Informational Barriers to Carbon Pricing: Singapore’s Experience, Benedict Chia - Singapore PMO
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The document discusses Singapore's experience implementing a carbon pricing scheme through a carbon tax. It provides context on Singapore's circumstances as a small, densely populated island nation with few alternative energy options. It then summarizes key aspects of Singapore's carbon tax, which began in 2019 at S$5/tCO2e and will increase to S$10-15/tCO2e by 2030. The document also discusses how Singapore addressed concerns about competitiveness and cost of living impacts through measures like a transition period, revenue recycling, and public communication. Singapore aims to demonstrate carbon pricing as an effective policy tool and play a catalytic role in encouraging climate action in the region.
Informational Barriers to Carbon Pricing: Singapore’s Experience, Benedict Chia - Singapore PMO
- 1. Informational Barriers to Carbon Pricing: Singapore’s Experience Carbon Market Platform 15/16 May 2019
- 2. 2 Export-oriented and Open Economy • Lack of natural resources and hinterland • Manufacturing as one of our twin engines of growth Dense Urban Landscape Low-lying, highly urbanised island-state Accommodate housing, commercial centres, air/sea ports, etc. High population density of 7,650 per km2 Limited Alternative Energy Options Unfavourable climatic conditions for large scale deployment of hydro, wind and geothermal Solar energy is the best option but limited by intermittency and land constraints 95% electricity generated from natural gas Singapore’s National Circumstances
- 3. 3 Carbon tax from 2019 • Tax rate set at S$5/tCO2e for transition period between 2019 and 2023 • Tax rate to be reviewed in 2023 with increased rates of between S$10/tCO2e to $15/tCO2e by 2030 Singapore’s Key Mitigation Actions
- 4. • Singapore’s GHG emissions for 2014 totaled 50.9 MT CO2e (about 0.1% of global emissions); industrialised only in 1980s • Small, low-lying island city-state, Singapore is vulnerable and are already facing the effects of climate change • Needs to be responsible global citizen; global approach best chance to avoid worst effects of climate change In our interest to address climate change #1 Need to Act on Climate Change Based on Second National Climate Change Study (2015); for the period of 2070 – 2099 (relative to 1980-2009)
- 5. 5 • Demonstrate that carbon pricing is a cost-effective mitigation measure • International platforms e.g. PMR, CPLC • Bilateral consultations with regional countries exploring carbon pricing • Co-hosting events aimed at building carbon pricing capabilities and cooperation (e.g. Asia Pacific Climate Week 2018, Asia Pacific Carbon Markets Roundtable 2019, Innovate4Climate 2019) • Led forums to galvanise climate action in the region • ASEAN Working Group on Climate Change, Special ASEAN Ministerial Meeting on Climate Change, CPLC Singapore Chapter Singapore can play a catalytic role in the region #1 Need to Act on Climate Change
- 6. #2 Impact on Competitiveness • Regular engagement gives advance notice and reduces regulatory risks • Started studying carbon pricing early in 2007 • Yearly conversations with large emitters, and regular consultation with broader public on the role of carbon pricing in our climate strategy • Emissions reduction projects take time to plan and execute • Introduced Energy Conservation Act in 2013 Long history of preparation and consultation
- 7. • Low tax rate for initial 5 years for companies to implement energy and carbon efficiency improvement measures; carbon tax rate review will take into account international competitiveness concerns • Carbon pricing more cost-effective compared to regulations or mandates • Improving resource efficiency also improves competitiveness, especially for carbon intensive companies • Carbon tax is not a revenue generation exercise • Carbon tax revenue are recycled to fund emissions reduction efforts, including enhancement of energy efficiency incentives (supports up to 50% of eligible costs, from previous 30%) • Prepared to spend more than the carbon tax collected to support worthwhile projects Transition period to help companies adjust and improve energy and carbon efficiency #2 Impact on Competitiveness
- 8. #3 Impact on Cost of Living • Transparent and upfront communications on the potential impact of carbon tax • Increase in electricity prices around S$0.2 cents/kWh (or ~1%) increase from tariffs • Small compared to historical quarterly fluctuations of up to 10% • Pricing carbon is in line with philosophy for right pricing of scarce resources • Transitional assistance for households to adapt to the carbon tax; energy saving from best practices such as adopting energy efficient household appliances can more than offset carbon tax Impact is modest and manageable
- 9. #4 Abatement Benefit • Carbon tax trajectory encourages emitters to internalise carbon constraints • Impact on large emitters • Clean tax system • Revenue recycling
- 10. Thank You