Carbon Pricing (Amendment) Bill

Order for Second Reading read.

1.33 pm

The Minister for Sustainability and the Environment (Ms Grace Fu Hai Yien): Mr Speaker, I beg to move, "That the Bill be now read a Second time."

This House has spoken extensively about the urgent need to address climate change. It is the greatest existential challenge to humanity today. Members have endorsed a Motion last year declaring climate change a global emergency and a threat to mankind; and another Motion this year calling on the Government to advance Singapore's inclusive transition towards a low-carbon society, in partnership with corporates, civil society and the community. Both Motions received support from all sides of the House.

The world is already experiencing more extreme weather events, from devastating floods in Pakistan, Thailand, Indonesia and Australia, to the record-breaking droughts and heat waves in Europe, China and Africa. In the absence of more ambitious climate action, the toll on human lives and livelihoods will be massive. By 2050, it is estimated that climate change could lead to 250,000 excess deaths per year worldwide and reduce global annual output by US$23 trillion – the equivalent of wiping out the gross domestic product (GDP) of the United States.

Recent events – the war in Ukraine, ongoing COVID-19 pandemic – have caused economic hardship and energy shortages throughout the world, casting a dark shadow on climate action. We must press on as climate change does not wait for events to be over. Countries are gathering in Egypt for the 27th United Nations Climate Change Conference, or COP27, to implement the Paris Agreement goals of capping long-term temperature rise and enhancing climate resilience.

In their latest report released ahead of COP27, the UN Climate Change Secretariat has warned that the world is not on course to meet these targets. Collectively, we must do better to turn the tide and secure a liveable and sustainable future.

Two weeks ago, at the Singapore International Energy Week, Deputy Prime Minister Wong announced that Singapore will raise our ambition to achieve net-zero emissions by 2050. We will also revise our medium-term international commitment – our Nationally Determined Contribution, or NDC – to peak our emissions earlier, and reduce our emissions to around 60 million tonnes by 2030.

Singaporeans have shown strong support towards our green transition, as announced by the Deputy Prime Minister. Our stakeholder consultations show that an overwhelming majority of corporates, non-government organisations (NGOs) and citizens believe that addressing climate change is a key priority.

We are making headway in our green transition. We are decarbonising our power sector by increasing solar deployment and harnessing green electricity imports from the region. Our National Hydrogen Strategy was recently unveiled at the Singapore International Energy Week. We are partnering major industry players in the Energy and Chemicals sector to develop needle-moving solutions such as carbon capture and storage. We have enhanced grant support for companies hoping to deploy energy-efficient technologies. We will promote resource circularity in our local industry to further reduce energy consumption and curb emissions. We are greening our public transport operations and expanding the electric vehicle ecosystem. And we are venturing beyond our shores and seeking out opportunities for international collaboration on green technologies and carbon markets, to get to net zero.

We need an effective carbon price to activate carbon mitigation solutions that will help us achieve our net-zero ambition.

The carbon price provides an effective policy to motivate emitters to take action to reduce their emissions. Setting the price at the right level requires careful calibration. Too low a carbon price will not provide sufficient incentive to make the necessary changes to achieve our emissions target. Too high a price will make the change too steep, erode competitiveness and destabilise our corporate sector.

The proposed carbon price was set after carefully balancing the environmental, economic and social needs of our country.

We have considered the availability of cost-effective green technologies and products, the pace of change we need to have and that our private sector can manage, and the support we need to give our companies and people to cushion the impact where necessary. All that with the intention of reaching our net-zero pathway.

Carbon pricing has been implemented in many countries. Close to 70 jurisdictions worldwide have implemented carbon pricing instruments, covering about a quarter of global emissions. Major economies, such as the European Union (EU), are driving global convergence through the imposition of carbon border adjustment mechanisms, intending to place equivalent tariffs on imports from countries with low or no carbon prices.

Members from both sides of the aisle have spoken in support of a higher carbon price on multiple occasions.

At Budget 2022, the Government announced that Singapore will raise the carbon tax and make a decisive move to achieve our net-zero ambition. The Carbon Pricing (Amendment) Bill will give effect to the key changes announced at Budget 2022 and strengthen our carbon pricing regime.

First, the Bill will amend the Third Schedule to the Carbon Pricing Act, or CPA, to adopt the revised carbon tax levels of $25 per tonne for greenhouse gas emissions in 2024 and 2025, and $45 per tonne for greenhouse gas emissions in 2026 and beyond.

We have decided to raise the carbon tax level progressively in phases and with advance notice, to give our businesses time to plan and carry out their low-carbon transition. The progressive increases will set us on a trajectory to reach between $50 to $80 per tonne by 2030.

Second, the Bill will insert new sections 20A to 20G in Part 5 of the CPA to set out the broad parameters of the industry transition framework, which will provide transitory allowances to companies in Emissions-Intensive Trade-Exposed, or EITE, sectors that face intense competition in the global market. We are mindful that our EITE companies will face higher costs than their counterparts in jurisdictions with no or lower effective carbon prices.

These transitory allowances will not offset the entire carbon tax obligation of the EITE companies. It will be limited to only a portion of companies' emissions, help to alleviate near-term competitiveness concerns, and provide a form of support to the companies as they work on reducing emissions and invest in cleaner technologies.

By providing for a transition framework, we minimise the risk of carbon leakage—where companies relocate to another jurisdiction with less stringent climate policies. Similar frameworks have also been implemented in other jurisdictions with carbon pricing regimes, including the EU, South Korea, and California.

Similar to our corporate income tax framework under the Economic Expansion Incentive (Relief from Income Tax) Act 1967, the industry transition framework will be administered by the Minister for Trade and Industry, who can assign relevant functions and powers to an appropriate public body.

To drive our industry towards becoming best-in-class, the amount of allowances awarded to each facility will be determined based on their performance on specified energy efficiency or carbon intensity benchmarks, or their decarbonisation plans. Companies in non-EITE sectors can continue to tap on support from the Government through broad-based schemes such as the Economic Development Board (EDB)'s Resource Efficiency Grant for Emissions and the National Environment Agency (NEA)'s Energy Efficiency Fund.

Third, the Bill will set up the International Carbon Credits framework, or ICC framework, through sections 33A to 33D in Part 5 of the CPA.

The ICCs referred to in the Bill are tradable certificates that represent the reduction or removal of emissions from the atmosphere, generated from projects or programmes outside Singapore. These carbon credits are generated by emissions reduction or removal projects that would not have materialised under a business-as-usual scenario, but are made possible due to financing from carbon markets.

Examples include reforestation projects that sequester more carbon in the atmosphere; or projects that help local communities switch from firewood to cleaner biogas cookstoves, which reduce emissions from current sources.

A robust carbon market which efficiently matches the demand and supply of high-quality carbon credits has multiple benefits. One, carbon-emitting companies gain access to an alternative decarbonisation pathway for hard-to-abate emissions. Two, much-needed finance can be channelled to support emissions reduction or removal projects globally. Three, these projects can bring valuable co-benefits, such as biodiversity conservation and air pollution reduction.

The development of well-functioning carbon markets is, thus, a vital part of global efforts to get to net zero.

With the finalisation of Paris Agreement Article 6 rulebook at COP26, countries can now cooperate through carbon markets to mutually support their respective climate targets and the raising of global climate ambition. As an alternative-energy disadvantaged country with limited domestic mitigation potential, Singapore is keenly exploring these new possibilities.

In recent months, we have signed Memoranda of Understanding (MOUs) with Indonesia, Morocco, Colombia and Vietnam; and exchanged Letters of Intent with Ghana to affirm our shared commitment towards advancing cooperation and capability building on carbon markets. We will step up our efforts to engage more like-minded partner countries with credible climate targets, both in the region and beyond.

Under the ICC framework, companies will have the option to tap on eligible ICC to fulfil part of their carbon tax liability.

Currently, companies only have one mode of carbon tax payment – by surrendering a corresponding amount of Fixed-Price Carbon Credits (FPCC), as referred to in the Bill, purchased from NEA at the prevailing carbon tax level.

The Bill will amend existing sections 2 and 17 of the CPA respectively. First, to introduce the definition of an ICC, as a certificate representing one tonne of emissions reductions or removals generated from projects and programmes outside Singapore; and two, to allow companies to surrender eligible ICC as a valid alternative mode of carbon tax payment, in addition to FPCC.

The ICC framework will ensure that the ICC surrendered are of high environmental integrity and compliant with Article 6 of the Paris Agreement. The new section 33A will stipulate that all ICC surrendered must adhere to a set of eligibility criteria, which will be prescribed in subsidiary legislation.

We intend for our eligibility criteria to minimally reference the Carbon Offsetting and Reduction Scheme for International Aviation, or it is more commonly known as CORSIA standards. These are a set of environmental integrity standards that have been developed and backed by a multilateral process led by the International Civil Aviation Organisation (ICAO), in consultation with green groups and experts, and are widely regarded as some of the most rigorous in the industry.

As the market for carbon credits is nascent and growing, we will review our eligibility criteria periodically to align with developments.

I should emphasise that while the ICC framework provides a complementary pathway for companies to decarbonise, reducing emissions through domestic abatement efforts will remain our priority.

Hence, the new section 33B will stipulate that the ICC surrendered must be capped at a prescribed facility-level limit. This is currently intended to be set at 5% of taxable emissions and will be prescribed in the subsidiary legislation. This limit is aligned with other comparable jurisdictions with similar climate ambitions, such as South Korea and California, and ensures that the ICC framework does not diminish the impetus for companies to cut emissions. We will continue to review the facility-level limit over time to align with international developments.

The ICC framework parameters apply only to companies that are carbon tax-liable and are surrendering credits to fulfil part of their carbon tax liabilities. They do not apply to the voluntary carbon market, where any company can purchase carbon credits to offset their own carbon footprint voluntarily and as part of their corporate climate targets.

