Singapore carbon tax will rise from S$5 to S$25 per tonne of greenhouse gas in twenty twenty-four, under a plan the Finance Minister set out in Budget 2022 on February 18. The tax is paid only by the largest emitters. But its cost can travel down supply chains, so smaller firms should know the dates and the numbers.
What the tax is today
Singapore began its carbon tax on January 1, 2019. Parliament passed the Carbon Pricing Act on March 20, 2018, and the National Environment Agency runs it. The tax is S$5 for each tonne of carbon dioxide equivalent (tCO2e) a facility releases.
That rate holds through twenty twenty-three. It applies the same way to every sector, and the 2018 law says it is applied without exemptions. The law lets the government change the rate later, but a change needs an Act of Parliament.
Which firms pay
The tax covers facilities that directly emit 25,000 tCO2e or more in a year. In 2018 the minister said such facilities produce about 80 percent of Singapore's greenhouse gas emissions. Most small and mid-sized firms are far below that line.
A second group has lighter duties. Facilities that emit at least 2,000 tonnes but under 25,000 tonnes must measure and report their emissions, but they pay no tax.
The person who runs the facility is responsible for the bill. That firm pays by surrendering carbon credits equal to its tax. It buys those credits from the National Environment Agency at a fixed price.
The rate path set out in Budget 2022
On February 18, 2022, the government announced a stepped increase. The rate stays at S$5 through twenty twenty-three. It then moves to S$25 for twenty twenty-four and twenty twenty-five. After that it moves to S$45 for twenty twenty-six and twenty twenty-seven.
The government also said it is aiming for a rate between S$50 and S$80 per tonne by the end of the decade. That last range is a goal, not a fixed rate. The steps also back a wider pledge to reach net zero emissions by or around the middle of the century.
Here is what the steps mean for one taxed facility that emits 100,000 tonnes a year. This is an example, not a real company.
- At S$5 per tonne, the yearly bill is S$500,000.
- At S$25 per tonne, it is S$2.5 million.
- At S$45 per tonne, it is S$4.5 million.
So the S$25 step is a fivefold rise, and the S$45 step is ninefold. Firms that are taxed have about two years to plan for the first jump.
How the cost may reach smaller suppliers
A small supplier does not pay the tax. Still, the firms that do pay will look at their costs as the rate climbs. Our editors see three places where the cost could show up.
- Energy prices. Power generation is one activity that can be taxed. If a generator passes some cost on, electricity bills may rise for businesses of every size.
- Materials and services. A taxed manufacturer may ask suppliers for lower prices, or favour suppliers who emit less.
- Customer questions. Large buyers may start asking suppliers for emissions data, as taxed firms look for ways to cut their own totals.
None of this is certain. The size of any pass-through depends on each market and each contract. The honest summary is that the direct cost falls on large emitters, and the indirect effect is still unclear.
What smaller firms can do now
Start with a simple step. Look at your electricity and fuel bills, and note how much of your cost they make up. If energy is a large share, a rate rise further up the chain matters more to you.
Next, ask your own suppliers whether they are taxed facilities. A short, polite question now is easier than a surprise price change later.
Third, keep basic records. Fuel use, electricity use and vehicle mileage are the numbers a large customer is most likely to ask for. A tidy spreadsheet is enough to start, and no special software is required.
Finally, build the rate steps into your budget notes. The rate is S$5 until the end of twenty twenty-three. After that, the published plan points to higher costs in each stage, so contracts that run past that date deserve a price review clause.
This article is general business information only. For how the carbon tax applies to your own facility or contracts, ask a tax adviser and confirm the current rules with the National Environment Agency.
Sources
- Ministry of Finance, Budget 2022: Charting Our New Way Forward Together, mof.gov.sg/news-resources/newsroom/budget-2022-charting-our-new-way-forward-together/
- NCCS, Singapore will raise climate ambition, February 18, 2022, nccs.gov.sg/media/singapore-will-raise-climate-ambition/
- NCCS, opening speech at the second reading of the Carbon Pricing Bill, March 20, 2018, nccs.gov.sg/media/speeches/opening-speech-by-masagos-zulkifli-minister-for-the-environment-and-water-resources-at-the-second-reading-of-the-carbon-pricing-bill-20-march-2018/
- National Environment Agency, carbon tax page, nea.gov.sg/our-services/climate-change-energy-efficiency/climate-change/carbon-tax