*This article is five of five in our Singapore Budget 2022 series. Links to the other articles can be found at the bottom of this page.
Up until now, Singapore’s carbon tax has impacted a small number of very large carbon emitters and was deliberately set at an introductory rate to give taxpayers time to adapt. Indeed, Singapore’s carbon tax rate of SGD5 per tonne of CO2 equivalent (tCO2e) is at the lower end of the range. To put this into context, Sweden has the highest rate in the world at around USD130, whereas the EU carbon price is currently hovering around USD90.
Currently, the power industry is one of the key sectors most affected by the carbon tax in Singapore although the introductory rate of SGD5/tCO2e means that the overall impact has been limited. Going forward, however, the carbon tax will be raised to SGD25 per tonne in 2024 and 2025 and SGD45 per tonne in 2026 and 2027 with a view to reaching SGD50 to SGD80 per tonne by 2030. This could weigh on margins of utilities companies but there would also be cost pass-through to customers in the form of higher electricity prices.
There will also be a transition framework to help firms in emissions-intensive and trade-exposed sectors to manage the near-term impact to their competitiveness from the increased carbon taxes. For instance, businesses will be allowed to use high-quality international carbon credits to offset up to 5% of their taxable emissions, in lieu of paying carbon tax, from 2024. There will also be more support for companies to invest in energy-efficient equipment and de-carbonisation solutions.
Other sectors would also indirectly face a carbon price on the electricity they consume as power generation companies will pass on some degree of their own tax cost through increased electricity tariffs.
Currently, Singapore's carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year, covering 40 to 50 large emitters that contribute 80% of Singapore's greenhouse gas emissions. If the excise duties on vehicular fuel are included, more than 90% of Singapore’s emissions are subject to a carbon price. This coverage is one of the highest in the world.
Links to other articles in the Singapore Budget 2022 series:
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