The Bill will also update the list of greenhouse gases to keep pace with the latest global developments and refine carbon tax administration. The list of greenhouse gases and their Global Warming Potential values will be updated in the First and Second Schedules to the CPA, in line with newer standards adopted by the Intergovernmental Panel on Climate Change (IPCC).

The Bill will also amend the Second Schedule to remove nitrogen trifluoride (NF₃), as a non-reckonable greenhouse gas. This will bring NF₃ emissions within the coverage of the carbon tax. We intend to do so from 2024 onwards. This is aligned with the UN Framework Convention on Climate Change (UNFCCC) and its Katowice rulebook, which require all parties to include NF₃ in the reporting of their national emissions inventory by 2024. The inclusion of NF₃ will mainly affect facilities in the Electronics sector, but transitional support will be provided to affected companies through grants and incentives, such as the Resource Efficiency Grant for Emissions and Investment Allowance for Emissions Reduction.

The Bill will also introduce amendments to improve tax administration. To minimise unintended gaps in carbon tax collection when there is a transfer in operational control over a taxable facility, the Bill will amend various sections of the CPA to impose revised registration, reporting and payment obligations. To reduce compliance costs, the deregistration criteria will be expanded to allow companies to apply for deregistration if their facility has ceased operations. In addition, NEA will be empowered to deregister a registered company and facility if the person has wound up, been dissolved, or ceased to exist.

As the carbon tax level is raised from 2024 onwards, the Bill will also prescribe the treatment for the carryover or refund of FPCC purchased at the "old" price and increase the thresholds for waivers of small assessments and appeals to the High Court by a commensurate degree, to simplify administration and minimise the regulatory burden on taxable facilities.

Mr Speaker, to conclude, the Carbon Pricing (Amendment) Bill will ensure that our carbon pricing regime remains fit for future; strengthens the impetus for businesses and individuals to reduce their carbon footprint and supports the growth of the green economy; in particular, by contributing to the establishment of high-integrity, internationally credible carbon markets.

It is informed by our principled, balanced approach to carbon pricing and reflects Singapore's unwavering commitment to decisive climate action. With that, Sir, I beg to move.

Question proposed.

Mr Speaker: Mr Louis Ng.

1.53 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, last year, this House affirmed that climate change is a global emergency. This year, through another Motion by the Government Parliamentary Committee (GPC) for Sustainability and the Environment, this House called on the Government to partner businesses and Singaporeans to make Singapore a low-carbon society. Since then, the Government has responded clearly and positively.

There was Deputy Prime Minister Lawrence Wong's announcement last month that Singapore will aim to reach net-zero carbon emissions by 2050. Many of us have fought hard to have this ambitious target for many years now and this was a topic I raised repeatedly, and almost annually, in this House.

Sir, in 2018 I said that Deputy Prime Minister Lawrence was my favourite Minister. I am happy to say now that with this latest net zero announcement by him, he remains my favourite Minister.

On a serious note, there is a reason Singapore's net-zero target is such a big deal. Singapore's word is worth its weight in gold, and the world knows it. Today's Bill is a testament to that fact.

This Bill raises carbon tax to the levels announced in this year's Budget. I have always said carbon tax is our best weapon against climate change. The new rates sharpen this weapon and helps Singapore achieve its net-zero emissions goal.

I have three points on how we can continue the push towards a low-carbon society.

My first point is on companies in EITE sectors. These sectors include the energy, chemicals and electronics sectors. This Bill allows the Government to grant allowances to companies in EITE sectors. In its public consultation, the Government said that these allowances are meant to help such companies "manage the near-term impact on business competitiveness and mitigate the risk of carbon leakage".

I do understand that we need to remember the trade-offs. We want to push for climate change, but we do not want to push businesses away. But green groups are concerned, and rightly so. Every allowance erodes the coverage of our carbon tax and reduces the urgency to go green. Every allowance weakens the effectiveness of the carbon tax. I have three points to make on this.

First, can Minister share how many companies currently belong to the EITE sector and will pay carbon taxes? In other words, how many companies are currently eligible for these allowances?

Second, given that the allowances are meant to reduce the "near-term impact" on business competitiveness, why does the Bill set no end date for such allowances to be granted? How will the Government decide when to stop granting allowances? Will it consider committing to 2030 as the year by which it will stop granting allowances? It seems fair to say that the near term should last no longer than eight years from today.

Third, will the Ministry consider making it a practice to name all companies that receive such allowances from the Government? There is no reason these names should be a secret. They are clearly not a matter of commercial sensitivity and companies that do not receive such allowances will rightly wonder whether the Government is secretly granting allowances to their rivals in the same sector. We must not let our carbon tax regime fall under such a cloud of suspicion.

My second point today is on the coverage of our carbon tax.

Our carbon tax, along with our transport fuel tax, currently covers 90% of our nation's emissions. This is a high proportion, but every percentage counts in the fight against climate change.

At this year's Budget debate, I asked the Government to raise this percentage by lowering the carbon tax threshold to include smaller emitters that are "reportable facilities". The Ministry's position is that lowering the threshold would impose significant regulatory burden and cost on companies, without any meaningful increase in coverage.

Can Minister share how compliance costs would increase for a reportable facility to become a taxable facility?

As I mentioned during the debate, operators of these facilities already have to pay the costs of tracking their emissions. So, the only obvious new cost is just the tax itself, and it is precisely my point that they should pay this tax – so that they have an incentive to cut the emissions.

My third and final point today is on publicising carbon tax data.

I previously asked that the Government publish more granular data on the impact of our carbon taxes, such as the trend in emission levels for taxed facilities and the breakdown of revenue by facility type. The Government answered by saying that company- and facility-specific data were confidential information that it could not disclose under our Carbon Pricing Act.

To address this, I suggested that the Government publish a ranking of top emitters without sharing the exact emissions level. This would allow the public to make more informed consumption decisions without compromising business confidentiality. Minister Grace Fu's response was that the Ministry agrees with the need to provide strong impetus for companies to reduce emissions and will continue to study how we can spur this meaningfully.

Can Minister share if it will now consider publishing a ranking of top emitters without the exact emissions level?

In addition, given that companies may now buy international carbon credits instead of paying carbon tax for up to 5% of taxable emissions, will the Ministry also consider publishing data on trends in ICCs used by companies and facilities?

In summary, I hope that we can clarify and limit allowances granted to EITE companies, expand the carbon tax to all reportable facilities and be more transparent with data on top emitters and ICCs.

Sir, we have done a lot in our battle to tackle climate change. Ultimately, we need to remember this quote: "Climate change is sometimes misunderstood as being about changes in the weather. In reality, it is about changes in our very way of life".

All of us need to change our mindsets and our lifestyles. All of us have an important part to play. All of us need to work together. I thank all the activists, NGOs, businesses and our public officers for their passion, determination and partnership in this important fight.

In my opening speech for the Climate Change Motion in 2021, I said, "I live this moment with sadness and optimism. Sadness because we are somehow fighting the same battle that our forefathers fought decades ago. But also, optimism – because we are now much clearer about what we can do. Optimism because Singaporeans, more than ever before, are speaking up and taking action".

Unfortunately, the sadness continues as each day, we see the effects of climate change right before our very eyes and we feel this change. We see how it may be getting worse and that we are running out of time.

The sadness and, perhaps worry, is fuelled by what UN Secretary-General Antonio Guterres said just yesterday: "Greenhouse gas emissions keep growing. Global temperatures keep rising. And our planet is fast approaching tipping points that will make climate chaos irreversible. We are on a highway to climate hell with our foot on the accelerator."

But – and it is a big "but" – I remain optimistic, and I hope we all do. There is so much progress made, so much more people joining this movement and millions wanting to take action. Let us ride on this wave and this growing movement to ensure that we have a healthy planet to live in. Sir, I stand in support of the Bill.

Mr Speaker: Mr Leon Perera.

2.00 pm

Mr Leon Perera (Aljunied): Mr Speaker, Sir, the Carbon Pricing (Amendment) Bill makes changes to our carbon pricing regime, including taking the major step of hiking the carbon price. As we debate this Bill, I am proud that our Singapore representatives and youth environmental activists are flying our flag in Egypt at the COP27. And their participation reminds us of what is at stake here, why this climate change fight is critical, not only for the world but for Singapore's national interest.

On that note, I would just like to say that I am sure that many Members of the House would agree that all of us owe a profound debt of gratitude to our Singaporean environmental activists who have helped to galvanise public opinion, move the needle and generate very useful ideas for policy debates.

Sir, the Workers’ Party supported the original CPA and we support the thrust of this amendment Bill as well, as will be reiterated by my Workers' Party colleagues who will be speaking on the Bill later. In the past, Workers' Party Members of Parliament have spoken about how there is scope to raise the carbon tax when comparing Singapore with international benchmarks. These are moves in the right direction for Singapore.

Why is that so? What is at stake here? There is no greater challenge facing humanity than that of climate change. Rising temperatures triggered by growing greenhouse gas (GHGs) emissions in the atmosphere will lead to freakish weather patterns, rising sea levels, rising incidence of heat-related illness, the loss of biodiversity and many other huge, dangerous, and perhaps, irreversible challenges for Singaporeans and for people around the world.

We must avert what is known in economics as the tragedy of the commons – which, in this context, means the problem created when individual countries pursue their national interest in an uncoordinated fashion at the expense of the global environment, leading to disastrous effects applicable to all countries. The uniqueness and seriousness of the challenge we face here calls on us to show national resolve and unity across the political spectrum.

If nations do their part, there is every reason to believe that the world can contain the danger posed by climate change. We should remember how nations came together in 1987 to bring into being the Montreal Protocol that succeeded in protecting the ozone layer. That precedent should give us hope that we can avert or, at least, substantially mitigate disaster at the edge of the precipice.

