Budget 2017: Singapore to impose carbon tax on large direct emitters

Monica Kotwani Channel NewsAsia 20 Feb 17;

SINGAPORE: The Government will introduce a carbon tax on large direct emitters of greenhouse gases (GHGs) such as power stations from 2019. The tax is expected to affect between 30 and 40 emitters currently operating in Singapore.

Finance Minister Heng Swee Keat announced this in his Budget speech in Parliament on Monday (Feb 20). He said that such a system is the “most economically efficient and fair way” to reduce GHG emissions, towards achieving Singapore's commitment to the Paris climate agreement, which it ratified in 2016.

As part of the agreement, Singapore has committed to reducing emissions intensity by 36 per cent by 2030 compared to 2005 levels. It also aims to stabilise its emissions, with the aim of peaking around 2030.

Mr Heng said the Government will consult stakeholders comprehensively and has already started industry consultation. It will start the public consultation process in March. As of now, he said the Government is looking at a tax rate of between S$10 and S$20 per tonne of GHG emissions.

“(The carbon tax) may also spur the creation of new opportunities in green growth industries such as clean energy,” Mr Heng said. “Revenue from the carbon tax will help to fund measures by industries to reduce emissions.”

Mr Heng said the impact of such a tax system would be “modest” on most businesses and households. In a statement, the National Climate Change Secretariat (NCCS) said the proposed tax rate is equivalent to a rise in electricity prices of between 0.43 and 0.86 cents per kilowatt-hour (kWh). This could mean a between 2.1 and 4.3 per cent increase in electricity prices compared to current rates.

It said the average household in a four-room flat typically sees electricity bills of S72 per month. A carbon tax imposed on power stations could result in an increase in electricity prices for that household of between S$1.70 and S$3.30 per month. As a point of comparison, NCCS said electricity prices have fluctuated by up to 10 per cent between 2010 and 2016.

On large GHG emitters, NCCS said a price signal would incentivise them to factor in the cost of their emissions in their business decisions. The tax will be imposed on large emitters of six GHGs, including carbon dioxide, methane and hydrofluorocarbons.

NCCS said that based on current data, there are between 30 and 40 of such large emitters operating in Singapore, which emit gases equivalent of 25,000 tonnes of carbon dioxide. This translates to emissions produced by the electricity consumption of 12,500 four-room households each year.

According to the World Bank, about 40 countries and 20 cities, states and provinces have implemented some form of carbon pricing, while many others have plans to introduce such systems in future.

- CNA/mo

Carbon tax to be imposed from 2019 to cut greenhouse gas emissions
SIAU MING EN Today Online 20 Feb 17;

SINGAPORE — From 2019, emitters of greenhouse gases will be taxed for every tonne of gas they release into the air, sending a price signal to power stations and large emitters to reduce their carbon footprint, said Finance Minister Heng Swee Keat on Monday (Feb 20).

Mr Heng said the Government is looking at setting a carbon tax rate of between S$10 and S$20 per tonne of greenhouse gas emissions, which is within the range of what other jurisdictions have implemented. The move will make Singapore the first country in South-east Asia to implement such a tax.

“There are different ways to reduce emissions … But the most economically efficient and fair way to reduce greenhouse gas emissions is to set a carbon tax, so that the emitters will take the necessary actions,” he added.

It will also create a price signal to incentivise industries to reduce their emissions and complement the regulatory measures the authorities are also introducing, he said.

Six greenhouse gases will be covered under the carbon tax: Carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.

The carbon tax will generally be applied to large direct emitters such as power stations, rather than electricity users, said Mr Heng. Currently, there are around 30 to 40 of such large direct emitters, such as those from the petrochemical, refinery and semiconductor sectors.

For stationary greenhouse gas emissions by this group, the Government is looking at a proposed annual threshold equivalent to 25,000 tonnes of carbon dioxide. This would be equivalent to the emissions produced from the electricity consumption of 12,500 four-room HDB households each year.

The revenue from the carbon tax will help to fund measures by the industries to reduce emissions, while new opportunities in green growth industries, such as clean energy, could be created, said Mr Heng.

