Progressive Carbon Tax Hike Aims to Reach Net-Zero Emissions by 2050
Singapore is set to progressively raise its carbon tax, with a target of S$50 to S$80 per tonne of emissions by 2030, as part of the country’s new goal to achieve net-zero emissions “by or around mid-century.” This change was announced by Finance Minister Lawrence Wong during his Budget speech on February 18. The new tax trajectory is significantly higher than the previous target of S$10 to S$15 per tonne set in 2018.
The updated goal aligns with the Glasgow Climate Pact, aiming for net-zero emissions much earlier than initially planned. Singapore’s long-term low-emissions development strategy previously targeted peaking emissions around 2030 and halving them by 2050. With advancements in green technologies and carbon markets, Singapore is confident in accelerating its climate action, including innovations in carbon capture, hydrogen, and carbon credits.
Raising the Carbon Tax Rate
Currently, the carbon tax in Singapore stands at S$5 per tonne for facilities emitting at least 25,000 tonnes of CO2 equivalent (tCO2e) annually, a rate that will remain in place until 2023. From 2024 onwards, the tax will rise to S$25 per tonne, and it will increase again in 2026 to S$45 per tonne. The tax will continue to rise towards the S$50 to S$80 target by 2030. Further increases will be announced ahead of time, giving businesses clarity and time to adjust.
Fuel excise duties on petrol, diesel, and compressed natural gas will remain unchanged, as these taxes already incentivise lower consumption and emissions. These excise duties will continue to be periodically reviewed.
Supporting Businesses and Households
Despite the carbon tax hike, the government does not expect to generate significant additional revenue. Instead, the increased revenue will be reinvested in decarbonisation projects, focusing on low-carbon and energy-efficient solutions. This approach aims to bring Singapore closer to its net-zero target.
For households, higher utility bills are expected due to the increased carbon tax, with an estimated rise of about S$4 per month for an average four-room HDB flat at the S$25 per tonne rate. To mitigate this, the government will provide additional U-Save rebates and other support, with more details to be announced in 2023 ahead of the tax increase in 2024.
Businesses in emissions-intensive and trade-exposed sectors, such as electronics, energy, and chemicals, may face increased costs compared to countries with lower or no carbon taxes. To support these companies, a framework will be introduced that offers allowances based on efficiency standards and decarbonisation goals. This system aims to balance business costs with environmental objectives and will be implemented in 2024 after consultations with affected businesses.
Carbon Credit Offsets and Additional Support for Businesses
From 2024, businesses will also be able to use high-quality international carbon credits to offset up to 5% of their taxable emissions. This move is expected to stimulate local demand for carbon credits and foster the growth of a well-regulated carbon market.
The National Climate Change Secretariat (NCCS) will continue supporting businesses’ decarbonisation efforts through schemes such as the Resource Efficiency Grant for Energy and the Energy Efficiency Fund. The government is also reviewing additional support measures to help businesses adopt transformative decarbonisation solutions to remain competitive in the medium term.
