Aqil Haziq Mahmud Channel NewsAsia 19 Feb 18;
SINGAPORE: In a downward revision from the previously announced range of between S$10 to S$20, large emitters in Singapore will be charged S$5 per tonne of greenhouse gas emissions under the carbon tax that will be implemented next year.
This will give the industry more time to adjust and implement energy efficiency projects. Following that, the tax rate will be reviewed by 2023, with the intention of increasing it to between S$10 and S$15 per tonne by 2030.
The review will consider global climate change developments, the progress of Singapore’s emissions mitigation efforts and its economic competitiveness, Finance Minister Heng Swee Keat said in his Budget speech on Monday (Feb 19).
The carbon tax will affect emitters that produce 25,000 tonnes or more of greenhouse gas emissions in a year, he confirmed, adding that the Government expects to collect carbon tax revenue of nearly S$1 billion in the first five years.
The first carbon tax is expected to be paid in 2020 based on emissions in 2019.
“The carbon tax will encourage businesses to take measures to reduce carbon emissions,” Mr Heng said, noting that large emitters account for about 80 per cent of Singapore’s emissions.
“Companies that do so will be more competitive, as more countries impose tighter limits on their carbon emissions and international agreements on climate change like the Paris Agreement take effect.”
The Government is also prepared to spend more than S$1 billion in the first five years to support projects that reduce emissions. As part of this, it will set aside funds from next year to support companies in improving energy efficiency.
This will be done through schemes like the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund, Mr Heng said. In addition, more support will go to projects that achieve greater emissions reductions.
“I urge companies to do their part for a higher quality living environment for all by putting in meritorious proposals for emissions abatement and energy efficiency,” he added.
TO BENCHMARK OR NOT
The downward revision comes after large emitters voiced concerns about how the carbon tax might be implemented amid fears it could affect international competitiveness.
As opposed to a flat rate, many wanted the carbon tax to be implemented based on emissions performance benchmarks for fairness. This system allows those that perform at or better than the benchmark to get free allowances.
However, the Government has decided to implement a credits-based carbon tax uniformly across sectors with no exemptions.
“This is the economically efficient way to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction,” Mr Heng said.
Channel NewsAsia understands that the decision was reached on the basis that each unit of emissions contributes equally to climate change, regardless of whether the emissions came from emitters that perform better or worse than the benchmark.
In addition, determining benchmarks for each sector and ensuring that they are equitable across sectors is a complicated and contentious process.
The development and implementation of benchmarks is also data-intensive and would impose additional reporting and verification requirements on companies, especially for sectors with specialised products.
IMPACT ON HOUSEHOLDS "SMALL"
When it comes to households, the impact of the carbon tax will be “small”, Mr Heng stated, making up about 1 per cent of total electricity and gas expenses on average.
The carbon tax is expected to translate to a rise in electricity prices of about 0.21 cents per kWh, assuming the full tax is passed on to end-users.
To help households adjust, the Government will provide additional Utilities-Save (U-Save) rebates from 2019 to 2021. During this period, each eligible Housing and Development Board (HDB) household will receive S$20 more per year.
“The increase in U-Save will cover the expected average increase in electricity and gas expenses for HDB households arising from the carbon tax,” Mr Heng said.
To that end, a 4-room flat household will get a U-save rebate of S$320 a year after the increase. The same household is expected to pay an additional S$9.70 a year on average in electricity and gas expenses due to the carbon tax.
“MEWR (Ministry of the Environment and Water Resources) will also work with the community to help households save energy, and will announce more details at a later date,” Mr Heng added.
Source: CNA/hz
Large emitters, observers welcome initial carbon tax rate of S$5 per tonne of greenhouse gas emissions
Aqil Haziq Mahmud and Monica Kotwani Channel NewAsia 20 Feb 18;
SINGAPORE: Large emitters and environmental observers have welcomed the progressive implementation of the carbon tax, saying that it encourages companies to adopt energy efficiency measures while giving them the time to adapt to the changes.
Finance Minister Heng Swee Keat announced in his budget speech that large emitters in Singapore will be charged S$5 per tonne of greenhouse gas emissions under the carbon tax that will be implemented next year.
