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Singaporean Emitters Seek Progressive Carbon Tax Regime

Mary Swire, Tax-News.com, Hong Kong

02 February 2018


Singapore is engaging businesses on tweaking the design of its new carbon tax, which is proposed to be in place by 2019.

In its Budget 2017, the Singapore Government announced plans to implement a carbon tax of between SGD10 (USD7.60) and SGD20 (USD15.25) per tonne of greenhouse gas (GHG) emissions. The tax will be applied upstream on large emitters that produce over 25,000 tonnes of GHG emissions per year ("taxable facilities").

Current plans are for the tax to take the form of a fixed-price credits-based (FPCB) mechanism. Taxable facilities will pay the tax by purchasing and surrendering the number of carbon credits corresponding to their GHG emissions.

The number of carbon credits that each taxable facility has to surrender will be determined by the National Environment Agency (NEA) based on a verifiable emissions report that the facility will submit by June 30 each year. The carbon tax will be levied on a facility's total emissions of the six covered GHGs – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6).

For example, if a taxable facility emits 50,000 tonnes of GHGs for the year, the tax will be applied on the total emissions of 50,000 tCO2e. Companies must surrender these credits to NEA by September 30 of each year, for their preceding year's emissions that are subject to the carbon tax.

Both the Government and the National Climate Change Secretariat conducted consultation exercises, in late 2017 and early 2017, respectively.

The Government is currently engaging with significant polluters to fine-tune or amend its plans based on industry feedback. Key among their requests is a change to the design of the carbon tax to introduce a "tiered pricing scheme" to progressively tax companies by the amount of emissions they emit, rather than levy a fixed price. This would involve establishing a benchmark level for their activities against which any emissions reductions improvements would be measured. The idea is to incentivize companies to invest more to reduce their footprint on the environment, with firms noting that any investment in this area will be considered against its financial return only.

During the earlier consultations also, stakeholders said the Government should increase the price level after a few years of introducing the tax, and extend the tax to other types of pollutants, such as carbon monoxide and nitrogen dioxide.

The talks, including a consultation with 44 industry representatives on January 23, 2018, come ahead of Singapore's Budget 2018, scheduled for February 19, which is likely to include firmer plans on the proposal.

In its earlier consultation, the Government reassured businesses and consumers that, "in implementing and deciding on the final carbon tax, the Government will take into consideration the prevailing economic conditions in Singapore and the need to maintain international competitiveness, and will provide appropriate measures to ease the transition."

Singapore has pledged under the Paris Agreement to reduce its emissions intensity by 36 percent from 2005 levels by 2030. The Ministry of the Environment and Water Resources has designated 2018 the Year of Climate Action.

TAGS: environment | tax | business | energy | Singapore | legislation | carbon tax

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