Singapore: Carbon tax scheme a matter of when

Business Times 5 May 11;

FOR most governments, going 'green' is clearly a matter of political correctness. But the route to achieving a cleaner, carbon-reduced environment is no easy one.

Shell recently signalled the closure of its Clyde refinery in Sydney, with the potential loss of 500 jobs. The rationale was that it was unable to compete with new, bigger and more efficient Asian refineries, although there was nagging industry suspicion that it was a proposed carbon tax by the Australian government which provided the final straw.

As opposition leader Tony Abbott puts it bluntly, 'if we have a carbon tax in this country, we won't have less emissions'. 'We'll just have less manufacturing,' he said, referring to not just oil refining but also the coal and steel industries.

In Singapore, talk of a carbon tax surfaced late last year, when Prime Minister Lee Hsien Loong said that a price on carbon would be introduced here should there be a global climate change deal. This could be a tax on the carbon content of fuels, or a cap-and-trade system that caps the amount certain industries can pollute, beyond which companies pay extra. If they pollute less, they gain carbon credits which can then be sold, contributing to the company's profits.

A working group is reportedly studying the possible introduction of such a carbon scheme and its cost impact on households and industries, with its report expected to be completed within the next few months. It will also go through a consultation process before being finalised. Timing-wise, there is no hurry for Singapore to push this. Cancun - which hosted the United Nations climate change talks at end-2010 - failed to deliver on a global green deal, with the next upcoming meeting in South Africa later this year.

Meanwhile, little more has been heard, although a recent government feasibility study on coal gasification as an alternative feedstock on Jurong Island stressed that the consultants take into account a potential carbon tax on the project's viability.

Industry watchers say that it would take time for a carbon scheme to take root here, although the government should engage players early for feedback - something which has not happened yet.

There will be an impact on any industry which uses hydrocarbons as fuel. This covers the oil refineries to the power stations among others, although the latter argue that over 80 per cent of Singapore's electricity is being produced from efficient gas-firing plants, which is already the greenest technology available. A carbon tax will only raise electricity prices for everyone. Besides, are there that many energy alternatives for Singapore?

How about carbon credits? IUT Global - a wastefood-to-energy recycling firm - recently folded up due to problems sourcing sufficient waste volumes to break even. While carbon credits may not have saved it, they would have helped - and would also have induced other green firms to invest here.