The tax rate will be reviewed by 2023, with the intention of increasing it to between S$10 and S$15 per tonne by 2030. The review will consider global climate change developments, the progress of Singapore’s emissions mitigation efforts and its economic competitiveness, Mr Heng said.
Mr Yu Tat Ming, chief executive of PacificLight, a power generation company, welcomed the Government’s proposal to review the carbon tax over time.
“The initial imposition of S$5 per tonne encourages industry to implement efficiency improvements and consumers to adapt their consumption pattern,” he said. “Future changes in the carbon tax can be made by the government depending on how close Singapore is to achieving its emission targets.”
The carbon tax is just one in a range of measures aimed at reducing emissions intensity in Singapore by 36 per cent from 2005 levels by 2030 under the Paris Agreement.
Likewise Mr Steven Fries, chief economist at Royal Dutch Shell, said the carbon tax represents an “important step” in meeting Singapore’s emission targets.
“However, it is important to design this tax so that it will be an effective incentive to cut emissions and also support industry competitiveness, both of which are Government goals,” he added.
To that end, Mr Yu said he still supports the setting of industry benchmarks based on “best in class” targets to encourage efficiency improvements without compromising future economic growth.
“International experience has shown a good way to deliver on both objectives is for Governments to set an appropriate carbon ‘price’ on emissions which exceed an acceptable industry performance,” Mr Fries added.
“This allows the government to set a carbon price high enough to incentivise companies to be more efficient, while safeguarding competitiveness by keeping the average carbon tax low.”
Still, Ernst & Young tax analyst Chia Seng Chye believes the carbon tax is a “good start”.
“It's also about creating the right kind of behaviour, incentivising emitters who proactively manage their carbon emissions, rather than treating it purely as a source of additional tax revenue for the Government,” he explained.
The progressive nature of the carbon tax also lets emitters warm up to it, he added. “So after 2030, when the rate is actually increased, they would not find it so prohibitive in terms of the cost.”
Energy Studies Institute research fellow Melissa Low said the time frame of five years before the tax is reviewed is an “adjustment period” for companies to become more efficient.
“The current fleet of power generators, such as turbines they have for example, is about 15 years of age, and the technology purchased by them is ‘locked-in’ for decades,” she explained.
In addition, 2023 is also when countries - as part of the Paris Agreement - will do a global stocktake on what has been achieved so far, she pointed out.
Therefore, that will be a good time for the Government to review whether current carbon tax has worked in reducing emissions, as well as to review its suite of measures, she said.
More importantly, Ms Low pointed out that unlike the European Union’s Emissions Trading Scheme which provides “free allowances” to certain emitters, Singapore’s carbon tax system does not exempt anyone.
So while the carbon tax rate might be lower than the previously announced range of between S$10 and S$20, it still sends a price signal to companies, affecting their bottom lines, she added.
Member of Parliament (MP) for Nee Soon GRC Lee Bee Wah said the carbon tax sends a “very clear” signal that reducing carbon emissions is an issue that needs to be dealt with.
Dr Lee, who also sits on the Government Parliamentary Committee (GPC) for Environment and Water Resources, said the progressive nature of the tax gives companies the time and space to adapt.
“As Minister Heng mentioned just now, he's prepared to spend more than what he collects for companies to come up with innovative solutions, so it gives a balance,” she added.
HOUSEHOLDS SHOULD PLAY PART
Beyond what emitters can do, Mr Yu stated that achieving emissions targets would require a “concerted effort” from all parties.
“On the demand side, the carbon tax must achieve the intended objective of encouraging consumers to adopt efficient practices and appliances,” he said.
To that end, he noted that the carbon tax would likely impact customers, adding that it would cost his company an additional S$8.25 million a year.
“As an electricity retailer, we shall do our part to cushion the impact on consumers,” he said. “For example, we encourage our customers to consume energy during off-peak hours, when electricity prices are likely to be lower and we can operate our plant more efficiently.”
