Budget 2026: Weak global climate action may keep 2030 carbon tax at lower end of $50 to $80 range
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Singapore will calibrate its moves cautiously while taking into account development in other countries, so that it does not put itself at a competitive disadvantage.
ST PHOTO: LIM YAOHUI
SINGAPORE - Even though some governments in other countries are scaling back on their climate ambitions, retreating from action is not an option for Singapore, which will continue to do its part, not only to address climate risks, but also to secure its long-term resilience and competitiveness, said Prime Minister Lawrence Wong on Feb 12.
“While Singapore will continue to contribute responsibly to climate action, we recognise that our actions alone cannot determine global outcomes,” he said.
Singapore will calibrate its moves cautiously – doing its part to reduce carbon emissions as a global citizen – while taking into account development in other countries so that it does not put itself at a competitive disadvantage, he added.
The country’s carbon tax in 2026 and 2027 stands at $45 per tonne
PM Wong noted that the Republic already has the highest carbon tax in the whole of Asia, but the country is assessing its tax trajectory carefully in the light of international developments.
“Unfortunately, global momentum on climate action has slowed,” he said, highlighting how countries were unable to agree on concrete decarbonisation road maps at the 2025 UN climate change summit in Brazil.
He also noted that the International Maritime Organization in 2025 delayed adopting its net-zero framework as member states could not reach consensus.
The carbon tax is a key decarbonisation strategy for Singapore as it puts a price on pollution.
There are about 50 carbon tax-paying facilities in Singapore, mainly in the manufacturing, power, waste and water sectors, and they account for about 70 per cent of the total national emissions. In 2024 and 2025, the tax rate rose to $25 a tonne, up from $5 a tonne previously.
“A key pillar of our climate strategy is the carbon tax. It sends a clear price signal to encourage emissions reduction. This is already having an impact. Firms are investing more in low-carbon solutions and improving energy efficiency,” PM Wong said.
With the carbon tax almost doubling to $45 in 2026, the total electricity and gas utility bill of an average four-room HDB flat will go up by about $3 a month
To help cushion the carbon tax’s impact on home utility bills, more than one million Singaporean HDB households will receive up to $570 in U-Save rebates
This will cover about five months of the utility bills for one- and two-room HDB flats, and about two months of expenses for those living in three- and four-room flats. Eligible four-room flats will receive $450 in U-Save rebates between April 2026 and January 2027.
To help companies manage costs arising from higher carbon tax, the Energy Efficiency Grant will be extended, alongside support for green loans under the Enterprise Financing Scheme, said PM Wong.
The Energy Efficiency Grant can cover up to 70 per cent of the costs for small and medium-sized enterprises to switch to energy-saving equipment, for instance. It will be extended by a year to March 2027.
The Enterprise Financing Scheme – Green, which helps green solution providers and firms access financing, will be extended by another five years until 2031.
“These will help firms invest in energy-efficient and sustainable solutions,” PM Wong added.
Budget 2026 documents revealed that the carbon tax revenue for emissions in 2024 is expected to be around $659 million, and the projected revenue for emissions in 2025 is around $657 million.
The projected revenues remain lower than expected
Experts have said this discrepancy was likely due to the allowances or carbon tax “discounts” given to trade-exposed emitters to help them stay competitive and ease cost strains as the carbon tax rose.
Between 2019 and 2023 – when the rate was $5 per tonne – the carbon tax revenue each year was around $200 million.
Looking further ahead, Singapore’s path to net zero will depend heavily on technological breakthroughs and sustained international cooperation, said PM Wong.
“Without these, it will be increasingly difficult for a small, resource-(constrained) country like Singapore to move further on our own. The progress of our transition to net zero may therefore be uneven. But our efforts will be credible, forward-looking and aligned with global realities.”
Even amid uncertainties, Singapore is making concrete progress, with its push to harness solar energy delivering results.
Singapore has reached its 2030 solar deployment target of 2 gigawatt-peak ahead of schedule, and will thus raise the target to 3 gigawatt-peak by 2030, announced PM Wong. Two gigawatt-peak can meet around 3 per cent of the country’s projected total electricity demand in 2030.
“We will continue to maximise solar deployment across all viable surfaces, and progressively set more ambitious targets further into the future,” PM Wong said.
Singapore is also advancing plans, at various stages of development, to import low-carbon electricity from the region. Energy imports are crucial to help Singapore wean off natural gas, a fossil fuel that is responsible for more than 93 per cent of its electricity generation.
The country has granted conditional approvals and licences to import greener electricity from Malaysia, Indonesia, Cambodia, Vietnam and Australia. The 11 projects across the countries cover solar, wind and hydropower, with a combined capacity of around 8GW.
“While not all will materialise, those that do will help to reduce our carbon footprint and strengthen our energy resilience,” noted PM Wong. The aim is to import around 6GW of low-carbon electricity by 2035, which is around one-third of the country’s energy demand at that time.
The country is also actively pursuing ways to further diversify its energy mix
“We are building up capabilities in nuclear energy to be able to assess its safety and viability for Singapore. We have initiated cooperation with the US and France, and are discussing similar arrangements with other partners like South Korea.”
On decarbonising the transport sector, PM Wong said Singapore remains committed to achieving 100 per cent cleaner vehicles by 2040.
Charging infrastructure for electric vehicles (EVs) is being expanded nationwide, and incentives are in place to encourage the early adoption of EVs.
Singapore is also supporting the demand for sustainable aviation fuel
The Government is also partnering with the industry to develop a low-carbon ammonia bunkering solution on Jurong Island
“If successful, Singapore will be among the first countries in the world to supply ammonia commercially as a fuel for international shipping,” PM Wong said.
He noted that the years ahead will be “beset by uncertainties”, from geopolitical tensions to cyberthreats and climate risks.
“We will face these challenges squarely and overcome them one by one. That’s how we will move forward – steadily and decisively, to build a safer and more sustainable home for generations to come.”
Read next: 11 highlights from PM Wong’s speech
