Carbon tax-paying firms can carry over unused offsets to 2026 amid limited carbon credit supply
Sign up now: Get ST's newsletters delivered to your inbox
Firms liable for carbon tax here will be allowed to roll over their unused offset quota in 2025 to 2026 given the lack of eligible carbon credits.
ST PHOTO: BRIAN TEO
SINGAPORE – Firms liable for carbon tax in Singapore will be allowed to roll over their unused offset quota in 2025 to 2026 given the lack of eligible carbon credits.
The one-year rollover is intended as “a transitional measure” to give international carbon markets more time to mature, and for more eligible credits to become available, the National Environment Agency and the Ministry of Sustainability and the Environment said in a joint statement on May 11.
This marks the second year in a row that firms have been allowed to carry over their unused offsets, which can be used to offset up to 5 per cent of their annual carbon tax bill.
The authorities said the delay in overall supply of eligible credits was caused by recent global developments, which include a stronger industry focus on carbon credit integrity and evolving international carbon market rules.
They said even though the Government has signed 11 deals with other countries to trade carbon credits, such projects typically take a few years to generate credits.
Application calls for carbon credit projects in Bhutan, Ghana, Peru, Rwanda and Thailand were launched from late 2025 to early 2026, the authorities noted.
They added that offsets carried over from emissions year 2024 to emissions year 2025 cannot be further rolled over.
A credit conversion formula will be applied to adjust the amount of offsets carried over from 2025 to 2026 to account for the carbon tax rate that rose from $25 to $45 in January 2026.
One carbon credit represents one tonne of carbon dioxide that is either removed from the atmosphere, such as through a forest restoration project, or prevented from being released, such as when a forest is saved from being cut down.
There are two main types of carbon credits – nature-based ones and technological ones. Nature-based credits could come from projects like sustainable agriculture, while technological credits could come from switching from pollutive firewood to cleaner cooking stoves.
Singapore’s carbon tax is paid by about 50 facilities in the manufacturing, power, waste and water sectors, according to the National Climate Change Secretariat’s website. Around 70 per cent of Singapore’s greenhouse gas emissions are covered by carbon tax levied on these firms.
In Singapore, carbon tax aims to reduce the use of pollutive fossil fuels by putting a price on planet-warming carbon emissions from facilities that emit at least 25,000 tonnes of greenhouse gases annually.
The rate was $5 per tonne of emissions from 2019 to 2023, before it increased to $25 for 2024 and 2025.
“The Government remains committed to supporting the development of a high-quality international carbon market and will continue working with its implementation agreement partners to expand the pipeline of eligible credits,” the authorities said.
Singapore’s carbon tax revenue for emissions year 2025, slated to be collected by end-September, is comparable with the 2024 revenue at about $660 million.
By 2030, the carbon tax is projected to increase to between $50 and $80 per tonne. However, Prime Minister Lawrence Wong said in his Budget speech that the tax rate could fall on the lower end of the planned range if global climate momentum continues to weaken.
