Singapore’s Increased Carbon Tax Signals Urgent Need to Decarbonise
- Articles
- April 26, 2022
- Craig Morgan
Singapore is one of 27 countries that has implemented a carbon tax, and it recently announced that it will ramp up its price on carbon, revealing the nation’s commitment to decarbonise its economy and do its part in addressing climate change.
To stay competitive, businesses will need to reduce energy consumption, direct carbon emissions, and the use of carbon-intensive goods and services.
The Singapore Carbon Pricing Act
The 2019 introduction of the Carbon Pricing Act (CPA) marked Singapore as the first country in Southeast Asia to establish a carbon price. The CPA requires any facility emitting more than 25,000 tCO2e annually to pay S$5/tCO2e.
The CPA considers emissions from direct fuel combustion as well as from Industrial Processes and Product Uses (IPPU) such as the production of CO2 from steam methane reforming used in ammonia or hydrogen production.
Setting the taxable emissions threshold at 25,000 tCO2e allows Singapore to target a relatively low number of the country’s C&I facilities while still addressing roughly 80% of its national GHG emissions. By addressing the majority of the nation’s heavy polluters with an easy-to-understand tax, the CPA could prove to be a more effective policy measure than a highly complex carbon cap-and-trade mechanism.
Tax to Increase
The price per tonne of CO2 equivalent (tCO2e) is set to go through steep price increases in the coming years:
- S$25/tCO2e in 2024
- S$45/tCO2e in 2026
- and potentially between S$50-$80/tCO2e by 2030
The 2022 CPA update offers businesses time to assess, plan, and execute strategies to reduce their carbon emissions and thus lower their tax liability.
Demonstrating Strong Intention for Social Good
Singapore’s carbon price commitment showcases the nation’s determination to decarbonise in a meaningful way. According to Singapore’s National Climate Change Secretariat (NCCS), the government will not receive additional revenue from this carbon price increase. Rather, the money will go towards supporting businesses and further efforts to promote decarbonisation — such as grants and tax incentives for ESG reporting — as the country advances its transition away from carbon.
Additionally, the CPA will allow for 5% of a business’s taxable emissions to be offset via certified international carbon credits. This gives businesses access to a wide range of options to mitigate their tax liability, yet the CPA still places overwhelming emphasis on reducing on-site emissions, which will compel businesses to reduce their actual carbon emissions and create a positive impact in Singapore.
Creating a Carbon Reduction Strategy
Decarbonising industry and the built environment is in the public’s best interest and increasingly aligns with corporate agendas. Economists and business leaders alike have stressed the importance of expanding the price of carbon to accelerate global decarbonisation.
Effective decarbonisation requires a deeper understanding of baseline conditions and how to profitably transition away from fossil fuels. With many potential pathways in an ever-changing energy landscape, keeping up with current trends, technologies, and policies can be a daunting task.
A corporate carbon reduction strategy is the best way to achieve your goals at the lowest cost. The following diagram shows what needs to be taken into account. A simplified approach is to be considered:
- Increase energy efficiency
- Electrify as much as possible
- Buy renewable energy
- Offset the remaining carbon emissions
How Businesses can Decarbonise through Energy Efficiency
There are no one-size-fits-all solutions to decarbonise the industry. There is however a universal principle that can be applied across all sites in which reducing energy waste means less energy use, fewer emissions and that businesses will save money at the same time. This is a ‘no regrets’ strategy.
How Electrification and Renewables Decarbonise Business
Beyond improving energy efficiency, plants can also undergo electrification to transition away from equipment and machinery that burn fuel on site. For instance, a natural gas water heater can be replaced with an electric heat pump, or a traditional furnace can be replaced with an electric one. In addition to helping transition away from burning fossil fuels, electrified equipment typically comes with fewer maintenance costs.
When purchased electricity is produced from clean, renewable sources with minimal carbon intensity, such as wind and solar power, the electrification process can significantly reduce a business’ overall emissions.
Current studies suggest that electrification could transition roughly 50% of the fuel that global industry uses for energy to electric-powered operations. This includes processes requiring low-temperature heat (≤ 100°C), such as food preparation, to industrial activities like steam reforming that require high-temperature heat up to 1,000°C.
The remaining fuel in the industry is often natural gas. There is an increasing amount of renewable gas available in the network, for example between 40%-50% of Denmark and Germany’s piped methane gas is from renewable sources.
Certificates and Carbon Offsets
Northmore Gordon will Guide You Through Profitable Decarbonisation
As a full-service Consultant, Northmore Gordon has energy experts prepared to guide businesses through all phases of their decarbonisation journeys to ensure a successful and profitable transition.
Northmore Gordon assists with the design and implementation of a carbon reduction strategy, which includes but is not limited to:
- Develop the carbon strategy
- Implement energy efficiency
- Electrify fuel use
- Create and competitively buy priced renewable energy and high-quality carbon offsets
We help businesses design and implement carbon reduction strategies and long-term roadmaps so that they can meet corporate goals and stay ahead of the changing landscape. This can include alignment with and commitment to the Science-Based Targets Initiative (SBTi), a robust framework strategy developed to keep the global temperature rise well under 2° Celcius from pre-industrial levels. In addition, Northmore Gordon helps businesses capture available grants, certifications, and incentives to make the process as profitable and streamlined as possible.
The world recognizes the threat of climate change and the risk of continued fossil-fuel dependence. Acceleration of decarbonisation is needed, and policy measures such as Singapore’s Carbon Policy Act showcase that more and more countries are making definitive steps to reaching a net-zero carbon economy. With an energy partner like Northmore Gordon, your business can incorporate our energy policy and engineering expertise to demonstrate leadership in sustainability and build a thriving business as the world undergoes this pivotal energy transition.