For businesses, the increase in operating cost from the proposed carbon tax rate represents a 6.4 to 12.7 per cent increase from current oil prices. In comparison, historical quarterly oil price fluctuations have ranged from minus 29 to 35 per cent from 2011 to 2016.

For households, the tax rate would be equivalent to an increase in electricity prices of 0.43 to 0.86 cents per kilowatt-hour. This is a 2.1 to 4.3 per cent increase from current electricity tariffs, compared with quarterly electricity prices that have fluctuated up to 10 per cent between 2010 and 2016.

Carbon taxes imposed by countries around the world range from about S$4 (Japan) to S$187 (Sweden) per tonne.

Singapore ratified the Paris Agreement on climate change last September, formalising its pledge to reduce emissions intensity by 36 per cent from 2005 levels by 2030. In 2009, Singapore pledged to reduce emissions by 16 per cent from Business-as-Usual levels by 2020 and is on track to meet this target.

Mr Heng said on Monday that consultations with industry players have begun. Public consultations will start next month and further studies will be made before finalising the tax rate and implementation schedule. “We will take into consideration the lessons from other countries and prevailing economic conditions in Singapore in implementation. We will also provide appropriate measures to ease the transition.”.

Singapore first declared its intention to implement some form of carbon pricing in the 2010 Singapore International Energy Week, if other countries also pledged to curb their carbon emissions.

Several European countries, such as Finland and Sweden, implemented carbon pricing as early as the 1990s. Closer to home, Japan and South Korea did the same in 2010 and 2015. Four years after the introduction of the Tokyo Cap-and-Trade programme for instance, the city achieved a 23 per cent reduction below baseline emissions in 2013 while their GDP grew around 7.4 per cent.

Likewise, China started pricing carbon through emissions trading pilots since 2013. The world’s largest emitter has also announced plans to introduce a national emissions trading scheme later this year.


Carbon tax regime timely, could boost Singapore's economy: Stakeholders
Monica Kotwani Channel NewsAsia 20 Feb 17;

SINGAPORE: Reactions to the announcement of an upcoming carbon tax system for Singapore have been generally positive, with stakeholders and observers calling the move timely and one that will transform Singapore’s economy for the better.

The system, when implemented from 2019, will target direct large emitters of greenhouse gases, rather than individual electricity users such as households. While the Government said it has started industry consultation and will also reach out to the public, it is looking at a tax rate of between S$10 and S$20 per tonne of emissions.

Speaking after the Budget address in Parliament, Member of Parliament (MP) for Sembawang GRC Vikram Nair told Channel NewsAsia that the best way of solving environmental problems is to link them to economic incentives.

He said when companies consider maintaining their profitability in future, they would have to take into account measures to reduce emissions. "(With carbon tax,) there will be a cost imposed to companies’ polluting in line with their emissions, which will mean that the cost of pollution goes up so it becomes a cost they have to take into account,” Mr Nair said.

In his Budget address, Finance Minister Heng Swee Keat said the implementation of the scheme may spur the creation of new opportunities in the clean energy sector for example.

The Singapore Environment Council (SEC) echoed this point, saying a carbon tax regime could boost Singapore’s economy. “Singapore should aspire to be a global leader in the research and development of renewable technologies as this will boost our economy by creating jobs and attracting investments,” said Ms Isabella Loh, chairman of SEC.

Executive director for the Sustainable Energy Association of Singapore, Kavita Gandhi, said the timeline for imposing the scheme from 2019 is “sustainable”. “The large emitters are already on the path due to the Energy Conservation Act and other initiatives to stimulate efficiencies. (The carbon tax scheme) will further enhance such measures being undertaken,” she added.

According to the National Climate Change Secretariat, there are between 30 and 40 large direct emitters of greenhouse gases.

PETROCHEMICAL COMPANIES REACT

In a statement, Shell Singapore said it has long supported a “strong and stable Government-led carbon price”. “Properly implemented, a Government-led carbon pricing mechanism stimulates technologies for the part of the economy that can decarbonise quickly; while providing time for other sectors that will take longer.”

