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The Carbon Tax in Singapore in 2024, has been designed to gradually increase its rates over the coming years, to reach S$50-80 per tonne of carbon dioxide equivalent (tCO2e) by 2030.
This trajectory aligns with national climate goals and encourages emissions reduction at both the industrial and individual levels.
Singapore Carbon Tax
In Singapore, the carbon tax was introduced on 1 January 2019 through the Carbon Pricing Act (CPA) and its accompanying Regulations.
The tax mechanism aims to align with Singapore’s climate ambitions, including achieving net zero emissions by 2050.
The carbon tax in Singapore serves as a crucial tool for steering producers and consumers away from carbon-intensive goods and services.
It holds businesses accountable for their emissions and enhances the business case for developing low-carbon solutions.
What is Carbon Tax?: Carbon Tax Meaning
The carbon tax is a monetary levy imposed on entities that emit carbon dioxide (CO2) and other greenhouse gases into the atmosphere.
The primary purpose of the carbon tax is to encourage businesses and individuals to reduce their carbon emissions and transition to more sustainable and environmentally friendly practices.
It provides a financial incentive for entities to curb their carbon footprint, fostering a low-carbon economy and supporting national climate goals.
Carbon Tax in Singapore Details
Singapore’s carbon tax initiative covers approximately 80% of the country’s total greenhouse gas (GHG) emissions, originating from around 50 facilities in sectors such as manufacturing, power generation, waste management, and water treatment.
This tax plays a significant role in Singapore’s comprehensive suite of mitigation measures designed to support the shift to a low-carbon economy.
Singapore’s Carbon Tax from 1 January 2024
In line with Singapore’s net zero targets and raised climate ambitions, the carbon tax is set to undergo significant changes effective from 1 January 2024:
- The carbon tax has been increased to S$25/tCO2e in 2024 and 2025.
- In 2026 and 2027, the tax will rise to S$45/tCO2e.
- Singapore aims to reach a range of S$50-80/tCO2e by 2030.
The Singapore government does not anticipate deriving additional revenue from the carbon tax increase in this decade.
Know also about Personal Income Tax in Singapore
Use of International Carbon Credits
Starting in 2024, companies will be allowed to use high-quality international carbon credits to offset up to 5% of their taxable emissions.
This approach helps companies source credible carbon credits cost-effectively, fosters local demand for high-quality credits, and promotes the development of well-regulated carbon markets.
Transition Framework
A transition framework will be implemented to support emissions-intensive trade-exposed (EITE) companies in reducing emissions and adopting cleaner technologies.
This framework aims to maintain business competitiveness and prevent carbon leakage.
Facilities’ allowances will be determined based on their performance against international efficiency benchmarks or decarbonization plans.
Updating Greenhouse Gas (GHG) Values:
The list of greenhouse gases and their associated Global Warming Potential (GWP) values will be revised to align with newer IPCC standards.
Nitrogen Trifluoride (NF3) will also be included in carbon tax coverage starting in 2024.
Carbon Pricing Act in Singapore
The Carbon Pricing Act in Singapore is a key legislative framework aimed at combating climate change and curbing greenhouse gas emissions. Here’s a breakdown:
- Introduction: Implemented on January 1, 2019, it made Singapore the first Southeast Asian nation to adopt a carbon pricing scheme.
- Carbon Tax Mechanism: It involves taxing carbon emissions produced by various industries and sectors.
- Transition Period: From 2019 to 2023, a modest tax rate of S$5 per tonne of carbon dioxide equivalent (tCO2e) was set.
- Post-2023 Updates: Starting January 1, 2024, the tax rates will significantly rise to S$25/tCO2e in 2024 and 2025, and then to S$45/tCO2e in 2026 and 2027, with a goal of S$50-80/tCO2e by 2030.
- International Carbon Credits: Post-2023, taxable facilities can offset up to 5% of their emissions using international carbon credits.
- Transition Framework: Introduced to aid emissions-intensive trade-exposed (EITE) companies in emission reduction and adopting cleaner technologies.
- Global Warming Potential Updates: The act will update greenhouse gas (GHG) lists and Global Warming Potential (GWP) values to meet new IPCC standards.
Who Should Pay Carbon Tax in Singapore?
The carbon tax in Singapore applies to industrial facilities emitting 25,000 tonnes or more of greenhouse gases annually. This measure aims to encourage environmental accountability and emission reduction.
Revenue from the tax supports initiatives for decarbonization, transitioning to a green economy, and lessening its impact on businesses and households.
Carbon Credits in Singapore
Carbon credits in Singapore are crucial for the nation’s efforts to combat climate change and transition to a low-carbon economy.
Here’s a concise overview:
- Carbon credits, or offsets, represent a reduction in greenhouse gas emissions.
- In Singapore, companies can use international carbon credits (ICCs) to offset up to 5% of their taxable emissions.
- ICCs must meet specific eligibility criteria to ensure environmental integrity and compliance with international standards.
- The use of ICCs promotes the development of robust carbon markets and supports Singapore’s climate goals.
FAQs About Carbon Tax in Singapore
Here are also some frequently asked questions related to Carbon Tax in Singapore.
What is the Carbon Pricing Act in Singapore?
The Carbon Pricing Act is a legislative framework in Singapore aimed at reducing greenhouse gas emissions and addressing climate change.
When was the Carbon Pricing Act introduced in Singapore?
The Carbon Pricing Act was first implemented on 1 January 2019, making Singapore the first country in Southeast Asia to introduce a carbon pricing scheme.
What is the purpose of the Carbon Pricing Act?
The primary purpose of the Carbon Pricing Act is to regulate carbon emissions and promote responsible environmental practices. It provides economic incentives for businesses and individuals to reduce their carbon footprint.
What is the carbon tax in Singapore?
The carbon tax is a tax imposed on carbon emissions generated by industries and sectors in Singapore. It encourages businesses to reduce their emissions and transition to low-carbon practices.
How does the carbon tax in Singapore work?
The carbon tax is applied to industrial facilities with annual direct greenhouse gas emissions of 25,000 tonnes of carbon dioxide equivalent (tCO2e).
What is the purpose of international carbon credits (ICC) in Singapore?
International carbon credits (ICCs) allow companies and industries in Singapore to offset up to 5% of their taxable emissions by investing in emissions reduction projects outside the country.
What is the long-term trajectory of the carbon tax in Singapore?
The carbon tax rates in Singapore are set to increase, with a target range of S$50-80/tCO2e by 2030. This trajectory is designed to provide a strong price signal for emissions reduction and align with national climate goals.
How does the transition framework in Singapore work?
The transition framework provides support for emissions-intensive trade-exposed (EITE) companies as they work to reduce emissions and invest in cleaner technologies.
How is the carbon tax revenue used in Singapore?
The carbon tax revenue collected in Singapore is used to support decarbonization efforts, the transition to a green economy, and to cushion the impact on businesses and households.
Final Words
Singapore has taken significant steps towards addressing climate change and reducing carbon emissions through the implementation of the Carbon Pricing Act and the introduction of a carbon tax.
These measures not only provide a strong economic incentive for businesses to transition to low-carbon practices but also support the country’s commitment to achieving net-zero emissions by 2050.
