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Singapore’s Increased Carbon Tax Signals Urgent Need to Decarbonise

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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 GHGGreenhouse gases trap heat in the atmosphere. They all have different global warming potentials (GWP) over different time frames, the higher the number, the worse the impact. For simplicity of accounting everything is referenced back to carbon dioxide which has a global warming potential of 1. There are over 200 GHGs listed in the IPCC fifth assessment report, a sample are below. Note that in current carbon accounting standards the 100 year GWP is used. Greenhouse gas 20 year GWP100 year GWPCarbon dioxide CO211Methane CH48428Hydrofluorocarbon HFC-134a37101300Chlorofluorocarbon CFC-1169004660Nitrous Oxide N2O264265Sulfur hexafluoride SF617,50023,500 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:

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:

  1. Increase energy efficiency
  2. Electrify as much as possible
  3. Buy renewable energy
  4. 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:

  1. Develop the carbon strategy
  2. Implement energy efficiency
  3. Electrify fuel use
  4. 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 TargetsThe science based targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. SBTi has specific sectoral guidance and is working on a Net-Zero standard. Initiative (SBTiScience Based Targets initiative), 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.

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What is Singapore's Carbon Pricing Act (CPA) and when was it introduced?

The Carbon Pricing Act (CPA) was introduced in 2019, making Singapore the first country in Southeast Asia to establish a carbon price. It requires any facility emitting more than 25,000 tCO2e annually to pay S$5/tCO2e.

What types of emissions does Singapore's CPA cover?

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.

Why was the taxable emissions threshold set at 25,000 tCO2e under Singapore's CPA?

Setting the threshold at 25,000 tCO2e allows Singapore to target a relatively low number of the country's Commercial & Industrial facilities while still addressing roughly 80% of its national greenhouse gas emissions, making the CPA a simpler and potentially more effective policy than a complex carbon cap-and-trade mechanism.

How is Singapore's carbon tax price set to increase over the coming years?

The carbon price per tonne of CO2 equivalent (tCO2e) is set to increase to S$25/tCO2e in 2024, S$45/tCO2e in 2026, and potentially between S$50-$80/tCO2e by 2030.

Will the Singapore government keep the additional revenue from the carbon price increase?

No. According to Singapore's National Climate Change Secretariat (NCCS), the government will not receive additional revenue from the carbon price increase. Instead, the money will go towards supporting businesses and further decarbonisation efforts, such as grants and tax incentives for ESG reporting.

Can businesses offset their taxable emissions under Singapore's CPA?

Yes, the CPA allows for 5% of a business's taxable emissions to be offset via certified international carbon credits, though the Act still places overwhelming emphasis on reducing on-site emissions.

What is the simplified approach recommended for a corporate carbon reduction strategy?

The page recommends a simplified four-step approach: 1) increase energy efficiency, 2) electrify as much as possible, 3) buy renewable energy, and 4) offset the remaining carbon emissions.

How can electrification help businesses decarbonise, according to the article?

Electrification allows plants to transition away from equipment and machinery that burn fuel on site, such as replacing a natural gas water heater with an electric heat pump or a traditional furnace with an electric one. Electrified equipment also typically comes with fewer maintenance costs, and when powered by renewable electricity, electrification can significantly reduce a business's overall emissions. Current studies suggest electrification could transition roughly 50% of the fuel that global industry uses for energy to electric-powered operations, covering both low-temperature heat processes (≤100°C) like food preparation and high-temperature processes (up to 1,000°C) like steam reforming.

What role does renewable gas play in industrial decarbonisation according to the article?

The remaining fuel used in industry that cannot be electrified 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.

What services does Northmore Gordon offer to help businesses decarbonise?

Northmore Gordon assists with the design and implementation of a carbon reduction strategy, including developing the carbon strategy, implementing energy efficiency, electrifying fuel use, and creating and competitively buying priced renewable energy and high-quality carbon offsets. It also helps businesses design long-term roadmaps, align with Science-Based Targets (SBTi), and capture available grants, certifications, and incentives.

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