Linking Carbon Tax Increases to Technology Readiness or Regional Carbon Price Movements
Ministry of Sustainability and the EnvironmentSpeakers
Summary
This question concerns MP Mr Yip Hon Weng’s inquiry on why Singapore maintains its planned carbon tax trajectory of $50 to $80 per tonne by 2030 rather than linking increases to technology readiness or regional price alignment. Minister for Sustainability and the Environment Grace Fu Hai Yien responded that tax rates must reflect Singapore’s higher decarbonisation costs as an alternative energy disadvantaged nation to provide a clear economy-wide price signal. She stated that advance notice of the trajectory allows businesses to adapt early while enhancing the business case for investing in low-carbon solutions. The Government will continually assess the post-2027 trajectory based on international developments to balance long-term resilience with near-term cost impacts on businesses and households. This calibration seeks to secure Singapore’s future competitiveness while managing economic pressures to safeguard jobs and sustain climate ambition.
Transcript
33 Mr Yip Hon Weng asked the Minister for Sustainability and the Environment given global adjustments to carbon pricing, (a) why has the Ministry maintained the planned trajectory of $50 to $80 per tonne by 2030 instead of linking increases explicitly to technology readiness or regional carbon price alignment; and (b) what specific indicators will justify moderating the pace of increase in carbon tax to safeguard jobs while sustaining climate ambition.
Ms Grace Fu Hai Yien: Tackling the complex challenge of climate change requires long-term planning and staying the course on a clear set of directions. As the world transits towards a low-carbon future, businesses and economies that remain emissions-intensive relative to their competitors will become less attractive. Singapore is alternative energy disadvantaged; our decarbonisation solutions are therefore more expensive and require longer lead times to study and implement. Consequently, our carbon tax rates need to reflect Singapore's higher costs of decarbonisation, to provide an economy-wide price signal to improve energy- and carbon-efficiency in all sectors and to enhance the business case for investing in low-carbon solutions.
The Government provides advance notice of the carbon tax trajectory to enable businesses to act early and adapt their operations. At Budget 2022, we announced a target carbon price of $50 to $80 per tonne by 2030. Nonetheless, we remain alert to the evolving near-term cost impact, especially on businesses. We will continually assess Singapore's post-2027 carbon tax trajectory carefully, in the light of international developments.
We will continue to calibrate our carbon tax trajectory to strike a balance between spurring decarbonisation to secure Singapore's longer-term resilience and competitiveness in a low-carbon future and managing the nearer-term cost impact on our businesses and households.