Most mainstream economists accept that carbon pricing is probably the most sound and effective approach to controlling emissions of GHGs. Jennifer Morris, research scientist at the Massachusetts Institute of Technology (MIT), puts it this way: "Rather than regulating exactly where and how emissions should be reduced, carbon pricing gives markets the flexibility to find the cheapest ways to lower emissions." The EU, Japan, China, California and a few other US states are already using carbon pricing.

A carbon price, by imposing a tax on large GHG emitters, can potentially result in part of that tax burden being passed on to consumers in the form of higher prices. But such inflationary pressures need to be mitigated by two means.

Firstly, good competition policy, which by optimising competition in key industries, tends to reduce the pass-through effect of the tax to end-consumers vis-à-vis what it might have been.

Secondly, social policies that cushion the effects of price rises on the most vulnerable segments of the population and, thus, help to enhance access to opportunities, social mobility and the perception of fairness across all our social groups. This is important, not only because we desire social justice, but also because climate change mitigation measures need to be designed to ensure the broadest possible public support, so that the country will continue to back such measures through thick and thin and across political cycles.

While we support the thrust of this Bill, the Workers' Party has some amendments to suggest. Our amendments, while accepting the principle that the Government can and should create allowances to reduce the carbon tax paid in specific cases, seek to limit the scope and extent of allowances; and to increase transparency and accountability, so as to ensure that the carbon pricing regime is seen to be fair, clear and uniformly applicable to all, which enhances public buy-in, while at the same time, making sure that it is a sufficiently robust nudge to businesses to find the best ways to reduce emissions.

We do agree that allowances are needed for nationally strategic projects that are important for job creation and job defence, as well as to hedge against needless carbon leakage of large EITE facilities. But we believe that the balance point can be struck a little differently between promoting emissions reduction and ensuring robust support for business using economic incentivisation.

The Workers' Party's proposed amendments to this Bill have been filed by my Parliamentary colleague, Sengkang Member of Parliament Ms He Ting Ru, and myself. They stand in the Order Paper Supplement. In our speeches, we shall explain these amendments in detail and address possible objections.

Mr Speaker, Sir, many Singaporeans are conscious of the threat posed by climate change to Singapore and the world. Many Singaporeans want our climate change policies to show ambition and seriousness. This is backed up by the recently released results from an online public consultation exercise run by the National Climate Change Secretariat, or NCCS. Of the 490 responses, 94% of respondents were willing to withstand trade-offs and inconveniences to achieve enhanced climate targets.

Some of the suggestions from respondents, such as pivoting away from emissions-intensive industries and doing more to electrify our commercial fleets and vehicle population, have been subjects taken up by the Workers' Party's Members of Parliament in this House in the past, including Hougang Member of Parliament Mr Dennis Tan and Sengkang Member of Parliament Mr Louis Chua, for example. Before leaving this topic, it should be said that the respondents for this consultation contained a disproportionate percentage of younger people.

Mr Speaker, Sir, beyond noting how public opinion is shifting, we should also note that being green need not be the enemy of economic growth. We can, and must generate good jobs from cleaner and greener economic activities. In fact, most of the large multinational companies, or MNCs, in pollutive industries themselves, seeing the writing on the wall, are trying to show that they are transitioning towards greener practices – like refining biofuels rather than crude oil or using carbon capture and sequestration technology, for example. Our challenge going forward is to find ways to promote a serious pursuit of ambitious climate goals with the pursuit of economic ones in tandem, not to counterpose the one to the other.

Mr Speaker, Sir, I would now like to move on to explain the amendments standing in my name on the Parliamentary Order Paper Supplement for today, starting with the amendments which deal with allowances awarded under the carbon pricing regime.

Sir, the new provisions of this Bill, on the face of it, introduce allowances that go against the "fair, uniform and transparent price signal" of the no-exemption carbon tax on large emitters, which Ministers have previously argued are important for carbon tax to be effective. For example, in 2021, the Government said in this House that: "Our carbon tax framework has been tailored to our context, putting in place a fair, uniform and transparent price signal to incentivise emissions reductions".

Having said that, the Workers' Party accepts the case for Government allowances vis-à-vis the carbon tax paid by specific entities in principle. Allowances may be justified on two grounds.

Firstly, that of attracting or retaining projects of a strategic nature where such projects are nationally important for job creation, job defence or the dynamism of our economy; as well as to manage the extent of carbon leakage whereby some firms in EITE sectors may transfer investments to countries with less green policies or with no carbon tax. This first rationale also applies to economic incentives awarded by agencies like EDB and Enterprise Singapore, for example.

Secondly, that of creating more of a runway for large entities whose products and prices affect many households to transition to a lower carbon-emitting business model in cases where that is justified.

On this note, I would like to ask the Government to expand on the considerations that will come into play in awarding allowances in more detail, a topic treated briefly in section 20D of the Bill.

However, when we consider the question of allowances, there is a difference between carbon tax allowances and general economic incentives. Economic incentives provide benefits that not all firms enjoy. Carbon tax allowances, on the other hand, mean that all large emitters have to pay the carbon tax, but some large emitters have to pay less when awarded an allowance.

There is a strong case to circumscribe the carbon tax allowances awarded in terms of extent as well as in terms of time. This is for two reasons.

Firstly, this is so as to demonstrate our ambition and seriousness in the face of such a major challenge as climate change; to demonstrate the political will to keep allowances to the bare minimum, so as to generate a strong nudge on business.

Secondly, this is so as to foster confidence among companies themselves that the carbon tax regime and, indeed, our entire business environment, are fair and transparent. This is necessary as the carbon tax is a significant burden applicable to firms and also the wider public. Imposing this burden comes with a responsibility to ensure that the public and business community see that the burden will be imposed fairly; and exceptions made on a very limited, transparent basis with strong reasons given, as opposed to a perception that allowances are awarded to companies close to any future government for one reason or another, for example. Only then will we obtain a wider buy-in to the carbon tax regime from citizens and the business community that we need.

Hence, we have tabled amendments to the broad powers given to the Minister to pick and choose taxable facilities to award non-time-limited allowances to. Creating a more limited allowance regime sends a stronger signal about how we intend to approach the carbon tax and ensures that no government of the day can prop up any large emitter in perpetuity.

At this point, Mr Speaker, Sir, perhaps I should add that before these amendments, both mine and Ms He Ting Ru's, can be voted on at the Committee stage later, I understand that we need the President's recommendation as these are tax-related and have fiscal implications. I am not aware if that recommendation is forthcoming at this point. But I shall continue to make the arguments for these amendments —

Mr Speaker: You can talk about it, and we will address it at the Committee stage.

Mr Leon Perera: Okay. Our amendment (3) in the Order Paper Supplement tackles this problem of having non-time-limited allowances that are not really as circumscribed in scope as they could be, by limiting the number of times a taxable facility can receive allowances. Assuming that businesses are able to get allowances when they ask for it, our amendment would mean – to take an example – that a facility can obtain allowances in the following years: 2024, 2025, and, if still deemed necessary after a gap, 2029 and 2030, with 2026, 2027 and 2028 being no allowance years. This still leaves a substantial runway for companies to transform to low-emission processes and sources from now until 2026; and leeway for the Government to apply an allowance in 2029 for particularly large and strategic projects, if deemed necessary.

And I would note at this point that large and strategic projects, facilities, factories and so on, typically have breakeven periods and are invested and set up based on projections that go forward far into the future, sometimes 10 years, sometimes 20 years.

Sir, our amendment (10) limits the extent of allowances to a maximum of 33% of the carbon tax assessed to be payable and not 50% as the wording of the current Bill reads, to our understanding. In other words, our amendment sets up a cap of 33%, because the tax charged must not be less than double the awarded allowance. We believe that lowering the allowance cap makes for a stronger nudge for large emitters to move towards greener business models faster. We believe that our amendment makes for a better balance point between the competing objectives on the table here.

Having said that, I would like to point out that for projects and companies that are deemed to be nationally strategic; or where their business affects the lives of many Singaporeans and they may need more time to transition to greener processes; or we may want to cushion the effects on a wider public, especially vulnerable groups, the Government still has other tools that can be used to address that situation, namely, first of all, other economic incentives that can be applied under other Acts; and secondly, fiscal tools to implement some degree of income redistribution and cushion the effect of higher prices on more vulnerable groups, in a targeted fashion.

Sir, next, I would like to move on, to speak on the amendments which have the effect of creating a public registry of the Government's allowance awards. Our amendments "ensure the award is listed on a registry that is provided free-of-charge and easily accessible to the public through electronic means, specifying..." and so on. The information which is required to be included in this public registry that we are proposing, in addition to that referring to the number of emissions years the allowance is applicable to and the methodology for calculating this, include:

"(c) the registered person of the taxable facility who has received allowances; and

(d) the Minister's reasons for deciding to award the allowances.".

The current version of the Bill does not require the Minister to disclose allowances or any details on them. Some members of the public raised this issue during consultations and some study groups as well, and in the Ministry's public response after the carbon tax consultation, the Ministry cited commercial sensitivity concerns. The Government has also said it is "not productive or correct" to put companies which pay carbon tax under public scrutiny.

It could be argued that such awards should remain confidential because their disclosure could give the competitors of the company receiving the award some information that might give them a competitive advantage in the various actions that they choose to undertake; or which might lead to that company being placed in an unfavourable position when negotiating with stakeholders, such as customers and partners, who may ask for better terms.

It could also be argued that being publicly known as a recipient of such an award may subject the recipient and their employees to some degree of public opprobrium due to the perception of being on the receiving end of some unfair advantage of some kind.

Or it could be argued that disclosure of awards may hinder the Government in applying different kinds of awards to different companies in consideration of what is needed to close the deal in each case, therefore, making the Government operate at a disadvantage in calibrating the award in each case to the bare minimum necessary to serve the national interest.

There could be other considerations here along similar lines.