ExxonMobil Asia Pacific said that while a uniform price of carbon applied consistently across the economy is a sensible approach to reducing emissions, a carbon tax regime that is added to the refining and petrochemical industry in Singapore would impact Singapore’s competitiveness as an export manufacturing centre.

Still, it said it is committed to working with the Government in subsequent consultations, and in finding a balance between providing affordable energy, addressing the risks posed by greenhouse gases while ensuring Singapore’s long-term competitiveness.

Chief sustainability officer of City Developments Limited (CDL), Esther An, said the introduction of the new carbon pricing system is "timely as the world steps up towards a low-carbon economy".

The property developer said it included a carbon pricing system into its strategic sustainability plan from as early as 2015. “CDL recognises the importance of future-proofing our business and continues to proactively manage climate-related risks, which comprise both physical risks to buildings and potential financial risks such as carbon pricing and taxation."

- CNA/mo


Carbon tax could hit companies hard
SIAU MING EN Today Online 21 Feb 17;

SINGAPORE — A carbon tax will put a dent in companies’ bottom lines, but experts say such a measure to reduce the carbon footprint is preferable to other forms of carbon pricing, as there would be minimal price fluctuations for businesses and a smaller chance of these costs being passed on to consumers.

Nonetheless, the possibility that costs will be passed on to households and businesses remains, while one of the largest power-generating companies here was quick to point out that companies would not be able to absorb the cost of the carbon tax.

Hours after the decision to put a price tag on greenhouse gas emissions was announced by Finance Minister Heng Swee Keat in his Budget speech, Tuas Power told TODAY that it has been running its power plants using the most energy-efficient technology currently available.

“Most of the generating companies have invested in the highly efficient Combined Cycle Plants to replace the less efficient oil-fired steam plants, and have thus reduced carbon footprint by half,” said its president and chief executive officer Lim Kong Puay.

The companies are already suffering losses due to overcapacity in the market, and cannot absorb the “significant increase” in cost from the tax, which he estimates to be about S$60 million to S$80 million annually.

Carbon pricing can come in the form of a carbon tax — where the government sets the price for each unit of greenhouse gas emissions — or a cap-and-trade model. For the latter, the government sets a cap on the total greenhouse gas emissions allowed by issuing an equivalent number of permits. The prices of these permits are determined by the market.

Director of environmental sustainability consultancy Green Future Solutions Eugene Tay said that a carbon tax is a “more straightforward” method that ensures price certainty, which will favour the businesses. “Businesses will know that there is this price, so they can adjust their business policies accordingly,” he said.

In turn, tax revenue can be used to subsidise the affected firms, which reduces the chances of this cost being passed on to other companies and consumers, said Mr Tay. But he also noted that this form of pricing carbon does not ensure that the reduction in greenhouse gas emissions targets will be met if companies think that the carbon tax is cheap, and choose to pay instead of reducing emissions.

Professor Euston Quah, Nanyang Technological University’s economics department head, said that a carbon tax can lead to more energy efficient solutions within Singapore’s context.

He added that Singapore’s overall competitiveness should not be affected given the “small carbon tax” and also since other jurisdictions are also applying a form of carbon pricing for theirs.

Chairman of the Singapore Environment Council Isabella Loh said a clear carbon tax regime will lead to a surge in investments in renewable technologies in Singapore. “A carbon tax could act effectively as a catalyst for innovations in the development of clean energy sources, as well as in other industry sectors like transport and building. We urge the Government to consider channelling the revenue raised by the carbon tax into promoting this innovation,” she added.

Affected firms acknowledged the need to promote greater energy efficiency. Mr Lee Soon Kiat, executive committee member of the Singapore Semiconductor Industry Association, said semiconductor firms will have to invest in new technologies to reduce emissions, which increases their immediate operating costs. Power stations may also pass the cost on to these firms in the form of higher electricity bills, he added.

