Carbon tax an opportunity to take a leap forward on sustainability and transparency

Amidst talk of possible tax hikes, one already-declared measure stands the chance of changing behaviour in Singapore and beyond. Jaime Ho, Channel NewsAsia’s Chief Editor, Digital News talks about what to expect of the carbon tax in 2018.
Channel NewsAsia 14 Dec 17;

SINGAPORE: In his Budget speech in February this year, Finance Minister Heng Swee Keat laid the groundwork for the implementation of a carbon tax in Singapore by 2019.

In preparation for it to come into force by then, much of the groundwork in the form of consultations has already been done.

The draft Carbon Pricing Bill, to be read in 2018, has been open for viewing since the end of October, with calls for input ending earlier this week. Further details such as the landing price point of the tax – currently expected to be between S$10-S$20 per tonne of greenhouse gas (GHG) emissions – should emerge in Minister Heng’s next Budget speech, if not by the time the Bill is read.

Coupled with the declaration that next year will be Singapore’s Year of Climate Action, 2018 already looks set to be an important year for the environment.

WHERE WILL THE IMPACT BE FELT?

Aimed at some 30 to 40 large emitters of greenhouse gases (GHGs), the impact of the carbon tax is not primarily meant to be felt by electricity users.

According to the National Climate Change Secretariat (NCCS), households will likely see an increase of S$1.70 to S$3.30 per month for electricity in a typical 4-room flat, on top of an average monthly bill of S$72.

Similarly, for businesses, increases in costs will likely be in the range of the equivalent of a US$3.50-US$7/bbl increase in crude oil prices. This is estimated to represent a 6.4 per cent to 12.7 per cent increase from current oil prices. Both these increases fall well within usual market fluctuations.

THE POWER OF SIGNALS

While impacts such as these will be minimal, the carbon tax still holds significant potential as a powerful signal on several important levels.

First, at the level of consumers – both large and small – the carbon tax will for the first time embed into the cost of electricity a price signal tied to the negative externalities (in this case GHG emissions) arising from the production of the resource.

While the costs arising directly from the carbon tax will not be significant for most users, the key is for larger users of electricity to take further stock of how efficiently they use energy.

Second, at the level of the government, the carbon tax is a signal of its commitment towards fully meeting its goals as inscribed under the United Nations Framework Convention on Climate Change (UNFCCC): To reduce emissions intensity by 36 per cent from 2005 levels by 2030, and more importantly, to stabilise and peak GHG emissions by around 2030.

Aside from these goals to mitigate emissions, what is also key is Singapore’s commitment to channeling revenue from the carbon tax towards further driving innovation in areas such as energy efficiency and green growth.

In this regard, apart from the government signaling to major emitters the need for them to invest in innovation and energy efficiency, the carbon tax must be seen as a key opportunity for Singapore to take a quantum leap ahead in its position as a global leader in offering solutions that can be developed here and exported worldwide.

Last month, together with the National University of Singapore (NUS) and Nanyang Technological University (NTU), oil giant ExxonMobil announced the setting up of a new Singapore Energy Centre in 2019 to explore technology in energy production and energy efficiency, with the goal of eventually breaking new ground in the area of sustainability. The Singapore-based centre will be ExxonMobil’s first such institution outside the United States.

With the policy and financial backing that will come from the government, there is every reason to be optimistic that academia, industry and government will continue to grow Singapore as a key global leader in clean energy, and develop the business opportunities that will follow.

Third, at the level of individual facilities, the carbon tax and its eventual implementation through the final Carbon Pricing Act 2018 and other measures present a unique opportunity to signal a new approach towards transparency and awareness, particularly when it comes to major emitters in Singapore.

Under the draft bill, two major categories of facilities will be covered.

The first are reportable facilities, which emit more than 2,000 tonnes, but less than 25,000 tonnes of GHG emissions annually. These facilities, already mandated to have reporting requirements under the Energy Conservation Act (ECA), will not be liable for the carbon tax, but will continue to submit emissions reports.

The second, taxable facilities, will be those which emit more than 25,000 tonnes every year. In line with eventually paying the carbon tax, each will have to develop a monitoring plan plus submit verifiable emissions reports as well.

It is unclear if information on these facilities and their emissions will eventually be made available to the public.

There are important examples around the world from which to take reference. In the United States for example, the Environment Protection Agency (EPA) provides granular information at the level of individual facilities: from power plants, refineries, chemicals, pulp and paper plants, to other significant emitters.

As a case in point, one of Exxon’s facilities in Billings, Montana is on record to have emitted 687,177 metric tonnes of carbon dioxide equivalents in 2016 – a figure that is among its lower figures since 2010. Emissions in 2013 were at 770,141 metric tonnes.

This provides not just a snap-shot of individual facilities’ emissions, but also allows public scrutiny of their progress at managing and reducing emissions over time.

While the emissions reports of each facility will have to be submitted and independently verified under draft legislation, it is likely that the public release of such information will be equally helpful in ensuring compliance as well as contributing to greater public awareness over the role that each major emitter plays in the larger economy.

The ultimate goal of the carbon tax is not to raise revenue, but to reduce emissions through changing behaviour at the level of facilities and industries. As such, to pre-empt any situation where emitters may choose the status quo, and either absorb or pass down costs in different degrees to consumers, a strong element of transparency will be crucial. Indeed, public awareness of potential laggards could serve far better than, or at least complement, the deterrent effect of the tax itself.

If the country as a whole aims to peak emissions by around 2030, then there is even more reason for there to be public clarity as to whether each of these major emitters is on a similar trajectory in the mid to long term.

Fourth, the openness with which Singapore operationalises the carbon tax will have important signaling effects beyond its borders as well. Singapore will already be the first country in Southeast Asia to implement such a tax.

Even if it is unlikely that regional neighbours will follow suit anytime soon, it will be key to signal the importance that Singapore places on transparency when it comes to all issues related to the environment, GHG emissions or even air quality reporting in neighbouring countries.

2018 will be a crucial year as Singapore puts in place a carbon pricing regime which must, and will, direct resources and attention towards ensuring environmental sustainability as well as to new growth areas in the clean and green energy sectors.

In addition, implementation of the carbon tax should also be seen as an opportunity for even greater transparency, and building deeper public awareness over where exactly emissions originate, and what climate change mitigation measures are being taken at the most granular level.

At its core, the carbon tax can be that rare fiscal tool – in not just providing for government revenue, but through its implementation, potentially driving even more important and long-term economic and behavourial changes.

Source: CNA/hm