Companies receiving Government incentives under laws like the Economic Expansion Incentives Act are currently not disclosed, nor, of course, are the amount of the incentives disclosed. Why, then, do we call for the carbon tax awards to be disclosed? And are we calling for the same disclosure for other types of economic incentives? Sir, we are not.

In fact, there are significant differences between carbon tax allowance awards and more general economic incentives for investment.

A carbon tax allowance is a reduction in tax applied to one entity, versus all similar entities which have to pay that tax. Hence, it is a lessening of a burden applied to all in the case of one. An economic incentive, on the other hand, gives additional benefits to one company that all do not receive. The difference between the two scenarios is that in the first case, a new tax being imposed means new costs to all. If one entity has their cost lessened, to obtain general buy-in for the tax among all companies and the public, a certain degree of transparency and public accountability is warranted for the new regime to be seen as fair.

Moreover, given that the carbon tax imposes costs across the whole society and an allowance blunts the effect of that tax to some degree, there is a public interest in knowing who receives such awards, to ensure accountability vis-à-vis the goals of the carbon tax. This helps ensure that any government of the day does not prop up certain companies for an unjustifiably long period of time, or even in perpetuity, for whatever reason. This ensures public support for a costly tax that is meant to be, in the words of the Government spoken in this House in 2021, a "fair, uniform and transparent price signal" that advances climate change goals; or, to quote the Government's words again in 2018, to create a carbon tax regime that "will apply uniformly to all sectors, without exemption. This will maintain a transparent, fair and consistent carbon price across the economy."

On a more practical note, not ensuring that transparency is also not a foolproof means of keeping the award information secret. Such information often gets leaked and shared by word of mouth within the community of persons interested in such things and may breed speculation and undermine confidence in the business environment. Sometimes, Government incentive information needs to be disclosed to some degree in public filings in the company's home country.

To address the competitive concerns and the concerns about Government agencies having a legitimate interest in not revealing the amount of the award or the terms of the award given to specific companies in specific cases, our proposal for a public registry does not require information about the quantity of the award to be disclosed. I repeat – it does not require information about the quantity of the award to be disclosed.

Sir, I trust I have explained why the Workers' Party is calling for more transparency in the case of carbon tax allowances but not for an equal level of transparency when it comes to general economic incentives for inward investment.

Sir, amendment (12) deletes the language of line 21 to 24 on page 14 of the Bill which allows the Minister to determine "in any other manner that the Minister considers appropriate" ways to incentivise the continued reduction in GHG emissions of the taxable facility.

We propose this deletion so as to eliminate a provision that might allow a Minister to disregard the formula specified in the previous section for the maximum cap for an allowance. That formula should be taken more seriously.

In short, we believe that deleting those lines reduces overly broad executive discretion and strikes a better balance point – between legitimate executive discretion on the one hand and creating a transparent, rules-based system on the other hand.

In conclusion, Sir, there are other amendments that are merely language edits, that are consequential to the substantive amendments that are numbered in the Order Paper Supplement as (3), (4), (7) and (10). I shall not explain them in detail but would be glad to take any questions on those.

Another important set of our amendments will be explained later by Sengkang Member of Parliament Ms He Ting Ru.

Sir, in conclusion, we support the thrust of the Carbon Pricing (Amendment) Bill before the House. We must avoid the tragedy of the commons – as a country and as a species.

However, we have proposed a number of amendments that we feel strengthen the thrust of the Bill, make it better and which will enhance wide public acceptance, as well as better align the provisions and effects of the Bill with the climate change outcomes that we seek. Sir, I beg to move the 12 amendments standing in my name in today's Order Paper Supplement. Thank you.

Mr Speaker: Mr Leon Perera, you will address those in the Committee stage. We do not move amendments now. Mr Gan Thiam Poh.

2.18 pm

Mr Gan Thiam Poh (Ang Mo Kio): Thank you, Mr Speaker, Sir. I fully support our Government's net-zero ambition and the implementation of measures to achieve our goal, including the carbon taxes. There is no doubt that our determination to not damage our environment further will provide a good future for our children and grandchildren.

Ideally, there should be a level playing field for all on this earth, for every individual, whether one is a big or small economy, a big or small country. We must not forget that we all share the same earth. While we are determined to stick to our environmental protection commitments, we cannot be sure others will do likewise. There remains a possibility that other countries will continue to resort to the easy way out, in order to make themselves more price competitive. This is the reality of the global marketplace.

In view of this, how will the Government help EITE sectors, such as the electronics, chemical and energy industries to remain economically competitive? How will the Ministry ensure that jobs are not lost to jurisdictions with less stringent legislation? If this were to happen, the global carbon emissions will not be reduced despite the loss of local jobs and investments. How will the Government get the largest carbon emitters, such as all the energy producers in the world, to take the lead in becoming more green?

I would like to know what the allowances are to incentivise the continued investments in decarbonisation. What are the incentives to develop optimal solutions and technology that will result in no additional cost to achieve net-zero carbon emissions.

Finally, the impact of the carbon taxes will spread to all sectors of our economy. How will the Government minimise the impact on consumers at the receiving ends? How would the Government use the tax revenue to support our residents and the decarbonisation efforts? With that, I support the Bill.

Mr Speaker: Assoc Prof Jamus Lim.

2.21 pm

Assoc Prof Jamus Jerome Lim (Sengkang): Mr Speaker, I had previously spoken during the Climate Change Motion debated at the start of the year, about the elegant simplicity of a carbon tax, and its importance as an instrument for addressing the global climate emergency. At the time, I explained why the Workers' Party believes that an emissions price of $15 per tonne – targeted by the existing CPA for 2030 – would be inadequate, and why a tax ranging between $58 and $133 would be more tenable, with $100 a ton being a reasonably close-to-median and scientifically-supported benchmark.

While the Government has declined to come as far as we have advocated, the proposed amendments to the CPA of 2018 provides for increases to the carbon price and carbon tax rate, which the Ministry of Sustainability and the Environment (MSE) has indicated, will now be in the order of between $50 and $80 per tonne by 2030. While we continue to believe that the appropriate level should be higher, we view this as an important compromise.

My Workers' Party colleagues Leon Perera and He Ting Ru have proposed two sets of amendments to the Bill, which we view as important safeguards to further enhance transparency and grant additional flexibility to businesses in how they satisfy their carbon commitments.

Because I am all about practice and not just theory, I wish to speak about transition issues associated with the practical implementation of a carbon tax; in effect, aspects surrounding the amended Third Schedule of the Bill. The Schedule currently proposes an increase of the carbon tax, from $5 per metric ton of carbon dioxide emissions up till 2023, to $25 in 2024 and 2025, and to $45 from 2026 onward. Presumably, there will be subsequent legislation after 2027 to conform with the stated $50 to $80 target.

I believe that this unnecessarily binds the hands of policymakers to a schedule that could be detrimental to our short-term economic performance.

It is easy to recognise the appeal of a steady increase in the carbon tax: it is gradual, predictable and incremental, thereby affording businesses time and certainty as they adapt to an impending tax increase. But its unyielding nature may also be its undoing.

After all, the increase in carbon taxes to the proposed range is fairly sharp: in just three years, the rate will be one order of magnitude greater than the $5 a tonne currently in place. Such a significant hike may also appear to be ill-timed, with our economy just exiting a relatively recent technical recession in 2020 and currently struggling to manage global pressures from rising inflation.

There is, however, an alternative: allow the carbon tax to vary over time, with the specific rate adapted to the current prevailing state of the economy. Following standard principles of stabilisation policy, such an optimal tax would strike a balance between safeguarding the economy and jobs, while protecting the environment. If the economy is in a recession, God forbid, the tax would be scaled back. In contrast, if the economy is expanding strongly, it should be able to bear a stiffer increase in the carbon tax rate.

Of course, accurately calling the state of the economy in real time is admittedly a challenge. But modern macroeconomics, along with access to big data, has already made substantial progress on this front, and it is now possible to reasonably gauge where we stand in the business cycle. In addition, modern central banks routinely gauge the extent to which the economy has deviated from its steady state. The European Central Bank, for instance, adjusts member states' budget balances to reflect the contemporary state of the economy. I would be shocked if the Monetary Authority of Singapore (MAS) does not have its own in-house team that performs this very exercise.

Using this approach, the tax would adhere to a central rate outlined in the Third Schedule but be up- or down-weighted by the MAS' evaluation of the current state of the economy. For example, if we find ourselves sliding into a recession next year, the $25 rate could drop to $15 or $20, depending on the severity of the contraction, whereas it could rise to $30 or $35 as the economy rebounds.

Does this proposal undermine the case that other taxes, such as the Goods and Services Tax (GST), should not be raised at this point of the cycle? Not quite. If anything, the notion of tax policy being sensitive to the state of the economy is entirely consistent with the argument that an increase in the GST next year is also inappropriate.

The basic principle is that carbon taxes – like all taxes – should be higher when the economy is growing steadily and lower otherwise. But the reason why I had previously argued for a temporary freeze in GST hikes despite the economy presently growing steadily is because other policy levers – in particular, monetary and exchange rate policy, are already acting counter-cyclically. This implies that the role of fiscal policy should be limited to serving as a moderating ballast. Moreover, we should keep in mind that, unlike carbon taxes which applies to only goods and services that involve carbon in their production and hence, has a narrower impact, the GST is a broad-based tax, which affects nearly all supplies of goods and services. The impact that rising carbon taxes would have on the economy would have correspondingly a more limited scope.

This notion is corroborated by the data. A study that examines the macroeconomic implications of a carbon tax in Europe finds that there is no evidence to support the view that such taxes are job or growth killers. Another that explores whether carbon pricing on inflation, finds that it likewise does not.

Incidentally, such a time-varying carbon tax need not apply only to this particular transition period. If the Government subscribes to the general principle that a time-varying carbon tax is attractive, the rate can be adjusted every time the Singapore economy experiences an economic weakness and vice versa.

