Correspondent's take

Singapore Budget 2018: Time to get serious about saving energy

A tax will never be welcome, but it can be timely. The carbon tax that Singapore will levy on large polluters from next year is one such example.

The tax - details of which were announced yesterday by Finance Minister Heng Swee Keat - comes against a backdrop of rising temperatures and increasingly erratic weather.

Last year was Singapore's warmest year on record - excluding years influenced by El Nino, a weather phenomenon associated with hot and dry weather in this part of the world. The Republic is also experiencing more bouts of intense rainfall - such as the one on Jan 8 that led to flash floods in its eastern parts.

That these effects can already be felt here highlights the urgent need for action. And a carbon tax is one direct way to tackle climate change - by trying to get large polluters to reduce the emission of greenhouse gases.

Singapore's introduction of a carbon tax is also in line with carbon pricing strategies adopted by other countries to reduce greenhouse gases.

As Singapore marks its Year of Climate Action this year, its move to get ready for the roll-out of the carbon tax next year shows how serious it is in tackling the global threat of climate change.

About 67 countries and jurisdictions, including China, the European Union and Japan, have implemented or announced plans to implement carbon pricing schemes, which incentivise emitters to reduce their greenhouse gas emissions and improve energy efficiency.

 
 
 

In Singapore, the carbon tax will initially be set at $5 per tonne of greenhouse gas emissions until 2023, although the plan is to increase this to between $10 and $15 per tonne of emissions by 2030.

This will be levied on the 30 to 40 companies responsible for the lion's share of emissions here, but households will experience a knock-on effect - a 1 percentage point increase in total electricity and gas expenses on average, Mr Heng said.

As the implementation of the carbon tax next year follows the full liberalisation of the retail electricity market in the second half of this year, households will be able to choose which retailer they wish to buy electricity from.

Professor Euston Quah, head of the economics department at the Nanyang Technological University, said competition will put pressure on energy retailers to keep their prices competitive by not passing on the full cost of the carbon tax to consumers.

The impact of the carbon tax will also be cushioned by the additional utilities rebates that eligible HDB households will get from next year to 2021.

This gives consumers some time to form energy-saving habits, which could include turning off power at the socket when appliances are not in use, or using more energy-efficient appliances.

The introduction of the carbon tax is a timely move which reminds both companies and individuals that it is time to get serious about saving energy.

 
A version of this article appeared in the print edition of The Straits Times on February 20, 2018, with the headline 'Time to get serious about saving energy'. Print Edition | Subscribe