Singapore will begin levying a carbon tax starting in 2019 in an effort to reduce the country’s greenhouse gas emissions and help make companies there more competitive. Finance minister Heng Swee Keat announced that facilities across all sectors that produce 25,000 metric tons of GHG or more annually must pay nearly $3.80 (5 Singapore dollars) per metric ton of greenhouse gas emitted.
The tax will be levied on total emissions for each facility, with the first payment in 2020 based on 2019 emissions. The Ministry of Finance plans to review the tax rate by 2020 and intends to increase it to $7.50 – $11.30 (10 – 15 Singapore dollars) per metric ton by 2030.
Thirty to 40 large companies from the petroleum refining, chemicals, and semiconductor sectors are likely to be affected by the tax, the Straits Times reported.
“Singapore produces less carbon emissions per dollar of GDP than most countries,” the Ministry of Finance’s 2018 budget says. “We intend to further reduce our emissions intensity, to make a bigger effort to combat climate change.”
Potential Competitive Advantage
When businesses in the country take measures to reduce their carbon emissions, they will become more competitive internationally as more nations impose limits emissions limits and international agreements on climate change such as the Paris Agreement take effect, Heng says. “There will also be new opportunities in areas like sustainable energy and clean technology,” he added. “We have to start preparing early so that industries have more time to adapt.”
Although other countries have levied carbon taxes, Singapore’s differs in that this initial carbon tax will be applied uniformly to all sectors without any exemptions granted. “This is the economically efficient way to maintain a transparent, fair, and consistent carbon price across the economy to incentivize emissions reduction,” according to Heng.
He says the Ministry of Finance expects to collect nearly $750 million (1 billion Singapore dollars) in the first five years of the tax. “To achieve our goal of reducing emissions intensity as soon as possible, I am prepared to spend more than this in the initial five years to support worthwhile projects which deliver the necessary abatement in emissions.” Companies will be eligible for grants and other support to help them lower emissions and increase energy efficiency.
Big industry generally supported the carbon tax when it was first floated last year. Recent responses were more varied. A Shell spokesperson was somewhat critical, telling the Straits Times that the flat rate doesn’t provide the right incentive for the company to perform better and deploy best-in-class technologies. However, a spokesperson for ExxonMobil Singapore said that the company is committed to working with Singapore’s government on emissions.
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