Beyond the instruments of fiscal policy – for which carbon taxation is a part – the Government can also attempt to realign monetary policy toward favouring green initiatives, too. This means that MAS can assist our transition process in its move toward net zero.

To be clear, MAS is no stranger to green initiatives. The MAS oversaw the inaugural launch of $2.4 billion worth of Green Singapore Government Securities (Green SGS) in August this year.

The MAS chief Ravi Menon has also explained how the MAS is supporting the development of a transition taxonomy – both at home and abroad – and spearheaded a host of other Enterprise Singapore (ESG) initiatives.

That said, the MAS has mostly been engaged in these initiatives as either a convener or a coordinator, under its financial development mandate. My suggestion is that it can affect the transition process even more directly, by embedding green considerations into its day-to-day operations. For example, MAS can target its open market operations toward green bonds. While the amount of tradable green bonds may be limited, consciously including green bonds in its potential portfolio of securities that it buys and sells when it conducts monetary policy, can assist us in this transition process.

Another way that the Government can support the green transition via financial development is to establish an Export Import (EXIM) Bank. This has been a core plank of the Workers' Party manifesto and is premised on the importance of offering financing to pursue internationalisation and digitalisation objectives for, especially, our small and medium enterprises (SMEs). To this, we can now add support for the green transition for SMEs to this list of objectives for a potential EXIM bank.

In an earlier response by then-Ministry of Trade and Industry (MTI) Minister Lim Hng Kiang's on why the Government did not feel that an EXIM bank was warranted, he stated that existing schemes under International Enterprise Singapore (IE Singapore) were deemed sufficient, without the "attending financial and implementation risks that setting up an EXIM bank would entail". While I understand such reservations, it is useful to understand why the Workers' Party, along with, in fact, the MTI's own Economic Strategies Committee have called for such a bank.

Export-import banks, along with export credit agencies, finance cross-border projects that the private sector would otherwise shun. Typically, these are projects that display substantial externalities, which are the costs or benefits that private agents either do not, or cannot, adequately factor into their own private decision-making. Such externalities include the risks of political upheaval, or propensity default on loans, or social benefits. Alternatively, projects may only be profitable at such a large scale that it is impossible for any single lender to achieve this scale.

Green projects, especially in infrastructure, satisfy both criteria, making an EXIM bank ideally positioned to fund them. Existing financing schemes, such as ESG trade loan facilities, credit guarantees, or political risk insurance schemes, do not adequately meet these needs, since they may not garner sufficient financial scale, or entail externalities that simply are not insurable. EXIM banks have also proven their mettle in times of crisis, preventing complete collapses in trade finance markets.

EXIM banks are, therefore, well suited to support green transition objectives. In fact, many green financing needs, such access to green energy sources, or carbon credit exchanges, are already inherently cross-border in nature. Consequently, the trade financing and international financial access portfolios of an EXIM bank could easily be expanded to enfold sustainability objectives. And indeed, the number of other EXIM banks, such as those in China, India, Hungary and Thailand, have successfully rolled out green on-lending facilities.

My Speaker, a carbon tax that better internalises the externalities associated with the use of carbon in our production is undeniably a step in the right direction and one that codifies into law our responsibility to take into account the welfare of future generations and the sustainability of our economic model. For this reason, I support the Bill.

But make no mistake: the transition to a lower-carbon economy and eventually to net zero, will be hard. As challenging as this may be, there is no reason why we should not ease the process as much as we possibly can. Allowing the carbon tax to dynamically adapt to the state of the economy, as well as introducing additional aspects to our monetary and financial policies that ease the transition process, will go a long way toward ensuring buy-in from those affected by the carbon tax.

As difficult as it may be for us today, it is perhaps apt to remind ourselves of why we make the sacrifices we do today. It is aptly summarised by a saying, frequently attributed to the Native American people, that "we do not inherit the Earth from our ancestors; we merely borrow it from our children."

Mr Speaker: Minister Grace Fu.

2.34 pm

Ms Grace Fu Hai Yien: Just a clarification, Mr Speaker. I have listened very intently to Assoc Prof Jamus Lim. And I appreciate his suggestion about making carbon tax vary in time, with the economic situation, with GDP or some projections that is short-term. I will address that later on in my Second Reading closing speech.

But there is a big chunk in the middle that talks about EXIM bank, that talks about financing. I would just like to clarify, whether he finds relevance of what he said to the Bill that we are moving today. In what way is MSE, as the Ministry moving this Bill responsible for what you have just said?

Assoc Prof Jamus Jerome Lim: I thank that the Minister for her question. As I have explained at the beginning of my speech, the bulk of what I am talking about is about a transition process. That is the whole point of why I am interested in speaking about the mechanism for getting to that process, while we are talking about the carbon tax.

Ms Grace Fu Hai Yien: Thank you very much.

Mr Speaker: Mr Cheng Hsing Yao.

2.36 pm

Mr Cheng Hsing Yao (Nominated Member): Thank you, Speaker, Sir. I would like to declare that in the preparation for this speech, I have sought inputs from private sector consultants in the carbon energy fields. I support the use of carbon pricing as a tool to help us peak carbon emission by 2030 and reach net zero by 2050. I also look forward to the transformative effect it will have on our economy and our environment.

When Singapore says it is going to do something, it will. That is one of our strengths. However, for the transition to net zero, we should maintain some flexibility and adaptability for the pathway to get there and for the final energy supply model. Energy, along with water and food, are vitals that keep Singapore going. Losing security of any one of them can incapacitate us within a very short time. I would like to seek clarification on our strategy to maintain energy security.

It was not too long ago that we courted some of the largest oil and gas companies to invest heavily into our Jurong Island. And Singapore became one of the world's largest petrolchemical hub despite not producing any oil or natural gas. Besides being a significant contributor to our GDP, it also contributed to our energy security.

We managed to secure our access to oil and natural gas through building up a strong petrochemical ecosystem, that is, industry, supply chain and logistics in and around Singapore. One day, green hydrogen could replace oil and natural gas as the primary energy vector. We also need to likewise implement a similar strategy to plug Singapore into the production, supply chain and market mechanism ecosystem of hydrogen. This complex endeavour will require years of planning and execution.

Green hydrogen shows promise, but when will it become ready to replace oil or natural gas is unknown. What happens if hydrogen and other alternatives take much longer to become viable? Meanwhile, how do we balance encouraging the petrochemical sector to transit into a low emission model, against the immediate impact on our economy and energy security?

For decades after our Independence, we have been subjected to frequent threats of having our water supply cut off. Thanks to technological advancement and the foresight of our leaders, we can technically achieve water self-sufficiency through harvesting our NEWater and Desalination National Taps. However, this is only true provided we always have access to energy. Losing energy security also means losing water security.

Direct import of electricity from foreign renewable sources, such as hydropower from Laos and solar power from Australia, may form a significant component of our total energy supply in the future. While the supply source can be diversified, the supply cables will ultimately have to physically pass through the lands and waters of our closest neighbours. The uninterrupted supply of electricity imports may be subjected to geopolitical risks.

Setting aside Government commitments, global investors and MNCs are already leading the way in factoring carbon emission into their business decisions. This will lead to higher demand for renewable energy around the world, including the countries that are exporting or planning to export renewable energy. If the source countries do not have sufficient renewable energy supply to meet their domestic demand, they may impose export limits.

Singapore's power grid's reliability is one of the important factors that helped us advance as a high-value manufacturing base, as well as a technology and financial hub. It is not just having access to power, but having stable, uninterrupted and reliable access to power. How do we manage potential fluctuations of power supply when a significant part is not "produced" domestically?

The COVID-19 pandemic showed us that low probability and high impact events do happen. The transition of our energy supply model into a low emission one while promising and exciting, will be met with many unforeseeable and uncontrollable factors. We must also be prepared for the proverbial "Perfect Storm". Thus, I would appreciate if the Minister could outline, as we seek to cut our carbon emissions, how our energy supply model will always be secured, resilient and reliable. Notwithstanding my clarifications, I support the Bill.

Mr Speaker: Ms He Ting Ru.

2.40 pm

Ms He Ting Ru (Sengkang): Mr Speaker, as the world gathers for COP27 this month, it is clearer than ever that the need for more action to reduce our carbon emissions is pressing. It is why we are debating amendments to the CPA today.

In April this year, the UN IPCC sounded a warning that we are running out of time to make changes to limit global warming. It concluded that limiting warming to around 1.5 degrees requires global GHG emissions to peak before 2025 – meaning in the next three years – and to drop by 43% by 2030. Even a more conservative target of two degrees warmer still requires global GHG emissions to peak before 2025 at the latest and to be reduced by a quarter by 2030.

While some decarbonising strategies rely heavily on the development of new technologies, we need to continue to pursue other avenues to ensure that we are properly supporting the green transition. These range from – amongst others – consumer education about necessary lifestyle changes, tackling greenwashing, to ensuring that our financing system is set up to properly, and sustainably, support the shift to a climate conscious economy and also to come up with a carbon pricing regime that equitably balances various considerations that come into play.

Indeed, a report fronted by McKinsey Sustainability in January 2022 warned that it is not technology that is the main limiting factor, but it is instead the big shifts in thinking and large-scale financing needed that are far behind schedule. More importantly, precisely because so many of these areas and approaches are relatively new, we must make sure that in our rush to "do something" about the problem, we take a moment to evaluate the effects and consequences of our policies. After all, well-intentioned but ultimately inappropriate policies may turn out to be even more costly to unwind when we are further down the path.

This is why we support the move to further refine our carbon tax regime, which is a key prong in a multifaceted approach for our transition to a green economy.

The largest contribution to Singapore's emissions undoubtedly comes from industry. And while it is industry that has been important for our economy, its decarbonisation is crucial, and our policies should be in place to speed progress and to be transparent along the way.

