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Carbon Tax In Singapore Has Increased: How Does This Affect You?

As announced this year at Singapore’s Budget 2022, carbon taxes in Singapore are set to increase exponentially from 2024 onwards. You might be concerned about how much impact this will have on your business or lifestyle, and if you should do anything about it. If so, read on to learn more!

What is the carbon tax measure in Singapore all about?

Singapore, being the first Southeast Asian country to implement a carbon price, introduced the idea of carbon tax in 2019 at $5 per tonne of greenhouse gas emissions (tCO2e), under the Carbon Pricing Act (CPA).

The rationale behind this move is simple. By introducing a carbon tax, the effect of greenhouse gas emissions on the environment by companies becomes quantifiable – in the form of operational cost.

This encourages companies, who are fundamentally profit-driven, to be more mindful about greenhouse gas emissions in their own business operations and implement energy efficient technology, which are already cost-saving in nature.

In turn, this supports the transition towards a low carbon economy alongside other initiatives under Singapore’s Green Plan 2030.

Currently, any industrial facility that emits direct greenhouse gas emissions (GHG) emissions equal to or above 25,000 tCO2e annually will be required to pay carbon tax. If you happen to own an industrial facility and wish to estimate whether your GHG emissions are above 25,000 tCO2e, you can refer to this spreadsheet prepared by NEA.

Why is the government planning to increase carbon tax, and by how much?

The decision to increase carbon tax in Singapore is due to the government shifting our net zero ambition forward to mid-century. This decision was made upon two external factors, which make it easier for companies to go carbon-neutral:

1. The advancement in green technology

Source: Pexels

Singapore is limited in options for renewable energy. Yet, the rise of potential alternative energy solutions such as carbon capture, utilisation and storage, as well as hydrogen generation, has made it possible to shift our targets forward.

2. Growth of international carbon markets

Source: Pexels

During the 2021 United Nations Climate Change Conference, better known as COP26, Singapore was able to finalise a landmark decision on Article 6 of the Paris Agreement, which enables carbon credits to be traded on a global basis.

In order to achieve this accelerated net zero ambition, the decision was made to raise carbon tax to the following prices, per tonne of carbon:

  • $25 by 2024 and 2025
  • $45 by 2026 and 2027
  • $50-$80 by 2030

Through the introduction of this gradual carbon tax increment, Singapore aims to provide impetus and certainty for companies to plan their transition towards zero carbon, encouraging companies to strategize how to go about lowering their carbon emissions.

Below are some cost-effective low-carbon solutions for your reference that will be available to you as a business owner, by the time the carbon increment is implemented.

What solutions are available to help companies with the carbon tax hike?

1. Switch to Solar with Zero Upfront Cost

The best way to protect your business from the carbon tax hike is to switch to renewable energy. In Singapore, solar is the premier source, and it doesn’t even have to cost you any upfront capital outlay!

Solar Leasing or Solar Power Purchase Agreements (PPAs) allow businesses to enjoy  discounted solar electricity at zero upfront costs – property owners enjoy a fixed rate structure or discounted rates usually at 20% to 50% less than prevailing market electricity prices. All upfront costs and maintenance fees are paid by the solar developers as well. 

However, this model is usually only available to larger clients, namely commercial or industrial building owners with a rooftop solar potential of at least 500 kWp (roughly an undisrupted rooftop area of 2,500 sqm).

This is why Solar AI Technologies is bringing this solar-as-a-service offer to all SMEs and business owners regardless of property roof size, with contract terms as short as 5 years. 

RTO zero-upfront solar panel singapore

We’re committed to democratising solar for all property owners. Get started with our instant solar assessment tool or reach out to us on Whatsapp for a discussion.

2. Use of International Carbon Credits

Source: Shell

From 2024 onwards, companies would be able to surrender high quality international carbon credits to offset up to 5% of their taxable emissions. 

How carbon credits work is that they act as permits for the company to emit a certain amount of carbon dioxide (eg. 1 carbon credit permits 1 tonne of carbon emission), and each company would be given a fixed amount of credits allowing them to pollute up to a certain limit. 

Companies in Singapore will be allowed to either sell any unneeded credits for extra cash flow, or purchase more credits to compensate should they over-pollute. 

This will cushion the impact for companies that are able to source for credible carbon credits in a cost-effective manner, while creating local demand for high-quality carbon credits. 

