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Carbon tax to be imposed from 2019 to cut greenhouse gas emissions

Published on 3 March 2017 Singapore

From 2019, emitters of greenhouse gases will be taxed for every tonne of gas they release into the air, sending a price signal to power stations and large emitters to reduce their carbon footprint, said Finance Minister Heng Swee Keat on Monday (Feb 20).

Mr Heng said the Government is looking at setting a carbon tax rate of between S$10 and S$20 per tonne of greenhouse gas emissions, which is within the range of what other jurisdictions have implemented. The move will make Singapore the first country in South-east Asia to implement such a tax.

“There are different ways to reduce emissions … But the most economically efficient and fair way to reduce greenhouse gas emissions is to set a carbon tax, so that the emitters will take the necessary actions,” he added. 

It will also create a price signal to incentivise industries to reduce their emissions and complement the regulatory measures the authorities are also introducing, he said. 

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

The carbon tax will generally be applied to large direct emitters such as power stations, rather than electricity users, said Mr Heng. Currently, there are around 30 to 40 of such large direct emitters, such as those from the petrochemical, refinery and semiconductor sectors. 

For stationary greenhouse gas emissions by this group, the Government is looking at a proposed annual threshold equivalent to 25,000 tonnes of carbon dioxide. This would be equivalent to the emissions produced from the electricity consumption of 12,500 four-room HDB households each year.

The revenue from the carbon tax will help to fund measures by the industries to reduce emissions, while new opportunities in green growth industries, such as clean energy, could be created, said Mr Heng.

For businesses, the increase in operating cost from the proposed carbon tax rate represents a 6.4 to 12.7 per cent increase from current oil prices. In comparison, historical quarterly oil price fluctuations have ranged from minus 29 to 35 per cent from 2011 to 2016.

For households, the tax rate would be equivalent to an increase in electricity prices of 0.43 to 0.86 cents per kilowatt-hour. This is a 2.1 to 4.3 per cent increase from current electricity tariffs, compared with quarterly electricity prices that have fluctuated up to 10 per cent between 2010 and 2016.

Carbon taxes imposed by countries around the world range from about S$4 (Japan) to S$187 (Sweden) per tonne.

Singapore ratified the Paris Agreement on climate change last September, formalising its pledge to reduce emissions intensity by 36 per cent from 2005 levels by 2030. In 2009, Singapore pledged to reduce emissions by 16 per cent from Business-as-Usual levels by 2020 and is on track to meet this target. 

Mr Heng said on Monday that consultations with industry players have begun. Public consultations will start next month and further studies will be made before finalising the tax rate and implementation schedule. “We will take into consideration the lessons from other countries and prevailing economic conditions in Singapore in implementation. We will also provide appropriate measures to ease the transition.”.

Singapore first declared its intention to implement some form of carbon pricing in the 2010 Singapore International Energy Week, if other countries also pledged to curb their carbon emissions. 

Several European countries, such as Finland and Sweden, implemented carbon pricing as early as the 1990s. Closer to home, Japan and South Korea did the same in 2010 and 2015. Four years after the introduction of the Tokyo Cap-and-Trade programme for instance, the city achieved a 23 per cent reduction below baseline emissions in 2013 while their GDP grew around 7.4 per cent. 

Likewise, China started pricing carbon through emissions trading pilots since 2013. The world’s largest emitter has also announced plans to introduce a national emissions trading scheme later this year.

Copyright 2017 MediaCorp Press Ltd. Article first appeared in TODAY on 21 February 2017

Source: National Climate Change Secretariat | 22 February 2017