Our initial thoughts on Budget 2022
The climate measures announced during the Budget are a step in the right direction and a vindication of SGCR's as well as the rest of environmental civil society's efforts. The announcement that the country will bring forward its net-zero target "by or around mid-century" is in line with SGCR's vision of net zero emissions by 2050, as well as one of the demands of the Youth COP26 Statement, of which SGCR was a co-author to.
However, there was no update to the 2030 target, which is also important as cutting emissions earlier rather than later will mitigate more warming. The IPCC’s targets to halve emissions by 2030 and reach net zero by 2050 is a global average target, meaning that high income countries like Singapore should achieve these goals even earlier to give low income countries more time to transition. The Climate Action Tracker estimates Singapore’s fair share to be a reduction to 8.3 million tonnes (Mt) of carbon emissions in 2030 (a reduction of more than 80% from 2010 levels), while the government’s committed target is 65 Mt — almost 8 times of that.
We look forward to the Government providing more clarity on the measures they intend to implement to realise this net-zero target and to commit fully to the 2050 date, as well as whether it will enhance the 2030 target. We call for the Government to enshrine this target by law, and introduce measures to reduce the size of our petrochemical industry to achieve this target.
The announcement that Singapore's carbon tax will be progressively increased to $25 by 2024-2025, $45 by 2026-2027, and $50-80 by 2030 is also in line with SGCR's and other environmental groups’ demands to introduce a more ambitious level of carbon tax, though still lower than estimates of the right price of carbon, which is at least USD 75 (SGD 100), as MAS chief Ravi Menon has acknowledged. Nevertheless, it is a welcome signal of our country's priorities in making sure polluters pay their fair share.
How it is implemented will be crucial, however. The Minister has said that the revenues will be used to support decarbonisation efforts and to help people cope with the impacts, such as increased utility bills. We call for the latter to be implemented steadily to ensure a just transition, and to ensure our most vulnerable communities do not bear the burden of the increased carbon tax. We also call for more public engagement from the government to look at raising carbon tax rates in the future, as we believe they can be even more ambitious. We also hope for more details about the use of "high quality" international carbon credits to offset carbon tax liabilities. Given the prevalent issues surrounding the verifiability and integrity of the global carbon offsets market, proper scrutiny is needed to ensure that offsets don't give polluters the opportunity to evade their climate obligations. Lastly, the design transition framework to provide companies with allowances for a share of their emissions has to be done in a transparent manner to ensure companies pay their fair share.
However, climate policies do not exist in a silo. To ensure a just transition, our entire tax regime must be examined. In this vein, it is disappointing that the government has gone ahead with the GST hike, albeit staggering it over 2023 and 2024. Lower-income households and individuals are still recovering from this pandemic, and such a tax will impact them more in relative terms as they consume a greater percentage of their income compared to higher-income households. In particular, we note that although the personal income tax rate for top-tier earners, property taxes and taxes on luxury vehicles were raised, we are disappointed that there are no new wealth taxes implemented. We feel this was a missed opportunity to make our tax regime more robust and generate greater redistributive outcomes for lower-income households.
Lastly, although we welcome the Assurance Package's enhanced cash payouts to offset additional GST expenses, we note that they are only for Singaporeans, and excludes low-wage migrant workers and foreign spouses. SGCR's vision is for a just transition for all, and we call for these measures to be expanded to all Singaporean residents. We hope to see more debate on this in Parliament as the various Ministries share more about their plans, and we will release a more in-depth evaluation subsequently. We invite everyone to continue pushing for a just transition!