Singapore will raise its carbon tax by 500% to SG$25 per tonne in 2024, said Lawrence Wong, the city-state’s finance minister, as the government strives to achieve its net zero goal by 2050.
The government plans to increase the carbon tax further to SG$45 in 2026, with a target of SG$80 by 2030, Wong stated on Friday in a budget speech.
Singapore is a global hub for oil refining and petrochemical exports. According to the Observatory of Economic Complexity, the country has exported US$43.1 billion in refined petroleum to become the world's fourth largest exporter.
In an effort to combat climate change and reduce carbon emission, in 2019, Singapore started to impose carbon tax on facilities that emit 25,000 tonnes or more of greenhouse gases each year, making it the first country in Southeast Asia to implement a carbon pricing scheme.
Wong added, to soften the blow for businesses, from 2024, local enterprises will be allowed to buy overseas carbon credits to offset up to 5% of their taxable emissions, which is also expected to help foster the creation of well-functioning and regulated carbon markets by creating local demand for high-quality carbon credits.
According to oil giant Exxon Mobil’s spokesperson, a higher carbon price and supportive government policies can help incentivize more firms and sectors to invest in research and technology to reduce emissions. However, she warned that since Singapore's economy is export-oriented, it's also critical that the proposed carbon tax structure stimulates greenhouse gas reductions while protecting the competitiveness of trade-exposed industries.
Holding the same stance, Shell expects the carbon price to rise over time as the energy transition continues. The oil company’s spokesperson stated, “unlike power, which is consumed domestically, Singapore exports the majority of its energy and chemical products, and it must compete with other exporter countries that either do not have a carbon price policy or have sophisticated mechanisms in place to help their trade-exposed industries remain competitive.”