Singapore will have to apply a carbon price - be it through a carbon tax or a cap-and-trade scheme - to send the right price signals, if a global regime to curb carbon emissions emerges.
This is according to Prime Minister Lee Hsien Loong who spoke at the Singapore Energy Lecture on Monday.
The Ministry of Finance had previously said it would be “more practical” to reduce carbon emissions through taxes because Singapore is a small domestic market with only “a few large energy consumers.”
PM Lee noted that it is not enough to push for efficiency gains because of the rebound effect.
Consumers would just use more efficient appliances more often, thereby increasing overall consumption. So, there’s a need to impose a charge to induce consumers to change their behaviour.
PM Lee said this was part of a four-pronged strategy to prepare itself for the future energy landscape.
“If there’s a global regime to curb carbon emissions, …Singapore would have to reduce our own emissions more sharply than we are doing now in order to comply with international obligations, and we would have to make the carbon price explicit to send the right price signals,” said PM Lee.
Analysts said that it is not easy to figure out how a carbon tax will impact consumers and companies here in Singapore as details are not currently available.
But green activists welcome the idea, saying it will encourage more environmentally-conscious behaviour.
One suggestion is to invest the money collected in energy research.
Howard Shaw, executive director of Singapore Environment Council said, “Currently the energy tariff is a flat figure. So, if you use more, you pay more. Perhaps one way of moving forward from that is to divide households into lower energy users, average energy users and high energy users.
“Basically, the high energy users will be subject to a different higher tariff. So, the more you use, the more you pay in terms of rate.”
India, which is Asia’s third-largest energy consumer, already has a carbon tax.
In July this year, the Indian government introduced a nationwide carbon tax of 50 rupees per metric tonne of coal both produced and imported into India. Officials expect to raise 25 billion rupees for the financial year 2010-2011 from the tax, which they are hoping to use for a clean energy fund.
Countries like Japan and South Korea are also considering implementing a carbon tax.
Meanwhile, Mr Lee said there are many uncertainties surrounding the energy climate. As a result, Singapore is diversifying its energy supplies as well as investing in energy research.
The prime minister noted that several Southeast Asian countries are planning to build nuclear power plants.
Given its small size, safety is a major concern for Singapore. At the same time, he said the nuclear energy option could not be totally dismissed.
“There is often strong resistance in countries - from the green movement and from populations who have witnessed accidents like Chernobyl, and are fearful and anxious about their safety. But if we look at this rationally, without nuclear energy, the world cannot make sufficient progress in dealing with global warming,” said Mr Lee.
He added it would be a long time before Singapore takes any decision on nuclear energy, but it should ready itself to do so.
