Singapore moves to cut pollution with carbon tax but risks putting off potential investors

Posted on: March 21, 2018 | Current Affairs

Singapore will become the first country in Southeast Asia to introduce a tax on carbon emissions, despite some MPs warning that it could affect the city-state’s competitiveness in the region

A man wears a mask to safeguard against the haze, pictured against the backdrop of the Marina Bay Sands resort, in the financial district of Singapore Photo: Wallace Woon / EPA

Singapore yesterday passed its Carbon Pricing Bill as it aims to cut emission intensity to 36% lower than 2005 levels by the year 2030.

Eight MPs raised concerns about the bill, demanding more detailed information on what it would entail, although they all said that they supported the reform and agreed that action was necessary to help counter climate change, the Straits Times reported.

According to website Climate Action Tracker, however, Singapore’s reduction plans are highly unambitious as the country is already on course to reducing emission intensity by 40% by that date. However, the website added that the carbon tax should “encourage more renewable energy in place of fossil fuel energy”.

Beginning next year, all facilities producing more than 25,000 tonnes of CO2 emissions per year will have to pay a carbon tax. It is expected to impact 30 to 40 companies, mainly from the petroleum refining, chemicals and semiconductor sectors, Singapore newspaper Today reported.

The city-state is a major manufacturer of electronics and chemicals and relies heavily on trade and foreign investment.

In accordance with the Paris Agreement, the government announced new regulations last year to improve the energy efficiency of electric motors and industrial facilities, with the changes set to come into effect in October of this year.  

The latest bill, coupled with these changes, could affect Singapore’s competitiveness as investors may look to neighbouring countries with fewer costs and constraints regarding carbon emissions.

Minister for the environment and water resources Masagos Zulkifli has said he is aware that companies will need time to make adjustments, adding that the government is taking measures to help those in the transition towards a low-carbon future, the Straits Times reported.

Masagos also stated that the revenues from a planned carbon tax increase will be pumped back into green initiatives run by the country’s top polluters and into small and medium-sized businesses, the Straits Times reported.

“The Bill is an important step forward – not only in encouraging industry to do their part for the climate, but also in readying our economy and strengthening our competitiveness as the world transitions to a low-carbon future,” Masagos told the Straits Times.

Related reading: