There is no denying that the upcoming carbon tax hikes will add to the cost of doing business here. With such a tax, emitters pay for the social costs of what they generate. Businesses need to eschew the use of fossil fuels and switch to clean, greener energy with a resulting fall in emissions. However, such a move can raise business costs, as it is a pricing mechanism structured to encourage companies to fundamentally change the way they do business. There was a lengthy debate in Parliament recently on the Carbon Pricing (Amendment) Bill before it was passed. Singapore has committed to raise the carbon tax over the years. From $5 a tonne currently, there will be staggered increments to $25 a tonne in 2024, $45 in 2026, and finally upwards of $50 in 2030.
There is increased momentum in global climate action. Countries are pledging a net-zero commitment with more initiatives on all fronts. More green, cost-effective technologies are also available. The ongoing meetings at the COP27 climate change conference in Egypt have once again brought the need for urgent action into sharp focus. But as with all policies, there are negatives for the economy. With exports making up more than 170 per cent of Singapore’s gross domestic product, there is a risk that the country’s competitiveness will be affected when carbon tax rates are hiked – not to mention that the higher rates will take place against a backdrop of elevated prices and the increasing likelihood of slowing global growth.