SINGAPORE - The carbon tax rate in Singapore will be increased from the current $5 per tonne of emissions to between $50 and $80 by 2030, a move that will help the nation reach new, more ambitious climate goals announced on Friday (Feb 18).
The aim is for emissions to dwindle to net zero by or around 2050, Finance Minister Lawrence Wong said in his Budget speech on Friday.
By then, the country will be taking out as much planet-warming greenhouse gases from the atmosphere as it releases.
The carbon tax hike will be done in phases to give businesses more certainty, Mr Wong said.
The current rate of $5 per tonne of emissions will be in place until next year (2023).
It will go up to $25 in 2024 and 2025, and $45 in 2026 and 2027, before reaching $50 to $80 per tonne by 2030, Mr Wong said.
"When we introduced the carbon tax in 2019, we kept the initial tax low... to give our businesses time to adjust," Mr Wong said.
"To move decisively to achieve our new net-zero ambition, we will need a higher carbon tax."
The Government does not expect to get additional revenue from the carbon tax increase in this decade, however.
Instead, it will be used to support decarbonisation efforts and the transition to a green economy, and cushion the impact on businesses and households, said the National Climate Change Secretariat (NCCS) in a separate statement.
Singapore's carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year. This covers 30 to 40 large emitters such as oil refineries and power generation plants, which contribute 80 per cent of Singapore's greenhouse gas emissions.
Greenhouse gases, including carbon dioxide and methane, are produced by human activity such as the burning of fossil fuels.
When they accumulate in the atmosphere, they trap heat on the planet, throwing Earth systems out of whack and causing climate change. The result: rising temperatures and sea levels, and more intense extreme weather events that imperil lives and livelihoods.
A carbon tax is a means of assigning costs to the release of these planet-warming emissions.
The International Monetary Fund (IMF) has recommended that by 2030, economies should each implement a carbon price floor based on a tiered system, to reduce emissions enough to keep global warming below 2 deg C - the threshold to avoid catastrophic climate change outlined in the Paris Agreement, the world's climate pact.
Based on the IMF's recommendation, the 2030 price floor should be US$75 (S$100) per tonne of emissions for advanced economies, US$50 for high-income emerging-market economies such as China, and US$25 for lower-income emerging markets such as India.
Singapore's carbon tax scheme was announced in 2018.
Then, the Government had said that the rate will initially be $5 per tonne of greenhouse gas emissions from 2019 to 2023.
It also said then that the rate will be reviewed by 2023, and that there are plans to increase it to between $10 and $15 per tonne of emissions by 2030.
But with Singapore upgrading its climate target so its planet-warming emissions reach net zero by or around 2050, a higher carbon tax rate is needed to send a signal to large emitters to take stronger action to reduce their emissions, said Mr Wong.
The Republic had earlier planned to reach net-zero emissions "as soon as viable in the second half of the century".
Mr Wong said advances in technology and new opportunities for international collaboration in areas such as carbon markets has allowed Singapore to bring forward its net-zero timeline.
Carbon markets, or the international trade in carbon credits, can offer countries another route to reducing their emissions other than decarbonisation efforts within their own borders.
The Straits Times had earlier reported that Singapore is considering buying carbon credits - which can be from forest conservation or renewable energy projects elsewhere - to meet its climate goals, even though the country will prioritise domestic efforts to cut emissions.
Climate scientists have recommended that for the world to have a better chance at limiting warming to the threshold set out in the Paris Agreement, emissions must be nearly halved by 2030 from 2010 levels, and reach net zero by 2050.
Almost 200 countries, including Singapore, were asked during the United Nations climate change conference COP26 last November to revisit and strengthen their 2030 climate targets to align with the Paris Agreement temperature goal by the end of this year.
Mr Wong added that the Government will consult closely with industries and citizens to firm up and finalise its plans before making a formal revision of the country's long-term low-emissions development strategy to the United Nations Framework Convention on Climate Change.
OCBC Bank economist Howie Lee said he was “positively surprised” by the revised carbon tax rate.
“This is a strong message of intent and commitment towards our net-zero goals," he said.
"We now have a clearer net-zero path and one of the highest carbon taxes in Asia. Companies will do well to heed to this change.”
A spokesman for oil company ExxonMobil said the firm supports an explicit price on carbon to establish market incentives and provide the needed clarity and stability required for investments.
Carbon tax, and supportive government policies, can help to incentivise more industries and sectors to invest in research or technologies to reduce emissions, she said.
“As Singapore has an export-oriented economy, it is also important that the designed carbon tax framework encourages greenhouse gas reductions, while safeguarding competitiveness of trade-exposed industries,” she said.
The ExxonMobil spokesman said the firm has set itself a target of reaching net-zero emissions from its operated assets by 2050.
“We are taking a comprehensive approach to develop a detailed emission-reduction road map for our major operated assets, including our integrated manufacturing complex in Singapore,” she added.