Singapore Finance Minister announces plans to hike carbon prices and achieve net-zero greenhouse gas emissions by 2050.
On February 18, 2022, in his Budget 2022 Statement, Singapore Finance Minister Lawrence Wong announced plans to progressively increase Singapore’s carbon price in the coming years in an effort to meet Singapore’s new 2050 net-zero emissions target.
In 2020, Singapore announced its goals to peak greenhouse gas emissions around 2030 and achieve net-zero emissions as soon as viable in the second half of the century. However, in his recent budget statement, Finance Minister Wong announced Singapore’s more ambitious goal to achieve net-zero by 2050. “With advances in technology and new opportunities for international collaboration in areas like carbon markets, we believe we can bring forward our net-zero timeline,” said the Finance Minister. Singapore’s new net-zero target aligns with the Glasglow Climate Pact’s call for countries to prioritize reaching net zero emissions by 2050.
Singapore plans to progressively increase carbon prices over the next 28 years to reach its new net-zero goal. In 2019, through the Carbon Pricing Act, Singapore became the first country in Southeast Asia to introduce a carbon price. The current price applies to all facilities producing over 25,000 tonnes of greenhouse gas emissions annually and is intended to incentivize emission reductions. According to Finance Minister Wong’s recent statement, Singapore will increase this tax fivefold to S$25 per tonne of greenhouse gas emissions in 2024. The carbon price will continue to rise to S$45 per tonne in 2026, with plans to reach S$50 to S$80 per tonne by 2030.
By staggering the carbon price’s increase over several decades, Singapore’s government hopes to set the needed trajectory to reach zero emissions by 2050 while allowing businesses and individuals time to plan and take actions to moderate their emissions. To limit the rising carbon price’s impact on businesses, Singapore will allow companies to purchase carbon credits to offset up to 5% of their taxable emissions. Singapore also plans to establish a transition framework to provide existing companies with allowances for a share of their emissions.
Singapore faces unique challenges in limiting emissions, including the city-state’s significant manufacturing sector, shipping, aviation, and tourism industries, and limited space and resources for renewable energy generation. During his statement, Finance Minister Wong was mindful of the challenges that the rising carbon price might bring about, acknowledging that “the path towards net-zero will entail significant economic restructuring and changes in how we live and work in the future.” However, despite these challenges, Wong emphasized that by acting quickly, Singapore can capitalize on emerging opportunities in green sectors and the growing demand for talent in green skills.
Wong also emphasized that he does not plan to derive additional revenue from the rising carbon price. Instead, revenue from the carbon tax will support decarbonization efforts and a smooth transition to a greener economy.
More details on Singapore’s carbon price increases and efforts to moderate financial impacts on businesses and individuals can be expected moving forward as we approach 2024.