The Singapore government plans to issue up to $35 billion in green bonds by 2030 to fund public sector green infrastructure projects. This will come from both the government and statutory boards.
In addition, Singapore will raise its carbon tax rate in stages from now till 2030, growing up to 16 times the current rate of $5 per tonne of carbon dioxide equivalent (tCO2e).
The rate will rise to $25/tCO2e in 2024 and 2025, before hiking further to $45/tCO2e in 2026 and 2027.
By 2030, Singapore's carbon tax rate will reach between $50 and $80 per tCO2e, says Finance Minister Lawrence Wong in his Budget 2022 speech on Feb 18.
There will be no additional carbon tax on the use of petrol, diesel and compressed natural gas, as these are already subject to excise duties.
With a higher carbon tax, household utility bills will rise, says Wong. At a rate of $25/tCO2e, a household living in a 4-room HDB flat will see an increase of about $4 per month in utility bills. The government will provide additional U-Save rebates to help cushion this price hike, with more details to be announced in next year's Budget.
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From 2024, the government will allow businesses to use "high-quality, international carbon credits" to offset up to 5% of their taxable emissions. "This will create local demand for high-quality carbon credits," says Wong.
Net zero
With advances in technology, Singapore can now bring forward its net zero timeline, says Wong.
Singapore aims to achieve net zero emissions by or around 2050, and will update its Low-Emission Development Strategy (LEDS) later this year.
Previously, Singapore aimed to peak emissions by 2030 and halve that figure by 2050.
“If the world is unable to cut emissions sufficiently in time, we risk extreme flooding and weather events. Island nations like Singapore will be especially threatened,” says Wong.
EVs encouraged
Singapore aims to be a "car-lite" city, and will maintain its zero growth rate for private vehicles alongside plans to phase out internal combustion engines by 2040.
While public transport is still the cleanest mode of transport, Singaporeans have embraced electric vehicles (EVs), says Wong. The share of EVs among vehicles here has jumped from 0.2% in 2020 to 4% last year.
Singapore will further accelerate EV adoption by building more charging points, with such infrastructure financed by green bonds.
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"Singapore is fully committed to doing our part in the global climate change agenda," says Wong.
'Very bold' move
Even at its 2030 peak, Singapore's carbon tax rate will still pale in comparison to that of other countries.
Ireland, for example, charges about 41 euros ($63) per tCO2e, while Sweden has the highest carbon tax rate of about 1,200 krona ($173) per tCO2e.
Singaporean investment company Temasek, too, has an internal carbon price of US$42 ($57) per tCO2e.
The carbon tax rate hike is not about increasing revenues for the government, says Saravanan Rathakrishnan, associate at law firm RHTLaw Asia. Rather, it will contribute to the greening of Singapore and its economy, "which puts it in good stead for green finance and ESG-related investments — a new frontier for growth."
While there may be temporary increases in costs of doing business in Singapore, these will be largely transitory as firms learn to adapt, Rathakrishnan tells The Edge Singapore.
The government is also allocating the tax revenue to assist companies and consumers in adapting to this increase, he adds.
Says Wong in his Budget speech: "I should clarify that I do not expect to derive additional revenue from this increase in the carbon tax."
While some revenue will be used to cushion households' utility bills, revenue from the greater carbon tax will go toward decarbonisation solutions, adds Wong.
The move is "very bold", says Selena Ling, head of treasury research and strategy at OCBC Bank. "It may even be seen as too aggressive from members of industry and companies."
From a societal point of view, however, it is the right thing to do, adds Ling. "What’s important is that the additional carbon tax revenue will be channelled into carbon solutions. So the focus is to invest in costly low-carbon infrastructure, green the aviation and tourism industries and capture economic opportunities in areas such as green finance."
The move to raise the carbon tax reflects the Singapore government's firm commitment to accelerate the green transition, says Yoon Young Kim, Singapore, Malaysia and Brunei cluster president at Schneider Electric.
This is in line with efforts under the Singapore Green Plan 2030 and plans to achieve net zero emissions by or around the mid-century, adds Yoon. "By putting a higher price on carbon, it sends a clear and strong signal for organisations to assess their carbon footprint and act more aggressively to reduce emissions."
The increase of Singapore’s carbon tax will "decisively" move the needle on Singapore’s decarbonisation roadmap, says Tan Wooi Leong, senior director, energy and industrial, Surbana Jurong.
"At this revised carbon tax rate, mid- to heavy-duty transport sectors may accelerate their electrification or even adopt hydrogen as fuel. Industries in petroleum and chemicals, iron and steel, cement and other major greenhouse gas emitters will see more value in adopting renewable energy, electrifying their processes and/or introducing new energy alternatives in their operations," adds Tan.
This will affect nearly all sectors in Singapore. Says Tan: "Major logistics firms have begun to study the feasibility of decarbonising entire trucking fleets. Real estate developers are exploring low carbon construction materials and energy efficient solutions for their developments.”
Photo: Samuel Isaac Chua
