Singapore will increase its carbon tax fivefold to S$25 ($18.60) a tonne in 2024. Image Credit: Shutterstock

Singapore: Singapore will increase its carbon tax fivefold to S$25 ($18.60) a tonne in 2024, Finance Minister Lawrence Wong said, in an attempt to meet its zero-emissions target by around 2050.

The city state, a major Asian oil refining and petrochemical export centre, plans to increase the carbon tax further to S$45 in 2026 and 2027, and S$50 to S$80 by 2030, Wong said on Friday in a budget speech.

From 2024, businesses will be allowed to buy international carbon credits to offset up to 5% of their taxable emissions, he added.

“This will moderate the impact for companies,” Wong said.

“It will also help to create local demand for high-quality carbon credits and catalyse the development of well-functioning and regulated carbon markets.” Carbon credits are certified instruments to represent emission reductions at climate action projects and are traded by companies to offset emissions elsewhere.

Singapore, the first country in Southeast Asia to introduce a carbon pricing scheme, implemented its carbon tax in 2019.

The country’s carbon tax applies to all facilities producing 25,000 tonnes or more of greenhouse gas emissions annually, which include oil refineries and power plants.

Push to curb emissions

A stronger price signal from the government would encourage investments in greenhouse gas reduction, said a spokesperson from ExxonMobil which operates its world’s largest refinery in Singapore.

“Carbon tax and supportive government policies can help to incentivize more industries and sectors to invest in research or technologies to reduce emissions,” she said.

“As Singapore has an export-oriented economy, it is also important that the designed carbon tax framework encourages greenhouse gas reductions, while safeguarding competitiveness of trade-exposed industries.” A spokesperson from Shell said the carbon price should apply to as many sectors of the economy as possible and the company expects the price to increase over time as energy transition progresses.

“This is critical as near-term competitiveness impact is real,” she said.

“Unlike power, which is consumed domestically, Singapore exports most of its energy and chemical products, and has to compete with other exporter countries that either do not have a carbon price policy, or have sophisticated mechanisms to help their trade-exposed industries remain competitive, if they do.”