The carbon tax will make up about 1 per cent of total electricity and gas expenses on average, translating to a rise in electricity prices of about 0.21 cents per kWh, assuming the full tax is passed on to end-users.
To help households adjust, the Government will provide additional Utilities-Save (U-Save) rebates from 2019 to 2021. During this period, each eligible Housing and Development Board household will receive S$20 more per year.
MP for Holland-Bukit Timah GRC Liang Eng Hwa, who also sits on the Environment and Water Resources GPC, said the rebates would be “more than enough” in offsetting the increase in electricity bills.
“I think these are schemes that have to be put in place to help mitigate the impact of all these tax increases,” he said.
Source: CNA/hz
Carbon tax of $5 per tonne of greenhouse gas emissions to be levied
Audrey Tan and Toh Wen Li Straits Times 19 Feb 18;
SINGAPORE - All facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year will have to pay a carbon tax from 2020, Finance Minister Heng Swee Keat announced on Monday (Feb 19).
The carbon tax will initially be $5 per tonne of greenhouse gas emissions from 2019 to 2023.
However, the Government will review the carbon tax rate by 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030.
"In doing so, we will take into account international climate change developments, the progress of our emissions mitigation efforts and our economic competitiveness," Mr Heng said.
The finance minister said the Government expects to collect a carbon tax revenue of nearly $1 billion over the first five years, and is prepared to spend more than this in the same period "to support worthwhile projects which deliver the necessary abatement in emissions".
He added that the carbon tax will apply uniformly to all sectors, calling it " the economically efficient way to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction".
A carbon tax is a common tool used to control the amount of earth-warming greenhouse gases being released into the atmosphere. About 67 countries and jurisidictions, including China, the European Union and Japan, have implemented or announced plans to implement such a scheme. Its aim is to incentivise emitters to reduce their greenhouse gas emissions and improve energy efficiency.
Professor Euston Quah, head of the economics department at the Nanyang Technological University, said it was timely for Singapore to adopt a carbon tax.
He said: “It sends a signal to those whose activities cause damage to society, whether in the form of human health or environment, that they must be responsible for their actions.”
The carbon tax will be levied on 30 to 40 large emitters that contribute 80 per cent of Singapore’s greenhouse gas emissions.
They are mainly from the petroleum refining, chemicals and semiconductor sectors, with each emitter producing more than 25,000 tonnes of carbon dioxide equivalent of greenhouse gases a year. This is equivalent to the emissions produced by the annual electricity consumption of 12,500 four-room Housing Board flats.
As for the remaining 20 per cent, Mr Heng said the Government "will study how to account for these emissions, and take action where necessary".
The first payment will be in 2020, based on emissions in 2019. The tax will be levied on each facility's total emissions.
For households, the impact of the carbon tax will be small, at "about 1 per cent of total electricity and gas expenses on average", Mr Heng said.
An additional U-Save rebate will be provided for three years to help HDB households.
Eligible HDB households will each receive $20 more per year, from 2019 to 2021.
This will cover the expected average increase in electricity and gas expenses arising from the carbon tax, Mr Heng said.
Two companies that will be affected by the new tax expressed reservations about it.
A spokesman for ExxonMobil Singapore said the petrochemical firm was committed to working with the Government to reduce the risks of climate change but added that “affordable energy” was important to support economic growth and ensure Singapore’s competitiveness.
A spokesman for oil company Shell expressed concern with the flat tax rate.
He said: “We should be incentivised to perform better and deploy best-in-class technologies – a flat carbon tax will not provide the appropriate incentives to do so.”
In a dialogue with the Government last month, companies that would be affected had asked if the carbon tax could be implemented via a differentiated approach.
But Mr Heng, noting the need for a uniform carbon tax, said on Monday: “This is the economically efficient way-to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction.”
Meanwhile, petrol, diesel and compressed natural gas (CNG) already have excise duties which encourage the reduced use of such fuels, so they will not be affected by an additional carbon tax.
In 2012, Singapore's greenhouse gas emissions came up to a total of 49 million carbon dioxide-equivalent tonnes.