Shell said the company has “long supported a strong and stable government-led carbon price because it is essential to tackle climate change”, while ExxonMobil added that the carbon tax is a “sensible approach to emissions reduction”.

Commentary: Budget 2017 and the carbon tax lays the groundwork for climate leadership
The move to introduce a carbon tax highlights the leadership role that Singapore can play in addressing climate change.
By Jaime Ho, Chief Editor Channel NewsAsia 21 Feb 17;

SINGAPORE: It was a bold move.

Apart from announcements aimed at further nudging the Singapore economy along the route of transformation, one that stood out was Finance Minister Heng Swee Keat’s signal that from 2019, Singapore will join the ranks of many other jurisdictions around the world with a carbon tax.

The main target of the tax: Some 30 to 40 large, upstream “direct emitters” which will include power stations, but naturally also other mega-emitters in the manufacturing sector, especially refining and petrochemicals.

At a time of lingering global and domestic economic uncertainty, it was a move that stood in contrast with the slew of initiatives that came with greater Government spending. In its boldness, it can set the stage for Singapore to now more confidently take a leading role at the forefront of the international fight against climate change.

SETTING THE CONTEXT

Just why was it so significant?

Singapore is what we have called ourselves “alternative energy disadvantaged”. Put simply, we import just about all of our energy needs and have little option in non-fossil fuel alternatives. To reduce greenhouse gas (GHG) emissions, this resource-limited city state has simply had to use what it needs as efficiently as it can; in other words, it has to be energy efficient.

This is precisely why in its international commitment enshrined in the Paris Agreement, Singapore’s efforts were primarily spelt out as a function of efficiency in reducing our emissions intensity, or GHG emissions per dollar GDP. By 2030, Singapore has committed to reducing emissions intensity by 36 per cent from 2005 levels.

Simply improving on energy efficiency, however, was never going to be enough. Prime Minister Lee Hsien Loong said as much in 2010: “… You must price the carbon. That is a fact you cannot run away from. And the energy prices when you tax the carbon will take into account not just the price of extracting and producing the fuel or the electricity, but also the social cost of the carbon emissions.”

It has taken seven years, but as the next step in ensuring that we use energy and reduce GHG emissions even more effectively, the carbon tax has at last landed.

For a country that depends as much as we do on energy-intensive industries, this is no small matter. Context is important.

First, Singapore has already done much in power generation, initially switching from fuel oil to natural gas, to the situation now where some 80 per cent of our electricity is generated from the far cleaner fossil fuel.

Second, another large emitting sector is in chemicals and refining, and let’s not forget that it contributes to about 25 per cent of Singapore’s manufacturing output by value. The economy depends on it.

Third, since being enacted in 2012, indications are that the Government is already looking into amending the Energy Conservation Act to further drive efficiency in industrial energy use among the biggest emitters.

The signs are clear. Singapore is ready and able to do more.

WHY EVEN MORE CAN BE DONE

The carbon tax will therefore have an important signalling effect to global and domestic audiences, of our seriousness in tackling climate change. But there are many other reasons why Singapore can be even more confident as we look ahead, in taking a stronger climate leadership position.

First, many of the big oil companies are already generally supportive of a carbon price. And many of them are here in Singapore. Many of the other major emitters are also going to be at the forefront of technology. For those which are not, moves such as the strengthening of the Energy Conservation Act will be crucial.

The key will now be in working even more closely with all major emitters, to ensure that both sides work on new research, new technology and new systems that discourage old high-emitting habits, and ultimately seed and embed ground-breaking green technologies in Singapore.

Second, the Smart Nation initiative provides a ready-made opportunity for Singapore to take a quantum leap ahead in green technology. A Smart Nation is a green nation, and many of the yet-to-be-found digital advances in urban management will lie in areas of energy efficiency and even emissions reduction.

Third, Singapore has already been driven to act not only in mitigating the effects of climate change, but in adapting to it. We are at the forefront of technology. Changi Airport’s new Terminal 5 will already be built about 5.5 metres above average sea level and more is being done to protect our shorelines. It's no joke, but talk of floating roads, bridges and cities is already part of the international discussion in adaptation. There is no other country that has the capacity and the need to act in equal measure. Singapore can take a leading position here.