On this note, I, therefore, wish to seek an amendment to the Bill before us, the text of which is contained in the Order Paper Supplement, for the reasons below.

Currently, the Bill allows for facilities to surrender ICCs for up to 5% of their taxable emissions. Clause 33B of the Bill provides an exception where the Minister may "permit eligible international carbon credits to be surrendered in excess of the prescribed limit in any particular case or class of cases." This means that the percentage could be increased to more than 5% if the Minister permits. Allowing facilities to use ICCs for a sizeable portion of their emissions may mean that facilities end up having less incentive to cut down on taxable emissions, as they do not have to pay tax on that portion of emissions.

Many Members in this House have spoken on the regime's allowing the surrendering of up to 5% of their taxable emissions and in particular, my Sengkang colleague, Mr Louis Chua during this year's Committee of Supply (COS), asked about what accountability measures will be put in place to ensure transparency and fair implementation of this regime.

This question is still pertinent today. How will the Minister decide when to lift the prescribed limit? Is there a framework to constrain this decision-making process? I have therefore sought to make the amendments, as listing the decisions of the Minister on a public registry will allow both industry players and civil society to observe the use of ICCs over the years and whether particular facilities are over-reliant on the use of ICCs.

First, the danger of allowing facilities to continuously use ICCs beyond the prescribed limit is that facilities may look to purchase ICCs with low and favourable prices. This could mean that the cost of producing emissions is significantly less than the cost of paying tax on emissions, which creates a disconnect between the purposes of carbon tax and the permitted use of ICCs. Instead of being compelled by the prevailing carbon tax to cut down their emissions, the entity-owning facilities may turn their efforts to purchasing favourable ICCs instead.

The problem is exacerbated by how different ICCs may have different criteria for pricing credits. The value of credits also changes through rounds of trading between entities. The worth of each credit in a different ICC framework, and at different time periods, is different. And the entity-owning facilities can exploit these differences to obtain credits that give them the greatest financial advantage. This defeats the purpose of having a fixed carbon tax that has carefully calibrated increases over the years to discourage emissions and, in particular, to make emissions increasing expensive over time.

Second, having the public registry listing the Minister's decisions will also be a first step in examining whether the use of ICCs indeed fits its purpose of allowing facilities some leeway in producing emissions only in the near to medium term. If facilities continue to surrender ICCs for many years beyond the prescribed limit, this indicates that they may not have found a way to reduce emissions adequately to avoid paying carbon tax excessively.

Third, requiring the Minister to state their reasons for granting permission to surrender ICCs beyond the prescribed limit ensures that we are told the reasons for such decisions upfront, reducing the need for unhelpful speculation or even false rumours to take bed. It can also give comfort that the Minister has indeed carefully considered the issue of the surrender of ICCs and respect of each facility.

Note, too, that I have not, in the amendment, asked for a disclosure of the amount surrendered as we recognise the commercial sensitivities surrounding this information, particularly in the market environment that is that is still finding its feet, so to speak.

Finally, my proposed amendment is also aligned with the Voluntary Carbon Market Integrity Initiative's Claims Code of Practice, which calls for the transparent reporting of information. The Code of Practice states that companies must disclose how carbon credits are used towards their climate targets, including "whether or not the current credit is associated with corresponding adjustments by the host and/or by a country".

In addition, I would like to seek clarification on the quality and eligibility of carbon credits. I understand that NEA has signed separate MOUs with Verra and Gold Standard to support Singapore-based companies in using eligible carbon credits issued by Verra and Gold Standard to meet part of their carbon tax obligations in Singapore.

However, there is little further information on the criteria for eligible credits and the ability to verify the carbon-lowering activities of such ICCs is key. Could the Minister let us know when we can expect further details on the prescribed criteria as set out in clause 33A and how are these criteria being formulated?

It is also precisely because the market for ICCs is still new and highly unstandardised that makes it difficult to quantify, and therefore, their use can be controversial. Indeed, academics and environmental groups are concerned that the use of carbon credits could hinder, delay or even displace environmental efforts.

Key aspects of ICCs have not yet been standardised and robust verification mechanisms have not been developed to be applied uniformly across various markets, unlike in the case of commodities, for example, which are traded using industry-specific standardised contracts.

The under-regulation of carbon markets also means that there is a risk for greenwashing, a topic which I will come back to later.

If carbon credits themselves are not rigorously regulated, it may end up hindering emissions reductions by reducing the pressure on regulators and thus, businesses, to aggressively commit to investing in cleaner technologies and to move away from high emissions activities.

There is also concern that there have been consistent over-estimations of emissions reductions in the past. Studies conducted on two of the world's largest offset programmes, which are both administered by the United Nations under the Kyoto Protocol – the Clean Development Mechanism (CDM) and Joint implementation (JI) – have found approximately 60% to 70% of their offset credits may not represent valid emissions reductions.

Adding to the mix is the difficulty in proving a counterfactual – that is, it is hard to prove that offset programmes made something happen that would not otherwise have happened, regardless of the programme's existence. This is often referred to as "additionality".

Yet, in spite all of these, the ICCs continue to have a role to play during the intervening years of our green transition. Limitations of today's technologies mean that hard-to-abate sectors still find it difficult to eliminate emissions. While costs may drop as we continue to work on better and cheaper technology solutions, high-quality ICCs are a way for businesses to plug the gap in the meantime. Our emissions reduction pathway to the 1.5-degree warming target still requires carbon offsets to play a role.

Because of the above reasons, ICCs cannot be the only tool in our market's toolkit to facilitate the green transition. Some of the lessons learnt and concerns from the green and sustainability financial markets are also useful when we look at ICCs. I shall now turn to them.

I note that closer to home, MAS has been making efforts to grow the size of the market here in Singapore and to improve both accessibility to SMEs, and also to maintain an eye on sustainability credentials. Initiatives, such as the Green and Sustainability-Linked Loan Grant Scheme (GSLS) and Project Greenprint aim to do just that, and we have also seen that the local green bond market has grown from S$1 billion five years ago to S$14.4 billion last year. The amount of green loans to has grown from S$2.9 billion in 2018 to S$17 billion last year.

Green financing and the development of robust and large financial markets for green instruments play a very important role to support enterprises and economies towards a decarbonised future. Various financial institutions have been active in developing these markets and various banks have committed to contributing large amounts to sustainable financing and investment by 2030. This is, in itself, a good thing.

Green instruments, like sustainability linked bonds, or SLBs, are ways in which businesses can get access to financing for investment and other activities, which are ostensibly for the purpose of transitioning to more sustainable activities. However, the nature of the market at the moment means that companies, the borrowers, pay experts and consultancies should set appropriate sustainability targets and to evaluate these during the course of the bond, to check whether these targets are being met. Lenders or arrangers, too, would like to be able to announce that they have a large amount of green loans or bonds on their books. In fact, all three parties benefit by being able to tell their involvement in green financing deals. This leaves a question about whether there is sufficient pressure and whether there is enough independent oversight be exercised to lower the risk of greenwashing.

Compounding the problem is that the structure of these green instruments may not have enough negative incentives to make issuers do all they can to meet the sustainability targets set. For sustainability-linked bonds, in particular, the funds are not ring-fenced, making them vulnerable to greenwashing and allows financing to continue to be used by issuers to fund carbon-intensive expenses and projects. More generally, penalties by way of bumps of less than 100 basis points in the amount of increased interest payable is paltry, especially if these are percentages agreed to by the companies themselves, and often represent amounts that are tiny fractions, that work out to be far under 1% of the annual revenue of these issuers.

And while it is true that there are attempts to create standards for sustainability and green targets that issuers and borrowers are expected to meet, such attempts are often voluntary in nature, like the International Capital Market Association (ICMA)'s Green Bond Principles and Sustainability-linked Bond Principles, and they do not address the lack of common disclosure frameworks for each asset class of green instruments and the technical nature of the green or sustainability data points themselves make it open to uncertainty.

Furthermore, taxonomies, like the ASEAN Taxonomy for Sustainable Finance are still works in progress and it is not clear if they will be voluntary or compulsory.

This lack of meaningful standardisation and uncertainty means that green financing is particularly vulnerable to greenwashing. The private nature of green loans, compared with bonds which tend to be public instruments, also makes it difficult for good data to be readily available to understand the picture more clearly.

It is against this backdrop that I believe an EXIM bank can really come into its own. My colleague from Sengkang, Assoc Prof Jamus Lim, earlier mentioned how an EXIM bank can play its role in developing green financial markets. I would like to take that one step further by repeating our calls to ask for an EXIM bank to be directly involved in financing green loans and arranging green and sustainability-linked bonds for our enterprises, with a view to using the rich trove of data available from this to either fine-tune existing taxonomies or develop a set of robust and internationally-acceptable set of standards for green financing, which we would then export to the rest of the region and world for wider adoption.

The EXIM bank, having a direct role as a lender or arranger has the added benefit of knowing exactly what the terms of its loans and instruments are. It can also have a special focus on providing financing options for the research of newer and cheaper green technologies, especially those which are more applicable to the specificities of Singapore and the region's energy and industrial needs.

Additionally, the bank would also have access to commercially sensitive information like the exact terms of its covenants, when they are breached or require waivers, and will naturally have harmonisation of disclosure built in. It will also be a natural complement to Project Greenprint's aims of addressing the data challenges of gaps in green and sustainability financial markets.

Coming back to ICCs, many of the principles of what I have just outlined also apply. I believe the above points are the reasons why Singapore has committed to the 5% threshold, and it is also important to note our commitment to "high-quality" ICCs.

But given the risks outlined above, I believe we can and should put information out in the public domain, where possible, including the public register for waivers of the threshold for ICCs, which would send a clear signal to emitters that buying their way towards net zero is not an option.