That year, the industry sector accounted for about 59 per cent of Singapore's total emissions, of which 41 per cent was from direct emissions and 18 per cent from electricity use.
As part of the Paris Agreement, Singapore has pledged to reduce its emissions intensity (emissions per dollar of GDP) by 36 per cent from 2005 levels by 2030, the same year it aims to have emissions reach a peak.
Mr Heng said that from 2019, he will set aside funds to give companies, including small and medium-sized enterprises and power generation companies, better support to improve their energy efficiency.
These include schemes such as the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund. Projects with greater reduction in emissions will receive more support.
Executive director for Singapore Green Building Council Yvonne Soh said such schemes could help companies overcome the cost barrier for energy efficiency initiatives.
“A number of such incentive funds or assistance schemes already exist, but more support is always welcomed as energy efficiency is usually not on the top of most companies’ minds," she said.
Time to get serious about saving energy
Audrey Tan Straits Times 20 Feb 18;
A tax will never be welcome, but it can be timely. The carbon tax that Singapore will levy on large polluters from next year is one such example.
The tax - details of which were announced yesterday by Finance Minister Heng Swee Keat - comes against a backdrop of rising temperatures and increasingly erratic weather.
Last year was Singapore's warmest year on record - excluding years influenced by El Nino, a weather phenomenon associated with hot and dry weather in this part of the world. The Republic is also experiencing more bouts of intense rainfall - such as the one on Jan 8 that led to flash floods in its eastern parts.
That these effects can already be felt here highlights the urgent need for action. And a carbon tax is one direct way to tackle climate change - by trying to get large polluters to reduce the emission of greenhouse gases.
Singapore's introduction of a carbon tax is also in line with carbon pricing strategies adopted by other countries to reduce greenhouse gases.
As Singapore marks its Year of Climate Action this year, its move to get ready for the roll-out of the carbon tax next year shows how serious it is in tackling the global threat of climate change.
About 67 countries and jurisdictions, including China, the European Union and Japan, have implemented or announced plans to implement carbon pricing schemes, which incentivise emitters to reduce their greenhouse gas emissions and improve energy efficiency.
In Singapore, the carbon tax will initially be set at $5 per tonne of greenhouse gas emissions until 2023, although the plan is to increase this to between $10 and $15 per tonne of emissions by 2030.
This will be levied on the 30 to 40 companies responsible for the lion's share of emissions here, but households will experience a knock-on effect - a 1 percentage point increase in total electricity and gas expenses on average, Mr Heng said.
As the implementation of the carbon tax next year follows the full liberalisation of the retail electricity market in the second half of this year, households will be able to choose which retailer they wish to buy electricity from.
Professor Euston Quah, head of the economics department at the Nanyang Technological University, said competition will put pressure on energy retailers to keep their prices competitive by not passing on the full cost of the carbon tax to consumers.
The impact of the carbon tax will also be cushioned by the additional utilities rebates that eligible HDB households will get from next year to 2021.
This gives consumers some time to form energy-saving habits, which could include turning off power at the socket when appliances are not in use, or using more energy-efficient appliances.
The introduction of the carbon tax is a timely move which reminds both companies and individuals that it is time to get serious about saving energy.
Singapore Budget 2018: Power generation company looks for ways to be greener
Audrey Tan Straits Times 20 Feb 18;
PacificLight is one of the newest kids on the power generation block.
Its $1.2 billion plant on Jurong Island began operating four years ago and is fitted with relatively new equipment, making it more energy efficient than older plants.
Since then, the firm has spent another $5 million to further reduce its carbon footprint, said its chief executive Yu Tat Ming.
This is done, for instance, by redesigning the fuel-supply system in its plant to bypass two energy-intensive compressors.
These efforts have led to a 1.5 per cent reduction in the plant's carbon emissions - equivalent to taking 15,000 cars off the road.
But despite this, PacificLight's annual operating cost is set to go up by $8.25 million in 2020, when the first carbon tax payment is due. The payment will be based on emissions next year.
The carbon tax will initially be set at $5 per tonne of greenhouse gas emissions until 2023, with plans to increase it to between $10 and $15 per tonne by 2030, Finance Minister Heng Swee Keat announced yesterday.