Fourth, cities and urban policy are where the action will be at when it comes to climate action. Cities are where emissions may originate, from consumption to transport and buildings. But they are also where technology, Government and innovation lie. Yes, Singapore has the disadvantage of being a city-state without the hinterland of other larger countries on which to site more carbon-intensive activities. But Singapore is also a country with the dexterity of a city, and a city with the resources and long-term imperatives of a country.

As it stands, the international environment is crying out for climate leadership. Long-held as the front-runners in environmental policy, Europe is likely to be preoccupied and distracted. The United States as well, is in the throes of a worrying climate-sceptic funk. Ironically, what’s left is for China to take up the mantle. There is no reason why Singapore cannot also do so in specific areas like energy efficiency and green buildings.

WHAT NEXT?

Besides the move on a carbon tax, Budget 2017 was also one that saw bold moves from the Government in announcing a 30 per cent hike in water prices, and a new volume-based duty of $0.10 per litre on more pollutive diesel. Seen in totality, there is no doubt that the Budget was one meant to stake a strong position on sustainability.

There will be push-back. There will be fears that the costs of being green may be passed on to consumers. This will have to be continually monitored and addressed.

There will be fears that higher costs may erode Singapore’s economic competitiveness. Here, the key is in ensuring that our economy is one that takes full advantage of the many opportunities that have been outlined above.

Green growth may be a cliché, but it is one that is fully aligned with our future economy.

Jaime Ho is Chief Editor of Digital News at Channel NewsAsia.

- CNA/db


Singapore carbon tax would hit refiners, help renewables
Jessica Jaganathan and Henning Gloystein Reuters 21 Feb 17;

Singapore's proposed plan to tax greenhouse gas emissions would probably hit oil refiners hard, ramping up costs in an industry that has been central to the city-state's rapid development over the last half-century.

Monday's announcement that a carbon tax on direct emitters is to be introduced from 2019 shows that Singapore, Asia's main oil trading hub, could be moving towards a longer-term future dominated by cleaner technology and resources.

"It is the first time in the history of Singapore that a budget has placed such a high emphasis on green initiatives linked to tax revenues," said Isabella Loh, chairman of the Singapore Environment Council, an independent non-profit body.

"The announcement clearly underpins the priority of a future-ready and greener economy."

Countries around the world have been under increasing pressure to crack down on carbon emissions, with Singapore part of the historic Paris climate accord that went into force late last year.

In parts of Europe and countries such as Australia, the introduction of carbon taxes or carbon trading schemes has often driven a decline in established refining industries and a parallel surge in investment in clean energy technology.

"The proposed carbon tax on emitters would prove a significant drag on industry profit-margins," said Peter Lee, oil and gas analyst at BMI Research in Singapore.

The government said the carbon tax would probably cover 30 to 40 "large direct emitters" including power stations, petrochemical facilities and semiconductor makers.

But it is Singapore's three refineries, run by ExxonMobil, Royal Dutch Shell and Singapore Refining Company, that would probably need to brace for the hardest blow.

The tax proposal comes as those refineries, with a combined fuel generation capacity of around 1.38 million barrels per day (bpd), grapple with rising competition from China, India and the Middle East.

Shell said in a statement it supported a strong and stable government-led carbon price, but that any policy "must ensure companies can compete effectively with others in the region who are not subject to the same levels of carbon dioxide costs".

Exxon said "effective policies are those that promote global participation (and) let market prices drive the selection of solutions".

Singapore Refining Company could not be reached for comment.

Looking at a carbon tax rate of S$10 to $20 ($7 to $14) per tonne, the government estimated that would add around $3.50 to $7 to the cost of processing a barrel of crude into fuels like diesel or gasoline.

Benchmark crude prices stood around $56 per barrel on Tuesday, translating to a daily surplus cost of $4.8 million to $9.7 million for the three Singapore refineries.

On the flip side, the tax would help fire growth in Singapore's nascent renewable energy industries.

