Singapore to introduce carbon tax

THE Singapore government plans to introduce a carbon tax in its 2017 Budget as part of efforts to meet its Paris Agreement commitments.

Minister for finance Heng Swee Keat made the announcement in the island state’s parliament on 20 February. He told ministers that Singapore already has good environmental protection standards, but that the most “economically efficient and fair way” to reduce greenhouse gas emissions is to introduce a carbon tax, incentivising the emitters to take action to reduce their emissions.

The proposed rate at present is S$10–20/t of greenhouse gas emitted (US$7–14/t), which Heng said is similar to other countries which have introduced a carbon tax. The tax will not be levied on heavy electricity users, but further upstream on direct emitters such as power stations. Revenue from the tax will fund further emissions reductions.

“It will help us to achieve our commitments to reduce emissions under the Paris Agreement, do so efficiently and at as low a cost to the economy as possible. This may also spur the creation of new opportunities in green growth industries such as clean energy,” said Heng.

The government plans to consult widely with stakeholders, and will begin a public consultation in March. The final tax amount will be decided following all consultations and further studies, before being introduced in 2019. Heng pledged to take into consideration the lessons learned by other countries and the current economic conditions in Singapore before introducing the tax. The government will put measures in place to help companies through the transition. Up to 30–40 large emitters are expected to be affected.

Singapore produces around 1.3m bbl/d of refined petroleum products and is a major oil and gas trading hub. Favourable taxes have attracted many refineries and petrochemical facilities, which are likely to be hit hard with the new tax.

Shell, whose largest refinery, the 500,000 bbl/d Bukom refinery, is in Singapore, supports the introduction of the tax.

A Shell Singapore spokesperson told The Chemical Engineer: “Properly implemented, a government-led carbon pricing mechanism stimulates technologies for the part of the economy that can decarbonise quickly; while providing time for other sectors that will take longer. Shell is committed to working with the Singapore government to make a positive and sustainable contribution to emissions intensity reduction.”

The spokesperson added that the design of the tax “must ensure companies can compete effectively with others in the region who are not subject to the same levels of CO₂ costs”.

ExxonMobil, which has more than S$20bn worth of assets in Singapore, told the Financial Times that the risk presented by climate change “warrants action”, and a uniformly-applied carbon tax is a “sensible approach to emissions reduction”.

Singapore joins several other countries in proposing or implementing a carbon tax in recent years, including South Africa, India, Denmark, parts of Canada and Japan. Others including New Zealand and countries in the European Union opted for an emissions trading scheme instead.