The carbon tax that Singapore will implement from next year will mainly affect large polluters, but households are also expected to feel the knock-on effects.
The carbon tax, levied on facilities that produce 25,000 tonnes or more of greenhouse gas emissions in a year, will initially be $5 per tonne of emissions, to give companies time to adjust.
However, the Government will review the carbon tax rate by 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030, Finance Minister Heng Swee Keat said yesterday.
The impact on households will be smaller - a 1 percentage point increase in total electricity and gas expenses on average, he added.
A household living in a four-room Housing Board flat, for example, can expect their annual electricity and gas bill to go up by about $10.
But households will get help in the form of additional utilities rebates through the GST Voucher U-Save scheme. Eligible HDB households will each receive $20 more per year, from next year to 2021.
"This will cover the expected average increase in electricity and gas expenses for HDB households arising from the carbon tax," Mr Heng said.
A carbon tax is a tool commonly used around the world to control the amount of earth-warming greenhouse gases released into the atmosphere. It incentivises emitters to cut their greenhouse gas emissions and improve energy efficiency.
Between 30 and 40 companies that are together responsible for 80 per cent of Singapore's greenhouse gas emissions will have to pay carbon tax. They are mainly petroleum refining, chemical and semiconductor companies.
The first payment will be in 2020, based on emissions in 2019.
Mr Heng said the Government expects to collect a carbon tax revenue of nearly $1 billion over the first five years, but is prepared to spend more "to support worthwhile projects which deliver the necessary abatement in emissions".
Revenue from the tax will fund green initiatives, via two existing schemes: the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund.
Executive director for the Singapore Green Building Council Yvonne Soh said the schemes could help companies overcome the cost barrier for green initiatives, as "energy efficiency is usually not on the top of most companies' minds".
Professor Euston Quah, head of the economics department at the Nanyang Technological University, welcomed the adoption of the carbon tax, calling it timely.
He said: "It sends a signal to those whose activities cause damage to society, whether in the form of human health or environment, that they must be responsible for their actions."
Two companies that will be affected by the new tax expressed reservations about it yesterday.
A spokesman for ExxonMobil Singapore said the petrochemical firm was committed to working with the Government to reduce the risks of climate change but added that "affordable energy" was important to support economic growth and ensure Singapore's competitiveness.
A spokesman for oil company Shell expressed concern with the flat tax rate.
He said: "We should be incentivised to perform better and deploy best-in-class technologies - a flat carbon tax will not provide the appropriate incentives to do so."
Yesterday, Mr Heng also noted that the carbon tax will apply uniformly to all sectors, without exemption.
He said: "This is the economically efficient way to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction."
He added that Singapore's initial carbon tax rate cannot be compared directly with that of other countries, as jurisdictions with higher carbon prices often have significant exemptions for certain sectors, lowering their effective carbon prices.
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