A carbon tax is commonly used around the world to control the amount of earth-warming greenhouse gases that is released into the atmosphere.
But Mr Yu said that it would be a challenge for his plant to become "greener", considering that it is relatively new and already fitted with energy-efficient fixtures. The life cycle of an industrial plant is about 25 years, and it is usually retrofitted only at the midway mark.
Mr Yu said a differentiated carbon tax system - in which companies that are more energy efficient pay less or even no tax while those that are less efficient pay more - would be fairer.
But he acknowledged that there is always room for improvement. "We will continue to look for ways to improve energy efficiency at our power plant, however modest they may be," he said.
One way is to install energy-saving devices, such as solar-powered lighting, throughout the facility.
PacificLight will also look into increasing the use of solar energy within its premises and those of its customers.
Mr Yu said the company will find ways to continue to supply its customers with energy "in as green a way as possible".
Audrey Tan
How greenhouse gas emitters are charged for pollution
Audrey Tan Straits Times 22 Feb 18;
From 2019, large emitters have to pay to pollute, when Singapore rolls out a carbon tax scheme.
Facilities that produce more than 25,000 tonnes of greenhouse gas emissions or more in a year - the equivalent of emissions produced by the annual electricity consumption of 12,500 Housing Board four-room households - will have to pay this tax.
The tax rate has been set at an initial $5 per tonne of emissions, but will go up to between $10 and $15 per tonne of emissions by 2030.
This was announced by Finance Minister Heng Swee Keat in his Budget speech on Monday.
A carbon tax is a type of carbon pricing strategy used to control the amount of earth-warming greenhouse gases being released into the atmosphere.
A total of 67 countries and jurisdictions, including China, the Eu-ropean Union and Japan, have im-plemented or announced plans to implement such carbon pricing strategies.
The Straits Times looks at how carbon is priced around the world.
WHAT ARE CARBON PRICING STRATEGIES?
Essentially, these strategies give facilities the licence to pollute - for a price.
This economic disincentive is what governments around the world hope will curb the amount of earth-warming greenhouse gases being released into the atmosphere.
Carbon pricing strategies give facilities the licence to pollute - for a price.
This economic disincentive is what governments around the world hope will curb the amount of earth-warming greenhouse gases being released into the atmosphere.
Such schemes have been adopted from as early as the 1990s, with Finland and Poland leading the pack as the earliest adopters of such strategies.
There are two main types of carbon pricing strategies: A carbon tax, and an emissions trading scheme.
CARBON TAX
A carbon tax puts a price on pollution. In Singapore, the 30 to 40 large emitters - mainly from the petroleum refining, chemical and semiconductor sectors - will pay up to $15 per tonne of emissions by 2030.
The price of carbon under such a system varies across countries and jurisdictions.
In Japan, which implemented a carbon tax scheme in 2012, the carbon tax is 289 yen (S$3.60) per tonne of emissions.
Finland, the first country to introduce a carbon tax, did so in 1990. In January 2016, the carbon tax rate for light and heavy fuel oil, coal and natural gas increased from €44 (S$72) per tonne of emissions to €54 per tonne of emissions, according to data from the World Bank.
EMISSIONS TRADING SCHEME
Unlike a carbon tax, which puts a price on pollution, an emissions trading scheme puts a cap on the total level of greenhouse gas emissions. This ensures that the required emission reductions will take place to keep total emissions within a pre-allocated carbon budget.
"Such a system caps the total level of greenhouse gas emissions and allows those industries with low emissions to sell their extra allowances to larger emitters," said the World Bank.
Market forces determine a price for greenhouse gas emissions under such a scheme.
Last December, China announced that it will roll out a nationwide emissions trading scheme.
Trading will be based in Shanghai, involving 1,700 power companies and more than 3 billion tonnes of carbon dioxide annually, according to a Reuters report. That volume would mean the Chinese scheme will eclipse the EU's.
Currently the world's largest, the EU's emissions trading scheme is expected to cover about 1.4 billion tonnes of emissions this year.