Likewise, we can also ensure that having another effective tool in the box by developing high-quality green financial markets and instruments, which have consistently good standards applied to ensure that the possibility of greenwashing is much reduced. This will go ways to ease the transition to a less carbon intensive world.

Mr Speaker, as some of our fellow Singaporeans represent us to the world at COP27 this week, I hope we support them by putting our money where our mouth is. We must continue to pursue real decarbonisation, in order to ensure that irreversible warming does not become the reality for our planet's future.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 3.14 pm.

Sitting accordingly suspended

at 2.56 pm until 3.14 pm.

Sitting resumed at 3.14 pm.

[Mr Speaker in the Chair]

Carbon Pricing (Amendment) Bill

Debate resumed.

Mr Speaker: Mr Don Wee.

3.14 pm

Mr Don Wee (Chua Chu Kang): Mr Speaker, Sir. I declare that I am working with a Singaporean bank, but I do not manage any revenue performance target.

Given that Singapore has committed to achieve net-zero emissions by 2050 and many large organisations, like the United Overseas Bank which had committed to net zero last week, how does the Government plan to work with the whole ecosystem of stakeholders to help ensure social and economic progress in tandem with decarbonisation to align with Singapore's net-zero emissions policy? Impacted stakeholders include large emitters, SMEs and consumers. What role does Singapore intend to play on the regional and global stage in maintaining our competitiveness and supporting a just transition?

The step towards progressively higher carbon taxes is a bold move. Within a few years, our carbon tax will be the highest in Asia, placing us amongst leaders in this region for decarbonisation efforts. While doing so will create new opportunities with exciting potential, it has its trade-offs too.

On one hand, we want to strengthen our response to climate change because of our island's own vulnerability. We also aspire to become a carbon services hub in the future, which will attract investments and create job opportunities for Singaporeans.

On the other hand, the trade-offs include rising business costs and the squeeze on the profits of our companies. As an economy with exports constituting more than 170% of our GDP, we risk hurting our international competitiveness with the imposition of such substantial carbon taxes. Our trading partners may turn to competitors which, with lower or no carbon tax, can underprice us.

Higher carbon taxes will certainly drive us towards a greener economy. However, in view of Singapore's constraints, we must take care to set rates and pace the increases such that businesses will have sufficient time to adjust. Hence, I understand and support the Government's decision to provide allowances to large emitters as part of the transition framework.

At the same time that we support the transition of hard-to-abate sectors, we must also ensure that our policies reflect the appropriate level of ambition to maintain Singapore on its decarbonisation pathway. I would like to know how the Government sets the amount of allowance for these large emitters. How many of these large emitters are already complying with these internationally recognised efficiency standards? If they are already complying, are we not subsidising them by providing them with allowance? Will these large emitters be prescribed a timeline to decarbonise? Can the unused allowances be traded in the carbon exchange market?

In addition to the carbon taxes, would the Government consider putting a cap on the amount of GHGs emitted by large emitters, such as the oil and gas industries? Large emitters in Singapore which plan to shrink their carbon tax bills by buying ICCs will be able to do so only if the credits meet Government's prescribed criteria. At minimum, for instance, the credits must be certified by the Verra or Gold Standard.

Can the Government work with Verra and Gold Standard to include local projects in Singapore, or consider the inclusion of Singapore Index on Cities Biodiversity score to generate and offer the carbon credits to emissions-intensive sectors, such as the petrochemical industry, that find it hard to reduce their carbon emissions in the short term? This will stand to benefit both Singapore and the companies that choose to invest in our companies.

Allowing large emitters to buy credits will also help fulfil Singapore's ambition to become a hub for regional carbon credits. By prioritising the reduction efforts of domestic emissions, and then allowing large emitters to buy credits, we create a win-win situation for our climate and our carbon market development. Speaker, Sir, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] While establishing a just transition, we must also remember that there will be an impact of carbon tax on other stakeholders not earmarked as high emitters, including SMEs and lower-income individuals.

I am heartened that the carbon taxes will be revenue neutral and earmarked to support decarbonisation efforts. Will the Ministry sharing greater detail how this will be done, as the broad tax will trickle down and find its way to everyone of us? For example, will there be an efficiency grants to spur SMEs with their decarbonisation efforts or carbon dividends for the lower-income households?

(In English): Singaporeans and our local companies should embrace the opportunities that come with this green transition. Many companies share Singapore's goal of decarbonising and are aligned with its net-zero vision. Their anchor buyers may also require them to commit to net zero.

Efficiency grants can be extended to more companies and industries to ensure that carbon abatement is an economy-wide project. Tax exemptions could be granted for startups and joint ventures that specialise in emerging green technologies and services. The Government should also continue to incentivise green financing initiatives by financial institutions with even greater focus on transition industries in the SME segment.

The implementation of carbon tax will catalyse our local SMEs' effort to reduce carbon emission as these companies contribute Scope 3 emission to their supply chains. I would like to seek clarification from the Minister on how our SMEs, for example, our local agricultural producers who cannot afford to be certified by second party opinion service providers, participate in this journey? It is really challenging for them as they will have to follow an accounting methodology that requires knowledge and understanding of the types of business activities contributing to carbon emissions calculations.

Fees for auditors to assess the outcomes of the calculations and transition costs are essential. It does require a certain level of rigour and demonstration of that rigour to be able to identify the investments needed to decarbonise and for SMEs to join the net-zero ecosystem.

Can the Government fund the installation of remote sensing and other emerging technologies that bring down the cost of monitoring, reporting and verification (MRV), which underpins the activity of carbon pricing, thus lowering the barrier to entry for these SMEs?

The setting of a carbon tax also allows the opportunity for us to examine complimentary policies which will support our nation's decarbonisation goals through regulation, supporting growth of green opportunities and taking a leadership role in ensuring a just transition for the region whilst maintaining our competitiveness.

Since reducing our carbon footprint is the main objective, carbon taxes must be complemented by more stringent environmental regulation. The point is not to collect a lot of carbon tax. Rather, tight regulations and effective enforcement will deter environmentally harmful behaviours, so that the carbon tax need not do all the heavy lifting. Over time, we will gradually phase out habits, lifestyles, items and systems which are not green.

As the large emitters are already applying their own internal carbon prices and are aligned on decarbonisation, I believe that the carbon tax should not have too much of an impact on Singapore's competitiveness. Although, in the near term, this is a concern because not many countries have a carbon tax to begin with.

To deter carbon leakage, can the Government also explore taxing the carbon content of imported goods? For example, the European Union had unveiled its draft scheme to target imported steel, aluminium, cement, fertiliser and other greenhouse gas-intensive goods produced in countries with weaker climate policies. The rationale is to protect the industries in Singapore, which face high carbon costs and progressively tougher climate regulations at home, against cheaper imports from nations with weak or no emissions regulations.

The aim is to try to get everyone on board in terms of putting a cost on carbon dioxide emissions and level the playing field for international trade. We should ensure that the large emitters in Singapore do not set up shop in neighbouring countries with lax climate policies, which make the goods produced there cheaper. Of course, we are aware that Singapore's competitiveness is not due to tax rates alone, but our entire business ecosystem and high-quality workforce.

During the "Transition Finance Towards Net Zero Conference" which was held on 4 October 2022, Senior Minister Tharman mentioned, and I quote, "we need all instruments of public policy to accelerate action". I agree with him. We need MAS to incentivise and guide the financial institutions to provide transition finance to these large emitters which will try its best to nullify its GHG emissions. We need ESG to provide more assistance to SMEs so that they know how to measure emissions. And we should look to MAS to lead a regional effort to support a just transition and decarbonisation not just in Singapore, but in the region. Being a frontrunner in adopting sustainable initiatives also means that Singapore companies will be in a better position to help others in ASEAN.

Increasing the carbon tax to $25 per tonne will raise the retail cost of electricity by an amount well within the fluctuations we have been seeing since 2021. The entire ecosystem of players – Government, regulator, companies, financial institutions, SMEs and consumers need to come together to support our net-zero target by 2050. I hope Singaporeans will come together on this issue of greening our economy and focus on the big picture at this inflexion point in our history.

Decarbonisation is a generation-defining business and job opportunity, and our Singaporean companies are well-positioned to lead the way. Notwithstanding the abovementioned, I support the Bill.

Mr Speaker: Mr Louis Chua.

3.25 pm

Mr Chua Kheng Wee Louis (Sengkang): Mr Speaker, the Carbon Pricing (Amendment) Bill is a step in the right direction towards decarbonising our economy. These changes are all the more significant in light of COP27, which is happening right now as we speak, in which I hope and trust that nations around the world will take urgent and decisive action to tackle the existential threat that is climate change.

Before I move on to specifics of the Bill, I would like to recognise the Government for setting a net zero by 2050 target, as opposed to the "by or around mid-century" target that was released in Budget 2022 earlier this year. As I shared in my speech on the Environmental Protection and Management (Amendment) Bill last year and reiterated during the Budget debates this year, we need to set bold, ambitious and specific emissions reduction targets that align with the global goal of reaching net zero by 2050.

The IPCC's sixth Assessment Report, or AR6, makes clear that the world faces a frightening future, even if – and that is a big if – the global economy is decarbonised rapidly. Across all scenarios considered by the IPCC, global temperatures will continue to increase until at least the mid-century. In fact, we are now expected to reach this 1.5 degree celsius tipping point 10 years earlier than expected. To limit warming to 1.5 degree celsius with no or limited overshoot, net global CO₂ emissions need to fall by about 45% from 2010 levels by 2030 and reach net zero by 2050. Unless immediate, rapid and large-scale action is taken to reduce emissions, the average global temperature is likely to reach or cross the 1.5 degree celsius warming threshold within 20 years.

Moving on to the specifics of the Bill, the key point I wish to make today is the need for transparency, as well as the need for continued, or even stronger climate ambition.

