MPs back carbon tax hike to fight climate change

There was broad agreement on raising the carbon tax, among the 18 MPs who spoke on the topic in Parliament on Feb 1, 2021.
There was broad agreement on raising the carbon tax, among the 18 MPs who spoke on the topic in Parliament on Feb 1, 2021.PHOTO: ST FILE

SINGAPORE - The carbon tax is one of the most important policy tools Singapore has to combat climate change, and raising it is the right approach, MPs said in Parliament on Monday (Feb 1).

There was broad agreement on this among the 18 MPs who spoke during the debate on a motion calling for bolder climate action in Singapore, with many calling for its scheduled 2023 review to be brought forward.

In his opening speech on the motion, Mr Louis Ng (Nee Soon GRC) also said the Republic's current target of setting the tax at $10 to $15 per tonne by 2030, up from $5 today, is far too low.

"Some feel that it simply will not work as a way to slash emissions. The International Monetary Fund, which has one of the most conservative models out there, says our rate needs to be no lower than S$99 in 2030 to keep climate change at safe levels."

Ms Poh Li San (Sembawang GRC) said the Government will have to take the lead in green efforts, such as by reviewing incentives and tax systems to encourage the private sector to play its part.

One such incentive could be a circular financing scheme, where carbon taxes collected from the building industry are then awarded as grants to developers to offset the higher costs for green buildings, she said.

Mr Louis Chua (Sengkang GRC) of the Workers' Party agreed with Mr Ng that the carbon tax needs to be raised, but said this should be complemented by financial assistance schemes to cushion the impact on lower-income households.

His fellow Sengkang GRC MP Jamus Lim noted that carbon taxes are easier to monitor compared to alternative systems such as cap-and-trade, which sets a fixed limit on emissions and allows firms that exceed their caps to buy the share allocated to less polluting firms.

Associate Professor Lim said the exact price of the carbon tax is up for debate and should be deliberated by a panel of experts, including representatives from business, environmental civil society groups, policymakers and academics.

As a starting point, Singapore's figure could be between $58 - "the midpoint among industrialised economies" - and $133, the average cost of carbon capture and sequestration activities, he said.

The revenue from the higher carbon tax could offset other taxes to make the transition easier, or be channelled toward a "Green Fund" for sustainability investments like solar panels and recycling operations, added Prof Lim.

Mr Henry Kwek (Kebun Baru) and Mr Don Wee (Chua Chu Kang GRC) said the carbon tax should beraised gradually as Singapore is still dealing with the impact of Covid-19.

"While I'm cautious about increasing carbon tax amidst the Covid-19 pandemic, it is clear that over time our carbon price must trend towards the international norms," said Mr Kwek.

Mr Wee said a tax hike should be announced with a long period of advance notice so businesses have time to adapt.

He suggested the amount could be raised to between $30 and $55 by 2030, between $50 and $90 by 2035, and between $75 and $120 by 2040. The upcoming review in 2023 should finalise the 2030 rate and give an estimate of the 2035 rate, Mr Wee added.

Responding to the motion, Minister for Sustainability and the Environment Grace Fu said Singapore's carbon tax is central to its climate change mitigation strategy, and that the Republic was the first country in South-east Asia to introduce a carbon tax in 2019.

"We are committed to supporting our businesses and households transit to a low-carbon future, and are prepared to spend more than what we collect in carbon tax revenue in the first five years on worthwhile projects to achieve emissions reductions."

Senior Minister Teo Chee Hean, who chairs the Inter-Ministerial Committee on Climate Change, also rose to speak on the motion.

He said the carbon tax in Singapore is one of the most comprehensive in the world, covering about 80 per cent of emissions.

"We have chosen to apply the carbon tax at key nodes of carbon emissions in Singapore so that this tax will flow through evenly to the rest of the economy. This makes the administrative load on companies very low."

Mr Teo said he was glad that many MPs supported the carbon tax, and he hoped this will smooth the passage of a carbon tax hike when such a measure is discussed in the House in future.