"Existing green projects, such as solar, will enjoy the much needed premium (as they are not taxed)," said Andrew Koscharsky, energy director at RCMA Group, which trades wholesale power and retail electricity in Singapore.

It would be important to adopt the law swiftly to encourage immediate investment in renewables, he added.

Singapore's government will next month invite feedback on its proposals from industry and the public.

(Reporting by Jessica Jaganathan and Henning Gloystein; Editing by Joseph Radford and Clarence Fernandez)


Idea of carbon tax to change mindsets, hit large energy users hard: Experts
Monica Kotwani Channel NewsAsia 22 Feb 17;

SINGAPORE: While power stations may be the hardest hit by the introduction of a carbon tax in Singapore, the idea is not for them to absorb the cost, but pass it down to large energy guzzlers. Energy experts Channel NewsAsia spoke with said this days after Finance Minister Heng Swee Keat announced that a carbon tax would be implemented from 2019, affecting between 30 and 40 large direct emitters of greenhouse gases (GHGs).

The National Climate Change Secretariat (NCCS) said those emitting gases equivalent of 25,000 tonnes of carbon dioxide a year would be affected. This translates to emissions produced by the electricity consumption of 12,500 four-room households each year.

BIG COSTS FOR POWER GENERATORS

According to data from NCCS, Singapore’s GHG emissions in 2012 was equivalent of 49 million tonnes (MT) of carbon dioxide.

Power generators made up 43 per cent of all emissions, and they could be the ones seeing a dent in their bottom lines. While the Government has yet to work out the details, it said it’s looking at charging between S$10 and S$20 per tonne of greenhouse gas emissions.

Based on market share in electricity production alone, Senoko Energy could end up paying between S$47 million and S$94 million annually, while Tuas Power could cough up anywhere between S$45 million and S$90 million.

PASS DOWN COSTS TO LARGE ENERGY USERS

Adjunct Research Associate Professor Ho Juay Choy from the National University of Singapore’s Energy Studies Institute (ESI) said power generation companies are already operating pretty efficiently. The idea is for power generators to pass on the cost of the carbon tax.

“Close to 95 per cent of electricity is generated from natural gas, which is the cleanest form of fuel. But there are other industries which are very energy intensive and their energy bills would increase with the tax. So if you are an energy intensive industry that uses a lot of energy, the imposition of an extra cost through the carbon tax would hopefully be an encouragement to improve energy efficiency and reduce emissions,“ he said.

Prof Ho said there are still many areas of improvements for such large users of energy, such as through improving their compressed air systems, boilers and other process heat systems. At the same time, he said the government has said it would use the revenue from the carbon tax to provide companies with greater support on energy efficiency improvements.

Head of Nanyang Technological University’s Economics Department, Prof Euston Quah agreed, saying the carbon tax would stimulate action among businesses. “(Firms and businesses) will compare paying the tax against the cost of cutting down emissions using their own technologies. If the cost of cutting emissions by their own technologies is cheaper than paying for the tax, they will then do so,” he said.

CARBON TAX: PROVIDING A PRICE SIGNAL BUT NOT AT EXPENSE OF EFFICIENCIES

Singapore’s carbon tax of between S$10 and S$20 per tonne of CO2 equivalent (tCO2e) is in the range of what other jurisdictions have implemented. Research Associate at ESI, Gautam Jindal cited a report that highlighted that three quarters of emissions with a carbon price, are below the suggested tax level of S$10 per tonne of CO2. But countries like Sweden have imposed taxes of more than S$100 tCO2e, although its power companies do not pay this tax and industries pay half of what is imposed.

Still, Prof Quah said a carbon tax should typically be priced high enough to significantly decrease greenhouse gas emissions. But in the case of Singapore, the price needs to balance effectiveness and competitiveness. “(Our carbon tax) is at the lower end not the higher end (of the scale) compared to countries like Sweden,” he said.

“But that could be a reflection of their society and their mission of moving very fast to a low carbon economy. In our case since we are relying a lot on natural gas, we don’t want to unusually burden the businesses and hurt our competitive position of the economy.”