Overall, this also catalyses the development of well-functioning and regulated carbon markets that companies can freely trade in. 

3. Buy Renewable Energy Certificates (REC)

RECs can also be used to help businesses manage their carbon footprint.

Unlike carbon credits, which are a direct carbon emissions offset, RECs help businesses take into account how much clean electricity is used in your daily business operations (1 REC always refers to 1 MWh of electricity).

The good thing about RECs is that while carbon credits require additionality test requirements, RECs currently do not, thereby simplifying the process of acquiring them.

If you wish to explore purchasing RECs for your business, do feel free to contact us, where we further simplify the purchase of RECs into just one step.

4. Green Mark Incentive Scheme for Existing Buildings 2.0 (GMIS-EB 2.0)

Source: Pexels

As part of Singapore’s Green Building Masterplan to convert 80% of our buildings into green buildings by 2030, GMIS-EB 2.0 will be launched within the 2nd quarter of this year. 

Under this scheme, energy efficient retrofits are subsidised based on your potential carbon abatement, allowing you to methodologically achieve your goals of improved energy performance standards, while optimising your return on investment. 

Solar photovoltaic solutions are subsidised under this scheme as well, which makes it very opportune if you are already considering green retrofits for your own building and are considering going solar in the first place.

5. Transition Framework

Credits: Pexels

Finally, a transition framework will also be introduced to give existing emissions-intensive trade-exposed (EITE) companies more time to adjust to a low-carbon economy. 

EITE companies are primarily manufacturing companies which are core to Singapore, but release large amounts of greenhouse gases and face fierce national/global competition for their products. 

Companies in these sectors will be granted transitory allowances that are determined by both the company’s efficiency standards, as well as decarbonisation targets.

What solutions are available to help households with the carbon tax hike?

As an individual, you might be worried that steeper carbon taxes could lead to higher electricity prices, which will increase your cost of living overall. 

Fret not, however, as the increased revenue from the carbon tax hike will be used to cushion companies and households during this low-carbon transition period. The carbon tax revenue will be used to fund a series of cost-saving measures as explained below.

1. USave Rebates

Source: GST Voucher SG

From 2019 till 2021, eligible HDB households have been given an additional allowance of $20 on top of the regular U-Save rebate, in order to cushion the impact of carbon taxes leading to increased electricity prices.

Carbon revenue will continue to be used for additional USave rebates to manage cost impact.

2. Climate-Friendly Household Programme

Source: Climate Friendly Households

Besides USave rebates, the Climate-Friendly Household programme, which supports lower-income households in purchasing more energy efficiency and climate friendly appliances such as 3-ticks water efficient shower fittings and climate friendly refrigerators, will also be funded by carbon tax revenue. 

The purchase of these equipment will enable households to enjoy the cost savings associated with them, while also being able to play their part in saving the Earth.

3. Regulations On Electricity Pricing by Government Bodies

Source: Energy Market Authority (EMA)

Finally, to ensure that consumers will not be overcharged by electricity retailers who might pass on more than 100% of carbon tax to consumers, EMA will continue to ensure fair and efficient conduct of market players.

Government bodies will also work closely with the Consumer Association of Singapore (CASE) and Competition & Consumer Commission of Singapore to monitor the market for unfair pricing and coordinated price hikes which are anti-competitive in nature.

What else can I do as an individual?

With electricity tariffs rising amidst the Global Energy Crisis, you can also start implementing useful electricity-saving habits in your daily lifestyle to reduce cost, while saving the environment. (In fact, we did an article a while back on the smartest top 5 ways you can save electricity.)

If you’re a private landed (or even a condo penthouse or MCST strata-landed) homeowner, you have the exclusive option to switch to solar! It is a sustainable long-term investment that can save you as much as $200-$500 on electricity a month!

solarai solar simulator estimate

Do contact us to learn more or try out our free online solar assessment tool for an instant solar roof quote and solar savings estimate.

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Solar AI Technologies
Solar AI Technologies
At Solar AI, we combine geospatial data and artificial intelligence to provide home and property owners with the tools and knowledge to get solar as easily as possible. Our mission is to use technology to simplify the solar experience for everyone.
Solar AI Technologies
Solar AI Technologies
At Solar AI, we combine geospatial data and artificial intelligence to provide home and property owners with the tools and knowledge to get solar as easily as possible. Our mission is to use technology to simplify the solar experience for everyone.
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