Climate-conscious Singaporeans back tougher rules, higher carbon tax on polluters ahead of 2025 budget

Those who responded to a public consultation called for the carbon levy not to be eroded by allowances and for more transparency. Last year, petrochemical firms reportedly received up to 76 per cent in rebates for near-term carbon taxes.

Jurong island flaring

The majority of Singaporeans who take an interest in climate issues are in favour of a higher carbon tax and stricter regulations on corporate polluters, according to findings from a public consultation exercise released this month, ahead of the city-state’s upcoming budget. 

At least three out of four respondents (77 per cent) said that Singapore should put in place policies that provide companies with stronger disincentives to emit carbon. Of those who backed more punitive policies on polluters, 64 per cent stated that they would pay more for the goods and services of firms that decarbonised at a faster pace, countering arguments carbon-intensive companies have used to justify climate delay by highlighting people’s economic anxieties.

The month-long public consultation conducted from October 2024, which solicited feedback on existing policies to meet Singapore’s target to meet net zero emissions by 2050, received 580 responses from members of the public. 

While sharing the findings, the National Climate Change Secretariat (NCCS) emphasised that the consultation was not designed to representatively sample Singapore’s population – those who took an interest in climate change issues made up 96 per cent of all respondents. But it said the government will take the findings into consideration as it “develops the next bound of Singapore’s climate targets, measures and policies”. 

Ho Xiang Tian, co-founder of local environmental group LepakInSG, told Eco-Business that the results do “show that Singaporeans, or at least the respondents, are willing to pay higher prices for decarbonisation, which should reassure the government and companies that potentially increased costs due to decarbonisation will be accepted by consumers”.

Singaporeans between the age of 20 to 39 responded most enthusiastically to the exercise. But a spokesperson from campaign group Singapore Climate Rally (SGCR) noted that at least 200 of the respondents were above 40 years old, showing that climate is not just a “youth” issue.

The group said it was heartened by the results which showed that Singaporeans want companies to be more accountable, so legislation should be angled towards those aims, rather than supporting business needs without transparency.

Singapore became the first Southeast Asian nation to have a carbon tax in 2019, when it started charging firms that emit over 25,000 tonnes of emissions a year S$5 (US$3.70) per tonne of carbon dioxide, covering around 80 per cent of national emissions from some 40 firms.

While the levy was raised to S$25 (US$18.60) per tonne last year, refiners and petrochemical companies were reportedly given up to 76 per cent of rebates for their planned 2024 and 2025 carbon taxes to remain competitive compared to their rivals elsewhere. This meant that instead of paying five times more for their emissions, the effective payable carbon tax rate went up by just S$1 (US$0.74) per tonne.

Since 2024, companies have also been able to offset up to 5 per cent of taxable emissions using eligible carbon credits. Singapore is on track to raise its carbon tax rate to S$45 (US$33.40) per tonne of emission next year.

Some respondents urged the government not to allow for the carbon levy’s impact to be eroded by allowances and for more transparency in how they are being allocated, a point which was also mentioned in SGCR’s public consultation guide.

“With the recent oil spills, we think the public, similar to us, is wondering why these companies continue to be supported so much, when their activities are so pollutive and they have made record profits of US$85 billion in 2023,” said SGCR’s spokesperson.

Eco-Business has reached out to the Ministry of Sustainability and Environment (MSE) to clarify what proportion of emissions are covered by the carbon tax, after accounting for the allowances given out to businesses.

Singapore’s carbon pricing rules were amended in 2022 to include an industry transition framework to allow companies in “emissions-intensive trade-exposed” (EITE) industries, like the energy and chemicals sectors, to have tax rebates in the interim to adjust to the higher rates.

The country’s Ministry of Trade and Industry (MTI) has been appointed the administrator of the framework, where the amount of allowances awarded to each firm “will be determined based on their performance on specified energy efficiency or carbon intensity benchmarks,” said environment minister Grace Fu at the amended bill’s reading.

In response to Eco-Business’ queries about the transition framework, a Singapore government spokeperson said that it “will consider releasing aggregated information on the amount of allowances provided while balancing the need to preserve commercially-sensitive information”. The spokesperson added that the framework “will be reviewed periodically” to factor in economic competitiveness, carbon prices in other jurisdictions and maturity of decarbonisation technologies.

When the amendment was put up for debate, parliamentarians from both the incumbent People’s Action Party (PAP) and opposition Worker’s Party (WP) called for disclosures of companies’ use of these allowances as well as international carbon credits. Then-WP member of parliament (MP) Leon Perera proposed an amendment to introduce a publicly accessible online registry indicating who has received such allowances and the ministry’s reasons for awarding them.

PAP MP Louis Ng also said: “There is no reason these names [of companies who receive allowances] should be a secret.”

The Ministry of Finance’s green budgeting occasional paper released on Thursday said that about S$1 billion (US$740 million) of carbon tax revenue has been collected so far since FY2020. Based on Budget Book 2024, Singapore’s carbon tax revenues for FY2023 were S$200.2 million (US$148.7 million) and expected to increase to S$203.7 million (US$151.3 million) in FY2024.

Earlier this month, professional services firm KPMG and Singapore Institute of Directors also recommended for more transparency over the allocation of carbon tax revenues to clarify how much would go to businesses to undertake green initiatives.

“When it was announced at that time, the government said, we are not going to keep that money as a revenue; we’ve got to give it back to help companies to decarbonise. But it didn’t specify which areas it will be giving businesses money, so that they can plan their investments and innovations accordingly,” said Ajay Kumar Sanganeria, partner and head of tax at KPMG Singapore, on the sidelines of the launch of its budget proposal.

Ho estimates that revenues from a S$50 (US$37.20) per tonne carbon tax could fully fund carbon dividends for low-income families to deal with the increased costs in household electricity bills, which could also increase buy-in for carbon taxes while incentivising households to reduce their electricity consumption. The remaining could then be channelled back to support businesses to help in their decarbonisation journey as planned. 

Eco-Business has asked MSE for a breakdown of how the sum has been spent so far and why the projected revenues in FY2024 are expected to increase by only 1.7 per cent, despite the tax rate increasing by five times.

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