Prof Quah said many countries are already moving towards carbon pricing, and for Singapore to get into the game early would allow it to fine tune the system, while being able to promote research and development activities and innovation on energy efficient technologies.

MINIMAL IMPACT OF COST BUT CARBON TAX SYMBOLIC OF TAKING ACTION

The Government has said the impact of a carbon tax on households would be modest, something which experts like Prof Quah, Prof Ho and Mr Jindal agree on. The idea of the carbon tax is to change mindsets; that everyone’s action contributes towards the emission of harmful greenhouse gases, and for them to make informed decisions about how they consume energy. Prof Quah added the carbon tax as it stands is “good as a starting point”, but eventually, it would have to reflect realities, with prices becoming higher over time.

- CNA/mo


Carbon tax may be passed on to consumers, but impact modest: Experts
SIAU MING EN Today Online 22 Feb 17;

SINGAPORE — Hit with a new carbon tax for every tonne of greenhouse gas they produce, power stations and other large emitter of such gases will likely pass on at least some of their costs to consumers, but the impact appears to be modest for now, said experts.

But the implementation of such a tax could throw up hiccups down the road, as the experiences of some other countries have shown — such as the tax having a regressive impact and hitting low-income end users harder, or the tax being politically unpopular.

Finance Minister Heng Swee Keat announced during the Budget speech on Monday that the Government is looking at imposing a carbon tax rate of S$10 to S$20 per tonne of greenhouse gas emissions, which contribute to global warming.

For households, the tax rate would be equivalent to an increase in electricity prices of 0.43 to 0.86 cents per kilowatt-hour. This is a 2.1 to 4.3 per cent increase from current electricity tariffs. For businesses, the increase in operating cost from the proposed tax rate represents a 6.4 to 12.7 per cent increase from current oil prices.

Speaking to TODAY, SIM University economist Walter Theseira noted that as with any tax, the costs tend to be shared with both sides of the market, in this case, between the emitters and the end-users. “The costs of energy generation will go up with the tax and power generators have the ability to pass through those costs to consumers – just like power generators pass through the costs when fuel prices go up,” he said.

He added: “For your consumer, I do not expect that these few percentage points increase in the electricity portion of the bill will cause most consumers to even turn down the air-conditioning (for instance), they are probably not going to notice it.”

Ms Melissa Low, a research fellow at the Energy Studies Institute at National University of Singapore (NUS), said the objective of the carbon tax is to have people undertake informed decisions about how they consume energy.

As such, it is important that the carbon tax is reflected in the electricity tariffs, even though she noted that the impact will be minimal here.

But Assistant Professor Yang Nan from NUS Business School warned against the carbon tax becoming regressive, and affect lower-income consumers to a larger extent and widening the inequality gap, he added.

In Ireland for instance, a 2008 study found that carbon tax was regressive and affected the poorer households.

But a modest increase in welfare payments would offset these negative impacts of a carbon tax in the lower half of the income distribution, noted the study.

Based on the experiences of other countries, Dr Theseira said the carbon tax here has to cover the right activities to reduce the carbon footprint, and minimise “harmful avoidance behaviour”, such as importing carbon-intensive products from countries that do not impose similar taxes.

The carbon tax will also have to be politically sustainable. Australia for instance, repealed their carbon tax in 2014 two years after it was implemented. This was amid claims that such a form of tax penalised legitimate businesses, cost jobs and drove up energy prices.

“If the public does not support the broader objective of environmental sustainability, it will be difficult to continue with the tax,” added Dr Theseira.

In response to queries, the National Climate Change Secretariat (NCCS) noted that Singapore remains open to linking the carbon tax framework to external carbon markets where feasible.

Among other things, Singapore is discussing the development of international carbon market rules at the United Nations Framework Convention on Climate Change.

“The use of international carbon credits is one of the issues being studied. Discussions are only at a preliminary stage, and it is too early to speculate on how international carbon markets will evolve. We will be monitoring international developments for now,” added the NCCS spokesperson.