Carbon tax changes will come with measures to ease costs for households: Gan

WHEN adjusting the carbon tax to spur firms' green efforts, the government will consider how to ease the impact on households, said Minister for Trade and Industry Gan Kim Yong in Parliament on Wednesday (Jan 12).

Set at S$5 per tonne of greenhouse gas emissions through 2023, Singapore's carbon tax rate has been under review, with the outcome to be announced in Budget 2022.

Singapore must "right-price resources through the carbon tax", said Gan, adding: "The correct pricing will guide investment decisions and spur companies to decarbonise."

But because it means higher costs, Singapore "should calibrate and pace the adjustment carefully, to give companies sufficient time to adapt, put in place decarbonisation measures, and stay competitive", he said.

As a higher carbon tax will have an indirect impact on households, the government will consider how to ease this cost increase, especially for lower-income households, said Gan.

He noted that when the carbon tax was introduced in 2019, the government provided additional U-Save rebates for 3 years, to cover the expected average increase in electricity and gas bills. It has since also introduced the Climate Friendly Households Programme, to provide eligible households with vouchers to offset the cost of energy-efficient appliances.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Speaking on a motion tabled by 6 Members of Parliament on Singapore's move towards a low-carbon society, Gan noted that the transition to a greener future entails trade-offs.

Greener methods of production - including greener equipment, materials, and waste disposal methods - may mean higher costs for firms, which may be passed on to consumers.

But Singapore should not focus only on higher costs in the short to medium-term and lose sight of larger, longer-term opportunities, he added.

"We must continue to act decisively to prepare ourselves for these opportunities, while pacing our transition in a calibrated manner, and managing the trade-offs and cost impact carefully," Gan said.

The minister laid out Singapore's plans under the "green economy" pillar of its Green Plan 2030. First is capturing green growth opportunities such as green financing, with Singapore well-placed to do so as a trusted financial hub.

The Republic is already a market leader in South-east Asia for sustainable debt, and the Monetary Authority of Singapore (MAS) has a Green Finance Action Plan to develop the sector, said Gan.

In response to MP for Chua Chu Kang Don Wee's suggestion that the government issue more green bonds, Gan said: "We are exploring opportunities to do so, under the Ministry of Finance's Green Bonds Programme Office."

Singapore is also aiming to become a carbon services and trading hub, and is working with partners to standardise cross-border carbon credit transaction rules, as well as to build the infrastructure and processes for this.

In 2021, 13 international firms anchored and expanded their carbon services offerings in Singapore, he noted.

In the longer term, the Republic is investing in low-carbon technologies such as hydrogen, sustainable aviation and maritime fuels, smart electricity grids, and sustainable foods, aiming to build new economic engines out of them.

Second, besides new growth areas, existing firms and industries must transform for sustainability. This is particularly true for the largest-emitting sectors such as petrochemicals, and the government is working with businesses in the sector to help them decarbonise, said Gan.

But lower-emitting businesses, too, will have to make sustainability part of their business and embrace it as a competitive advantage, he added.

Third, workers must be equipped with skills to benefit from green growth.

Workforce Singapore is working with partners on a broad-based Career Conversion Programme for Sustainability Professionals, while the MAS is setting up centres of excellence for training and research in green financing, and launching a Sustainable Finance Technical Skills and Competencies category in the existing Skills Framework for Financial Services.

To encourage the low-carbon transformation, the carbon tax will be complemented with financial support, said Gan. The existing Enterprise Sustainability Programme supports firms to go green, while green financing is made more accessible under the Green and Sustainability Loan Grant Scheme.

Singapore is also developing sustainability standards and accreditation; working on Green Economy Agreements with partners such as Australia, so firms can access green opportunities abroad; and partnering firms for research and development of new green technologies and solutions.