Global carbon price needed to accelerate decarbonisation: Chee Hong Tat
Singapore’s carbon tax currently stands at S$25 per tonne of CO2 equivalent
THERE needs to be a global carbon price to accelerate the pace of decarbonisation so that the world can reach its target of net-zero carbon emissions by 2050, said Transport Minister Chee Hong Tat on Thursday (Oct 3).
If every government is able to introduce and agree upon a global carbon price, the right incentives would be created for investors or companies to factor in the monetary value of carbon emissions in their investment decisions.
“Today, without that global carbon price, some of the projects may seem – from a cost-benefit point of view – not worth it. But that’s because you didn’t account for the carbon price, which is an externality from an economics point of view,” said Chee, who was speaking at a conference organised by the United Nations Global Compact Network Singapore – the Singapore chapter of the UN Global Compact.
“But if you account for it, actually the projects may be worthwhile investing in,” he added.
Setting a global carbon price would also level the playing field between countries.
“If some countries do it and some countries don’t, the countries that impose a high carbon price will lose competitiveness. And then you’ll have this let’s wait and see free-rider type of mentality, which we should not encourage, because this is a global effort. This requires a global commitment,” added Chee, who is also second minister for finance.
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The rationale behind setting a price on carbon is to reflect the environmental cost of carbon emissions.
Currently, establishing an emissions trading system and setting a carbon tax are the two main avenues for policymakers to set a carbon price.
Singapore’s carbon tax was raised from S$5 per tonne of carbon dioxide equivalent to S$25 earlier this year. It is set to go up to S$45 per tonne between 2026 and 2027. The official guidance is for the tax to land between S$50 and S$80 per tonne by 2030.
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“I’m not saying it’s an easy solution. It is something quite difficult to achieve. But if you think about it logically, (it) will be a very useful enabler for the world to move forward faster in achieving the sustainable goals,” said Chee.
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