Singapore carbon tax has been saved
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Singapore carbon tax
Singapore implemented a carbon tax, the first carbon pricing scheme in Southeast Asia, on 1 January 2019. The carbon tax is imposed by the Carbon Pricing Act 2018. The carbon tax provides a broad-based price signal to encourage companies to reduce their emissions yet gives them the flexibility to act where it makes the most economic sense.
In the Singapore Budget 2022, Minister for Finance Mr Lawrence Wong announced that Singapore will raise its climate ambition to achieve net zero emissions by or around mid-century. He announced that the carbon tax will be raised to S$25/tCO2e in 2024 and 2025, and S$45/tCO2e in 2026 and 2027, with a view to reaching S$50-80/tCO2e by 2030. The Singapore Budget 2022 also announced that companies may also surrender high quality international carbon credits to offset up to 5% of their taxable emissions from 2024. This will help to create local demand for high-quality carbon credits and catalyse the development of carbon markets.
The government does not expect to derive additional revenue from the carbon tax increase, in this decade. The revenue will be used to support decarbonisation efforts and the transition to a green economy and cushion the impact on businesses and households.
The budget announcements were included in the Carbon Pricing (Amendment) Bill (Bill), which was tabled for First Reading in Parliament on 3 October 2022. The Second Reading of the Bill was on 8 November 2022; it passed on the same day.
In addition to revising the carbon tax rate and providing for the surrender of eligible international carbon credits, the Bill amends the Carbon Pricing Act in a number of key aspects, including to:
- Provide for the grant of allowances for eligible taxable facilities to reduce carbon tax (see “Transition Framework”);
- Rename "carbon credits" as "fixed-price carbon credits”;
- Establish the International Carbon Credits Registry and international carbon credit registry account; and
- Revise registration and emissions reporting obligations.
Transition framework
A transition framework will be introduced to give existing emissions intensive trade exposed (EITE) companies more time to adjust to a low carbon economy. Existing facilities in EITE sectors will receive transitory allowances for part of their emissions. The allowances will be determined based on efficiency standards and decarbonisation targets. The transition framework is not applicable to new facilities. Consultations with relevant stakeholders on the support measures, transition framework, and the framework for the use of carbon credits are currently ongoing. Details will be shared in 2023, ahead of the implementation of the revised carbon tax framework in 2024.
Acceptable credits
Singapore’s National Environment Agency has signed memorandums of understanding with Gold Standard, Verra, and the Global Carbon Council (GCC). The memorandums support Singapore-based companies in using eligible carbon credits issued by Gold Standard, Verra, and the GCC to meet part of their carbon tax obligations in Singapore.
Carbon credits are permits that certify measurable reductions in carbon emissions created by certified climate action projects, such as restoring forests and investing in renewable energy. Such projects reduce, remove, or avoid carbon emissions. Article 6 of the Paris agreement outlines the ways in which countries can cooperate to achieve climate goals and includes the trading of carbon credits in the public and private sector on international market.
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