Issued by the Ministry of Sustainability and the Environment (MSE)
22 September 2022
1. The Ministry of Sustainability and the Environment (MSE) conducted an online public consultation through REACH on the draft Carbon Pricing (Amendment) Bill from 8 July to 5 August 2022.
2. At the close of the public consultation exercise, MSE received 34 responses from members of the public, companies, and non-governmental organisations. A summary of the key feedback and our responses can be found below.
Carbon Tax Level
3. Most respondents acknowledged the role of the carbon tax in enabling the transition to a low-carbon future, and the need to raise it to achieve our net zero ambition. Nonetheless, some respondents were in favour of a more aggressive carbon tax trajectory, citing the higher carbon prices in some other developed countries, the latest scientific recommendations on carbon tax levels required to hold global warming to within Paris Agreement goals, and the need to sufficiently deter greenhouse gas emissions from growing.
4. At Budget 2022, the Government has announced that the carbon tax will be raised from S$5 per tonne to S$25 per tonne in 2024, and S$45 per tonne in 2026, with a view to reaching S$50-80 per tonne by 2030. This carbon tax trajectory was calibrated to set the pace of transformation needed to achieve our climate goals, while giving businesses sufficient time to transition to a low-carbon future. We will regularly review Singapore’s carbon pricing regime to take into account international developments, the progress of our domestic mitigation efforts in meeting our climate change targets, the impact on households and businesses, our economic competitiveness, and the role of the carbon tax in stimulating the development of our green economy.
Industry Transition Framework
5. There were mixed views on the provision of allowances to emissions-intensive trade-exposed (EITE) sectors. Some respondents commented that the provision of allowances to EITE sectors goes against the “polluter-pays” principle. Others commented that sufficient allowances should be granted to EITE sectors to help them adjust to the carbon tax increase, taking into account factors such as cost pass-through from electricity suppliers and residual emissions that cannot be abated by existing emissions abatement technologies.
6. The Government recognises that in the near-term, companies in EITE sectors may face higher costs than those in countries with lower or no carbon prices. These companies produce not only for Singapore, but for the world, and contribute a significant number of jobs and value-added to our economy. Many of their products and expertise will be needed as the world decarbonises. Some will need more time to make the necessary reduction in emissions or investment in cleaner technologies. Hence, to manage the near-term impact on business competitiveness and mitigate the risk of carbon leakage, transitory allowances will be provided to facilities in EITE sectors. Such transition frameworks are common in many countries with carbon prices. To encourage decarbonisation, the allowances will be determined based on the efficiency standards and decarbonisation plans.
7. The Ministry of Trade & Industry (MTI) and Economic Development Board (EDB) will continue to engage affected companies on the details of the industry transition framework.
8. We received suggestions for the Government to publicly disclose the amount of allowances awarded to each eligible facility each year. However, as the quantity of allowances provided to each facility is linked to the nature and scale of operations of the facility, it is commercially sensitive and challenging to make public.
9. Some respondents raised concerns on the provision allowing the Government to revise the methodologies used to calculate the quantum of allowances awarded to eligible facilities (“allowance methodologies”). The intent of this provision is to allow the Government to update the allowance methodologies if a methodology currently in use becomes outdated. The Government will provide sufficient notice to companies should there be any changes to the allowance methodologies.
International Carbon Credits
10. Respondents were generally supportive of the international carbon credits (ICC) option. However, there were differing views on the prevailing facility-level limit on ICC usage (i.e. 5% of taxable emissions). Some argued that the facility-level limit should not be increased, as ICC should only be used after companies have exhausted measures to avoid and reduce their emissions. Others requested for the facility-level limit to be raised, particularly for hard-to-abate sectors.
11. The facility-level limit is set at 5% to ensure that the industry continues to prioritise emissions reduction, while providing an additional decarbonisation pathway for hard-to-abate sectors that may find it challenging to significantly cut emissions in the near to medium term. We will continue to review the facility-level limit, as carbon markets continue to develop.
12. There were also requests for greater clarity around the eligibility criteria for ICC. The broad principles of the eligibility criteria will be set out in subsidiary legislation, taking reference from internationally accepted environmental integrity principles as well as relevant practices amidst the evolving international landscape on carbon credits. The Government will ensure that eligible ICC are derived from real emissions reductions or removal, aligned with global climate ambition, and in line with Article 6 of the Paris Agreement, including the requirement for corresponding adjustment by host countries.
Carbon Tax Revenue and Support Measures
13. While not directly relevant to the draft Carbon Pricing (Amendment) Bill, several respondents sought greater clarity on how the carbon tax revenue would be utilised. Some urged the Government to channel the revenue to support industry decarbonisation efforts, such as investing in clean energy to decarbonise the grid. Others called on the Government to provide support to low-income households and vulnerable communities to help them absorb the potential rise in cost of living.
14. The Carbon Pricing Act does not stipulate how carbon tax revenue will be used. Instead, government expenditures, whether funded from carbon tax revenue or other revenue sources, are consolidated through the annual Budget process coordinated by the Ministry of Finance (MOF). The expenditures are passed through the Supply Act, which controls the Government’s spending for the next financial year.
15. The Government does not expect to derive additional revenue from the increase in the carbon tax. Some of the carbon tax revenue will be used to support both households and businesses in the green transition. A large part will be used to support a decisive shift towards decarbonisation through investments into renewables, and new low-carbon and more energy-efficient solutions.
16. The Government has provided support to households since the implementation of the carbon tax in 2019. For example, we disbursed additional U-Save rebates from 2019 to 2021 to eligible households to cover the expected average increase in utility bills. We also introduced the Climate Friendly Households Programme in 2020 to provide eligible households with vouchers to offset the cost of purchasing energy-efficient appliances and water-efficient shower fittings. The Government will continue to review cost-of-living issues and is prepared to provide more help to households if needed.
17. One respondent suggested for the Government to consider exempting carbon credits from the Goods & Services Tax (GST) to promote carbon credits trading in Singapore. The Government will study the GST treatment of carbon credits, as part of its periodic review of the GST regime. Such reviews ensure the GST regime remains up to date, as a broad-based tax with limited exemptions.
18. MSE would like to thank all respondents for their feedback. We will consider all suggestions received and incorporate them into the revised Bill where appropriate.
1. The Ministry of Sustainability and the Environment (MSE) is carrying out a public consultation on the draft Carbon Pricing (Amendment) Bill. The consultation period will be from 8 July 2022 to 5 August 2022.
2. At Budget 2022, the Government announced that Singapore will raise our climate ambition to achieve net zero emissions by or around mid-century. To support the move towards our new net zero ambition, the Government announced that:
a. 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;
b. A transition framework will be introduced to give eligible companies in emissions-intensive trade-exposed (EITE)1 sectors more time to adjust to a low-carbon economy; and
c. 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.
3. The Carbon Pricing (Amendment) Bill will give effect to the revised post-2023 carbon tax regime.
4. Interested parties are invited to provide feedback on the draft Carbon Pricing (Amendment) Bill. The draft Bill may be further revised following feedback received from consultations with the public and the industry.
5. All submissions should be clearly and concisely written, and should provide a reasoned explanation for any feedback. Where feasible, please identify the specific provision of the draft Carbon Pricing (Amendment) Bill which you are commenting on.
6. All submissions should reach MSE no later than 5pm on 5 August 2022. Late submissions will not be considered. Submissions are to be in softcopy only (in Microsoft Word or PDF format). Please send your submission to CPA@mse.gov.sg, with the subject “Public Consultation for Carbon Pricing (Amendment) Bill”.