissions has been a strategy in the stable of environmental regulation for decades. Finland, for example, was the first country in the 1990s to impose a carbon tax. Other countries that have implemented a carbon tax include Zimbabwe, India, Japan, Denmark, Germany, the Netherlands, Norway, Sweden, Switzerland, the UK and Canada. There are also various countries within the Asian region and beyond where the carbon tax has been proposed, but not yet implemented – South Korea, Taiwan, South America, New Zealand and France are some examples. Larger users of carbon resources, such as the United States, Russia and China, have been actively resisting carbon taxation despite growing calls to engage in more market-based solutions to curb GHG emissions.
What does this mean for you?
The carbon tax that the Singapore government aims to implement in 2019 is aimed at curbing GHG emissions upstream, targeting power stations and other large direct emitters, rather than individual, domestic electricity users. The impact of the tax will be more significant in industries that are larger contributors to Singapore’s GHG emissions, such as the manufacturing sector. Making up 59% of total emissions in 2012, the sector has specifically been part of Singapore’s commitments towards reducing emissions, with a target set up to improve energy efficiency in the sector by 1-2% a year from 2020 to 2030.
Carbon pricing systems are a timely addition to larger, multi-lateral plans to reduce GHG emissions and address the pressing issues of climate change. It offers a balanced solution between addressing climate change risks and ensuring economies stay competitive in the long-term. Contact us if you would like to know more about how we can offer our customised help and strategic expertise in this area.