Carbon tax a 'more practical' system for Singapore

Teo Xuanwei, Today Online 23 Feb 10;

SINGAPORE - It would be "more practical" to reduce carbon emissions in Singapore through a tax system, rather than a cap-and-trade system, said the Ministry of Finance (MOF) in the FY2010 Revenue and Expenditure Estimates it released yesterday.

This is because Singapore is a small domestic market with only "a few large energy consumers".

A tax system - where the Government fixes the price per unit of carbon - can also "provide greater price certainty and stability that will incentivise investments in energy efficiency and low carbon solutions", MOF said.

Conversely, a cap-and-trade system - which allows firms to buy and sell their emissions permits - could pose "substantial" transaction and monitoring costs on both the Government and firms because a new carbon trading infrastructure would have to be set up.

Carbon trading also allows the price of carbon to vary, and may deter or delay carbon reduction investments, the ministry added.

MOF said a combination of price signals, fiscal measures and other policy interventions will be needed to curb carbon emissions.

It is studying all the options, and will announce specific measures after working out the details and the outcome of climate change negotiations is clearer.