SINGAPORE: To deal with newly-announced carbon tax hikes that will take effect over the coming years, large emitters say they will continue improving energy efficiency, among other initiatives, to cut their emissions.
Singapore’s carbon tax rate will go up from the current S$5 per tonne of emissions to between S$50 and S$80 by 2030, amid more ambitious climate goals announced as part of Budget 2022 on Friday (Feb 18).
Rates will first be raised to S$25 per tonne of emissions in 2024, and again to S$45 per tonne in 2026. The tax is currently applied to facilities that directly emit at least 25,000 tCO2e of greenhouse gas (GHG) emissions per year.
DBS’ Senior Economist Irvin Seah said this will create a “significant impact” on the economy, especially for the power generation, manufacturing, aviation and land transport sectors. This may in turn be passed on to consumers as higher prices, he said.
One such large emitter that CNA spoke to, power generator and electricity retailer PacificLight, said the increases will certainly have “a direct impact” on operation costs.
But it will deal with this by optimising the efficiency of its generating equipment, said CEO Yu Tat Ming.
Mr Yu said that the firm has invested more than S$5 million in improving plant efficiency since 2013, which has helped cut its emissions by 1.5 per cent.
It will also upgrade its plant next year with “the region’s first ever Advanced Turbine Efficiency Package (ATP)”. This will bring total carbon reduction to 40,000 tonnes per annum – equivalent to supplying carbon-free electricity to more than 20,000 Singapore households, he said.
In addition, PacificLight has received an in-principle license for a pilot solar import project from Indonesia to Singapore, which will reduce carbon emissions by more than 357,000 tonnes per annum, said Mr Yu.
As part of the Budget announcement on Friday, firms will also be allowed to use “high-quality” international carbon credits to offset up to 5 per cent of their taxable emissions from 2024.
Mr Yu said PacificLight, which has been trading carbon credits since 2014, will likely make use of these offsets to optimise costs.
SUPPORTING AN “EXPLICIT PRICE” ON CARBON
Oil company ExxonMobil told CNA it supports an “explicit price on carbon to establish market incentives” and provide the clarity needed for investments.
It has even set its own goal of reaching net-zero emissions from its operated assets by 2050, a company spokesman said.
“We are taking a comprehensive approach to develop detailed emission-reduction roadmaps for our major operated assets including our integrated manufacturing complex in Singapore.”
But given that Singapore has an export-oriented economy, it also noted the importance of ensuring that the carbon tax framework “safeguards competitiveness of trade-exposed industries”.
As for oil company Shell, the firm “has always been supportive of putting a direct price on carbon emissions” as part of a broader framework for net-zero emissions, a spokesperson told CNA.
It also welcomed the news that authorities will be using a large part of the carbon tax revenue to support companies to invest in low-carbon technologies.
“This is critical as near-term competitiveness impact is real,” it said.
It noted that Singapore exports most of its energy and chemical products, and has to compete with other countries that do not have a carbon price policy, or have “sophisticated mechanisms” to help their trade-exposed industries remain competitive, if they do.
Shell added that it is in the process of transforming its business, moving away from traditional fuel production and instead embarking on businesses such as in circular chemical production.