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Singapore's carbon tax revenue falls short despite rate hike. (Photo: unsplash)
The Singaporean government estimates that the 2024 carbon tax will generate SGD 640 million (about USD 497 million), more than 30% below the original projection. Experts attribute the shortfall primarily to additional exemptions offered by the government to ease the burden on businesses—highlighting the challenges of implementing carbon tax policies effectively.
Carbon tax revenue grew slower than the new rate
Singapore, a regional front-runner in climate policy, raised its carbon tax rate in 2024 from SGD 5 (about USD 3.88) per ton of CO₂ equivalent to SGD 25 (about USD 19.4), a fivefold increase. According to data obtained by The Straits Times, overall tax revenue only tripled despite little change in total emissions, reaching an estimated SGD 640 million. This falls short of the projected SGD 1 billion (about USD 776 million).
Liang Hao, Associate Professor of Finance at Singapore Management University (SMU), noted that while emission volumes do affect total revenue, the scale of the shortfall suggests that tax exemptions were the primary cause.
A government spokesperson explained that many factors influence carbon tax revenues besides the rate itself, including estimated emissions from taxable facilities, the use of international carbon credits for offsets, and transitory allowances for companies in the emissions-intensive, trade-exposed sectors.
These transitory allowances, tax exemptions granted to mitigate the burden on industries such as chemicals, electronics, and biomedical manufacturing, are intended to help qualifying businesses remain competitive globally.
Carbon tax scheme faces implementation challenges
To date, the government has not disclosed details about how transitional allowances are allocated, leaving unclear which companies received them and in what quantities. Reuters previously reported that in 2024 and 2025, refineries and petrochemical companies may be exempt from up to 76% of their total carbon tax liabilities.
As for international carbon credit offsets, Singaporean authorities confirmed that no companies have yet reported using them.
In late May, the government responded to the limited availability of high-quality carbon credits in 2024 by allowing companies to combine offsets—permitting up to 10% of total emissions to be offset using credits in 2025. Previously, the cap was 5% per year.
Melissa Low, a climate policy observer from the Centre for Nature-based Climate Solutions at the National University of Singapore (NUS), said the revenue shortfall reflects a conscious policy decision. In her view, the government prioritized safeguarding business competitiveness over maximizing tax revenue.
This challenge is not unique to Singapore. Kim Jeong Won, a senior research fellow at the NUS Energy Studies Institute, pointed out that Swedish manufacturers have received carbon tax breaks for up to 20 years, with rates reduced by as much as 50%.
However, she cautioned that prolonged tax incentives may discourage companies from taking serious emissions reduction action. Kim concluded that Singapore must now consider how to reduce subsidies while preserving its economic competitiveness.
Source: The Straits Times
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