MSE is holding a public consultation on the draft Carbon Pricing (Amendment) Bill and here's why you should write in. But first:
What is carbon pricing?
Carbon pricing involves charging a fee per unit of greenhouse gas emitted. This is typically done to cover the external costs associated with emissions (e.g healthcare costs from heatwaves; loss of property due to sea level rise).
There are different types of carbon pricing:
Cap and trade schemes
Carbon tax
Carbon offsets
Internal carbon pricing
Currently, Singapore has imposed a carbon tax of SGD $5 per tonne of CO2 emissions ($5/tCO2e), which is substantially lower than the recommended carbon tax of US$40–80/tCO2e in 2020 and US$50–100/tCO2e by 2030, in alignment to the temperature goal set during the Paris climate agreement.
Why is carbon pricing important?
It creates financial accountability for emitters by shifting the burden of environmental costs to those who are responsible for GHG emissions.
It provides financial incentive for the reduction of GHG emissions, e.g. instead of paying a carbon tax, they can invest in innovations in clean energy technology or energy efficiency to reduce their carbon tax burdens.
It is an increasingly important tool for decarbonisation
Sources:
https://www.lse.ac.uk/granthaminstitute/explainers/what-is-a-carbon-price-and-why-do-we-need-one/; https://unfccc.int/about-us/regional-collaboration-centres/the-ciaca-initiative/about-carbon-pricing#eq-3
What is the government proposing in the draft (amendment) bill?
The carbon tax will be raised from the current $5/tCO2e to $25/tCO2e for 2024 and 2025, and $45/tCO2e for 2026 and 2027
A transition framework will be introduced to give eligible companies in emissions-intensive trade-exposed (EITE) sectors more time to adjust to a low-carbon economy
Companies will have the option to use eligible international carbon credits in lieu of paying carbon tax for up to 5% of their taxable emissions from 2024 onwards
What suggestions can we make?
1. The carbon tax will be raised from the current $5/tCO2e to $25/tCO2e for 2024 and 2025, and $45/tCO2e for 2026 and 2027
Although the government is providing additional rebates for utility bills, the cost of living may continue to rise beyond just utilities if businesses pass on their increased operating costs to consumers. How does this affect our most vulnerable communities, especially with inflation?
The recent $1.5 billion support package provides mostly one-off relief for lower-income families to cope with the inflation, but the impact of the carbon tax is long-term.
As MAS chief Ravi Menon has suggested, part of the proceeds of carbon taxes could be distributed to lower-income households through carbon dividends.
2. A transition framework will be introduced to give eligible companies in emissions-intensive trade-exposed (EITE) sectors more time to adjust to a low-carbon economy
This would mean that while all qualifying firms pay the full tax, the most polluting firms may pay only a reduced portion (e.g. petrochemical companies on Jurong Island that contribute a third of Singapore’s emissions).
This is not aligned with the inclusive green transition proposed in the Jan 2022 parliamentary motion, nor the no-exception approach “to maintain a transparent, fair and consistent carbon price” as outlined during its introduction in 2018.
We would like to seek assurances that Ministerial discretion is not used to give EITE sectors a free pass, and that any allowances given be made known to the public.
3. Companies will have the option to use eligible international carbon credits in lieu of paying carbon tax for up to 5% of their taxable emissions from 2024 onwards
Carbon credits should be used with proper discretion, as they are notorious for lacking transparency and integrity. There have been instances where carbon credit schemes for forested areas were done without proper consultation and informed consent of the indigenous people who live off those lands.
The climate action projects that Singapore partakes in should not be destructive to other communities. For example, the purchase of hydropower generated from the Mekong dams has raised concerns about the environmental damages and socio-economic impacts on the people who largely depend on the Mekong river for their livelihoods.
TLDR; main points for suggestion:
While we undergo the necessary green transition, we have to ensure that the transition is just.
There should be a clear criterion on how the government intends to give tax allowances to companies, especially those that significantly contribute to the country’s carbon emissions.
Singapore should use the international carbon credits wisely and make well-informed decisions that minimise the harm induced to communities involved in carbon offset projects.
To help you write in your suggestions, refer to our template here! Help us call for a fairer carbon tax.