Budget 2022: Quick Takes on carbon taxes and other green initiatives

THE Singapore government is bringing forward its net-zero timeline "by or around mid-century", as part of the green initiatives announced in Budget 2022 on Friday (Feb 18).

To meet its new net-zero goal, the carbon tax - introduced in 2019 at S$5 per tonne of emissions - will be raised to S$25 per tonne in 2024 and 2025, and S$45 per tonne in 2026 and 2027, with a view for it to hit S$50 to S$80 per tonne by 2030. The current rate will remain unchanged till 2023.

Additionally, the government is aiming to publish a Singapore Green Bond framework and issue its inaugural green bond later this year, with a goal to issue up to S$35 billion in such bonds by 2030 to fund public sector green infrastructure projects.

Singapore also intends to build more electric vehicle (EV) charging points closer to where people live. Green bonds can help finance these infrastructure upgrades.

Here are some quick takes from companies and observers on these green measures:

Surbana Jurong senior director, energy and industrial, Tan Wooi Leong:

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• "The increase of Singapore's carbon tax ... will decisively move the needle on Singapore's decarbonisation roadmap. Major emitters and industrialists will now be motivated to seriously explore and even expedite the adoption of carbon capture technologies, low-carbon alternatives (such as hydrogen) and carbon utilisation solutions.
• "At this revised carbon tax rate, mid to heavy-duty transport sectors may accelerate their electrification or even adopt hydrogen as fuel. Industries in petroleum and chemicals, iron and steel, cement and other major GHG (greenhouse gas) emitters will see more value in adopting renewable energy, electrifying their processes and/or introducing new-energy alternatives in their operations.
• "The carbon taxes could be purposefully channelled into R&D and technology development on decarbonisation and new energies to reduce greenhouse gas emissions."

Global Counsel senior associate Marissa Lee:

• "The decision to ramp up the carbon tax more quickly while allowing for offsets as a means for reducing tax liability is a bold one, and will certainly help to catalyse a shift to clean energy.
• "Singapore's original plan to gradually raise the tax to S$10-S$15 a tonne by 2030 would have been insufficient to achieve the 2015 Paris Agreement's main goal of limiting warming to 2 deg Celsius.
• "Importantly, the government has signalled that Singapore's carbon tax could be raised to S$50-S$80 per tonne by 2030. The IMF (International Monetary Fund) has previously said that advanced economies should strive for a carbon price floor of US$75 per tonne by 2030."

Kristal.AI founder and CEO, Asheesh Chanda:

• "Greening efforts will require capital and investment, and the government has taken a huge first step in laying the groundwork by announcing the issuance of up to S$35 billion of green bonds by 2030 to fund public-sector green infrastructure projects. This move will spur firms in the private sector, such as banks, funds and fintechs to also provide green financing solutions for their clients."

KPMG in Singapore, partner, head of infrastructure, government and healthcare, Satya Ramamurthy:

• "Accessibility of EV charging infrastructure nationwide will be critical to the continued growth momentum in Singaporeans' adoption of EVs. In this regard, the proposed plans for building more charging points near homes and securing green finance to fund this infrastructure are welcome.
• "The ambition to bring forward the net-zero timeframe is supported by a well-thought out plan to decarbonise the economy. This can be achieved through the significant increase in carbon taxes, the development of the carbon credit market and green bond markets, while cushioning the impact of cost increases on citizens."

Schneider Electric cluster president for Singapore, Malaysia and Brunei, Yoon Young Kim:

• "By putting a higher price on carbon, it sends a clear and strong signal for organisations to assess their carbon footprint and act more aggressively to reduce emissions.
• "In taking bolder steps towards decarbonisation, organisations should not look at it merely as a matter of compliance, but as a timely opportunity to make the fundamental organisational changes now, and put in place a robust sustainability strategy that would also position them well for long-term viability and profitability.
• "Ultimately, the move to impose a higher carbon tax will urge more companies to seize the moment, realise the sense of urgency to act now to stay ahead, and step up their pace in making a low-carbon transition as they increasingly recognise the costs of inaction and the value of limiting emissions."

Oliver Wyman head of consumer and industrials, South-east Asia, and energy, Asia-Pacific, Abhi Bhuchar:

• "The progressive increase in carbon tax will increase Singapore's attractiveness as an investment hub. The government has given certainty in an uncertain path to decarbonization, which will certainly attract capital. In addition, this will spur carbon market development and all the investments that go with it. For example, in the aviation and shipping sector, it would drive investments in more fuel efficiency and the development of sustainable fuels."

SAP Singapore managing director, Eileen Chua:

• "Technologies such as AI, IoT and data analytics enable businesses to track and manage their operational value chain and weed out inefficiencies, helping drive a cleaner and more sustainable growth model. Support from the government and clear policies and frameworks in this area can help businesses ensure they are meeting the necessary standards and leverage technology to advance towards a sustainable future."

Cushman & Wakefield head of research, Singapore, Wong Xian Yang:

• "The increase in carbon tax from $5 to $25 per tonne is a significant leap and could lead to an increase in operating costs for properties with high energy requirements. Landlords could potentially pass down this additional costs to tenants resulting in higher property service charges.
• "Given the expected increase in operating costs, we anticipate a stronger drive for asset enhancement and redevelopment across all property types as building owners do more to lower their carbon footprint. There could be higher investment sale activities with a view to redevelop or for asset enhancement to brush up its green credentials and to future proof the asset to cater for 'green conscious' demand."

Get the latest updates on Budget 2022 here: bt.sg/budget22

READ MORE:

• Budget 2022: Carbon tax set to rise to S$25 from 2024, S$45 from 2026, S$50-80 by 2030
• Budget 2022: Singapore to target net zero 'by or around mid-century'
• Budget 2022: Boost to green plan from public sector green bonds, more EV chargers
• Carbon tax likely to be raised to S$10-15, but rate needs to be higher to drive change: watchers