Singapore's carbon tax needs 'stronger price signal' amid decarbonisation push: Grace Fu

SINGAPORE'S carbon tax needs a "stronger price signal" for it to steer the economy towards a low-carbon future, said Sustainability and the Environment Minister Grace Fu on Wednesday (Jan 12).

"This will tilt the scales further in favour of more innovative low-carbon technologies, driving companies to take bolder steps towards decarbonisation," Fu told Parliament in response to a private member's motion "Towards a Low-Carbon Society".

She added that such a price signal will also keep Singapore's carbon tax trajectory in line with the broader international momentum on climate action and support the review of the Republic's climate targets.

"Indeed, we observe that carbon tax-liable companies have accelerated the implementation of decarbonisation projects. The impact of a carbon price goes beyond current industries - it also ensures that Singapore attracts the right kinds of future investments that are aligned with our low-carbon vision," Fu said.

Filed by Poh Li San, Sembawang GRC MP and deputy chairman of the GPC for Sustainability and the Environment, the motion is the second one on the climate crisis and is supported by a group of MPs from the People's Action Party.

Singapore currently charges a carbon tax of S$5 per tonne, which several MPs said is set too low, although Bukit Panjang MP Liang Eng Hwa said businesses need to be ready for the next round of carbon tax hike, since every S$5 per tonne could lead to a 1 per cent increase in electricity prices for households and businesses.

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Finance Minister Lawrence Wong will announce the outcome of the government's review of Singapore's carbon tax at Budget 2022, following a public consultation over the past months.

Fu said the need for an appropriate carbon pricing policy while preserving Singapore's competitiveness speaks to the complex and difficult considerations that influence the Republic's approach.

The carbon tax should provide a broad-based pricing across the economy, she noted. Including the excise duties on vehicular fuel, more than 90 per cent of Singapore's emissions are subject to a carbon price - one of the highest coverage in the world.

At the same time, it should be balanced against potential administrative costs on businesses, especially small and medium enterprises, she said.

Fu also noted that companies and countries are looking to carbon markets to give their low-carbon transition an added boost.

While domestic abatement should remain a priority alongside steps to decarbonise through low-carbon technologies such as hydrogen and carbon capture, utilisation and storage, the minister said there is significant uncertainty associated with these options at the moment.

This is because their commercial success hinges on factors such as technological maturity and transboundary cooperation, which are not entirely within Singapore's control.

"Therefore, access to well-functioning carbon markets serves as a complementary option in our toolkit to meet our climate commitments, especially in the event that domestic abatement options do not materialise."

Fu noted Singapore's efforts in helping to address the "trust deficit" in carbon markets, including its participation in international platforms such as the Voluntary Carbon Markets Integrity Initiative and the Taskforce on Scaling Voluntary Carbon Markets.

In terms of strengthening corporate accountability, she said the Singapore Exchange last month published its roadmap for mandatory climate-related financial disclosures for listed entities, while the Monetary Authority of Singapore will be consulting the industry on such disclosures for financial institutions.

She added that the government will consider global developments and the experience of mandating disclosures for these entities before deciding on the approach for other entities.

Fu encouraged all companies to begin building capabilities in sustainability reporting and auditing as reporting standards evolve, urging them to improve the sustainability of their supply chains.

The government is catalysing the change through procurement measures to encourage its service providers and suppliers to be more sustainable, she added.

Fu told the House her ministry will study the ideas voiced by MPs during the motion and will incorporate suitable suggestions into its policies and plans.