Singapore will progressively raise its carbon tax per tonne of greenhouse gas emissions in phases, with the goal of reaching S$50 to S$80 per tonne by
Singapore will progressively raise its carbon tax per tonne of greenhouse gas emissions in phases, with the goal of reaching S$50 to S$80 per tonne by 2030, Minister for Sustainability and the Environment Grace Fu announced in Parliament on Nov. 8. This move is part of the changes proposed in the Carbon Pricing (Amendment) Bill, which was read for a second time in Parliament.
The carbon tax will increase to S$25 per tonne in 2024 and 2025, followed by S$45 per tonne in 2026 and beyond, with the eventual target of S$50 to S$80 per tonne by 2030. Minister Fu explained, “We have decided to raise the carbon tax level progressively in phases, giving businesses time to plan and carry out their low-carbon transition.”
Carbon Price as an Effective Motivator
Fu emphasized that a well-structured carbon price serves as an “effective motivator” for emitters to take steps toward reducing their emissions. The carbon price needs to be set at an optimal level, balancing environmental, economic, and social considerations. If the tax is too low, it won’t incentivize businesses to change; if it’s too high, it could hurt competitiveness and destabilize businesses.
Current Carbon Tax and the Road Ahead
Currently, Singapore’s carbon tax rate is S$5 per tonne until 2023, applicable to facilities that emit at least 25,000 tCO2e of greenhouse gases annually. This rate will progressively increase to encourage industries to adopt greener technologies and reduce emissions.
Support for Companies in Emissions-Intensive Sectors
The bill will also establish an industry transition framework to provide allowances to companies in Emissions-Intensive Trade-Exposed (EITE) sectors, which face competition in the global market. These allowances will cover a portion of their emissions and provide support as companies work toward reducing their carbon footprint.
Framework for International Carbon Credits (ICC)
Another significant element of the bill is the establishment of a framework for International Carbon Credits (ICC), which will allow companies to use carbon credits from overseas emissions-reduction projects to offset part of their carbon tax liability. This framework will ensure that companies use high-integrity ICCs that comply with international standards, including the Paris Agreement.
Singapore’s Carbon Trading Ambitions
Fu also noted that the ICC framework will position Singapore as a hub for carbon trading and services, creating growth opportunities and green jobs in areas like low-carbon project development and financing. Initiatives like the Climate Action Data Trust, which will be launched in Singapore in December 2022, will drive transparency in carbon markets and bolster global climate efforts.
“As we transition to a low-carbon economy, we must keep an eye on our economic competitiveness and ensure an inclusive transition for society,” Fu concluded, emphasizing that Singapore’s efforts will generate green growth and secure good jobs for its citizens.
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