My first point is on the carbon tax. The Bill proposes an increase in carbon pricing from the current $5 a tonne to $45 a tonne from 2026 to 2027. Deputy Prime Minister Lawrence Wong also announced in Budget 2022 that it will be raised to between S$50 and S$80 by 2030. That is roughly US$35 to US$57.

Mr Speaker, I support the more ambitious pricing but believe that there is room to do more. My colleague, Assoc Prof Jamus Lim, shared in his speech in February 2021 about the importance of a well-functioning carbon tax system for delivering effective reductions in our nation's carbon footprint. And as highlighted by some participants who took part in MSE's public consultation, whom, I quote, "were in favour of a more aggressive carbon tax trajectory, citing the higher carbon prices in some other developed countries, the latest scientific recommendations… and the need to sufficiently deter greenhouse gas emissions from growing."

As Deputy Prime Minister Lawrence Wong said at the Singapore International Energy Week recently, the carbon tax is an "important lever to shape responsible behaviour", so that consumers and businesses internalise the costs of carbon emissions in their consumption and investment decisions.

I fully agree with the Deputy Prime Minister on his comments. But if we look at international benchmarks, the World Bank-supported High-Level Commission on Carbon Prices proposes US$50 to US$100 is needed by 2030, the OECD provides a central estimate of €120, while the London School of Economics and Political Science (LSE)'s Grantham Institute suggests a price of US$145. Our proposed US$35 to US$57 by 2030 still sits below or at the very lowest end of these recommendations.

Next, I will touch on the industry transition framework. The Workers' Party believes in the principle of allowances, and this will be important to ease the transition for both carbon emitters and for individual Singaporeans, such as in the context of a higher carbon tax on power prices. This transition framework could mitigate the impact of higher carbon taxes, such as by giving companies in EITE sectors more time to invest in cleaner technologies.

Yet, we must ensure that we do not give out a free meal to polluters. The introduction of allowances goes against the spirit of the Government's previous commitment to apply the carbon tax uniformly to all sectors, including energy-intensive and trade-exposed sectors, without exemption. This is why we are proposing that the Government publicly disclose which facilities are receiving allowances, and for which emission years.

I recognise that the Government is proud of the achievements of our energy and chemicals industry, with Singapore ranking as one of the top 10 global chemicals export hubs and one of the top five refinery export hubs. However, such a framework could be seen by some that the Government is overly protective of these industries in the face of the existential threat of climate change and with many of these very same companies keen to decarbonise themselves! Shell and BP, for example, have set net-zero commitments by 2050.

Finally, I wish to speak about the use of ICCs. While ICCs hold significant promise, current markets are still highly unstandardised. The Government seems to acknowledge this by allowing companies to offset up to 5% of taxable emissions via ICCs in this Bill.

However, clause 33B of the Bill currently provides an exception where the Minister may "permit eligible international carbon credits to be surrendered in excess of the prescribed limit in any particular case or class of cases". This effectively gives the Minister unlimited legal power to decide the use of ICCs. How will the Minister decide when to lift the prescribed limit? Is there a framework to constrain this decision-making process?

Earlier this year, during the MSE COS debates, I asked about accountability measures to ensure transparency and fair implementation in the use of "high-quality international carbon credits". In the spirit of transparency and accountability, my Sengkang colleague Ms He Ting Ru has filed an amendment to clause 29 for public disclosure of Ministerial decisions to permit registered persons of taxable facilities to surrender eligible ICCs in excess of the prescribed limit.

Before I conclude, Mr Speaker, I would like to touch on the recent US Inflation Reduction Act (IRA). I shared in my previous speech about how in 1961, Shell built an oil refinery on Pulau Bukom, and this became one of the largest refinery complexes globally and sparked the start of Singapore's pursuit of the petrochemicals industry. In the same way, clean energy and green finance can be our next growth sector. The US appears to be leading the way with its recent IRA, which directs significant funding for climate efforts through a mix of tax incentives, grants and loan guarantees, and is set to be funded by prescription drug pricing reform and a 15% corporate minimum tax among others.

Over US$400 billion in spending over the next 10 years will be on climate and energy initiatives, but more importantly, the multiplier effect of this from both the public and private sector would mean significantly higher investments into a new growth area. This could have far-reaching effects across industries and supply chains, with companies likely needing to rethink and recalibrate their strategies to not miss out on the opportunities arising from the energy transition.

We need to change the narrative from one of risk mitigation and protection for the industries of the past, to opportunity capture and setting the stage for future growth.

Mr Speaker, the question surrounding net zero in Singapore now is no longer when, but how. Our pathway to net zero must be transparent, fair and inclusive. As highlighted in public consultations, Singaporeans want to participate in meaningful discourse over our collective future. This can only be achieved if data related to our emissions – and emitters – is made more accessible and available.

The increased ambition in our Carbon Pricing Bill today is welcome, but as climate scientists have repeatedly warned, we are running out of time. Based on the IPCC's AR6, the global carbon budget to stay below the 1.5 degree celsius warming threshold could be used up in less than eight years from now.

It is also concerning that while we have a net zero by 2050 target, which is contingent on technological advances, the economic viability of low-carbon technologies and effective international collaborations in areas such as carbon credits and renewable energy imports, it appears that our near-term emissions are still expected to continue accelerating. While the reduction in 2030 target emissions of 60 million tonnes of CO₂ equivalent from 65 million tonnes is definitely welcomed, does it mean that we will still reach 65 million tonnes of CO₂ or higher ahead of previous forecasts, even as we set a lower 2030 emissions target?

I recognise from the Minister's reply to the Parliamentary Question earlier today that we are expected to peak emission sometime between 2025 to 2028, but would that also mean that we are on the higher emissions path in the near term, and are in fact producing even more CO₂ than what we previously projected?

At COP27, nations around the world are being urged to cut emissions by 45% by 2030, compared to 2010 levels. We cannot, in good conscience, continue to release even more carbon dioxide into the atmosphere against this backdrop. Let us be that bright green spark and show the world that even in spite of our constraints, Singapore can, and must, strive to do more for the climate.

Mr Speaker: Ms Janet Ang.

3.35 pm

Ms Janet Ang (Nominated Member): Mr Speaker, I thank you for the opportunity to join in the debate on the amendment of the Carbon Tax Bill. According to the World Bank, "A carbon tax reflecting the social cost of carbon is viewed as an essential policy tool to limit carbon emissions". The increase in carbon prices in Singapore – from S$5 per tonne of CO₂, to the proposed $25 per tonne of CO₂ from 2024 to 2025; and then to $45 per tonne of CO₂ from 2026 to 2027, with a further step up to a target range of S$50 to 80 per tonne of CO₂ by 2030 – sends a strong signal for large emitters as well as all other companies in Singapore at large to mitigate their emissions, at least, to be line with Singapore's carbon reduction goals.

All of Singapore needs to support Government to do the right thing, and the right thing to do is to price carbon meaningfully so as to motivate decarbonisation and reduction of CO₂ emission.

While the world seems to have come around at COP26 with collective strong intentions to mitigate climate change, the policies and actions taken across countries differ widely. This leads to the challenge of carbon leakage where companies shift their operations to jurisdictions where there are less stringent rules and taxes on carbon emissions.

At this time, Singapore remains the only country in Southeast Asia with a carbon pricing regime in place and with our carbon price at levels being debated today, we will potentially face the risk of carbon leakage and Singapore's competitiveness will be impacted. This is especially so as the large emitters are key contributors to Singapore's GDP and Singapore's position as an important node in the global value chain of those industries and their ecosystems.

In my speech this afternoon, I would like to tackle three aspects related to the carbon tax: (a) the transition framework; (b) the ICC framework; and (c) the implementation plan for the rest of Singapore.

First, the transition framework. As part of the Bill amendment, there will be a transition framework to support companies to move to low-carbon operations. Most of the companies in the affected industries, large emitters especially, are already working on decarbonisation and many have pledged to get to net zero by 2050 or thereabout. Many of these companies, being MNCs, probably have already applied a shadow carbon price or an internal carbon price for their own projects and, therefore, understand and support the need for a meaningful carbon tax in Singapore in order to motivate industry to reduce emission.

Notwithstanding industry's understanding and support, I would like to table the following issues for the MSE's consideration.

Let me first touch on emission allowances. Industry players believe that there is a need for a differentiated emission allowance, both in terms of amount and timing, taking into account the specific industry and organisation's decarbonisation plans to achieve low-carbon operations. There is a thinking that carbon tax pricing should be based on the principle that it is pegged close to the abatement cost, so as to motivate the industry to implement abatement without losing competitiveness.

Next, the industry hopes that the transition framework will consider technology allowances, since countries and industries are all relying on future technologies such as carbon capture and utilisation and storage (CCUS), green hydrogen or nuclear just to name a few. These technologies are immature and are still in development. With current technologies, there will still be remnants of carbon remaining and the tax amount can be significant. I am given to believe that current technology is at best 90% efficient, and power and natural gas are still required for burn abatement. Industry believes that this carbon should be "forgiven" or returned as allowances for the industry to invest into technology development to achieve zero carbon. Maybe the allowances might even be pooled together to accelerate the development of the future technologies at a macro level.

The third issue concerns indirect carbon tax from electricity. Singapore power rate is amongst the highest across countries. The proposed carbon tax potentially increases power rates further, and industry has no control over it. Companies think that they should not be penalised from the lack of green energy in Singapore. Current plans have Singapore importing four gigawatts of low-carbon electricity only by 2035. Industry hopes that further allowance be factored into the transition framework while Singapore is building its green energy infrastructure, and carbon tax resulting from the lack of green energy, should not pass through to industry during this period.

Another side-point is to protect local industrial competitiveness. Jurisdictions like the EU will be introducing carbon border adjustment mechanisms (CBAM) in 2023 to be operational by 2026. What does this mean for Singapore? Will we be advocating similar CBAMs with our trading partners and ASEAN?

The next topic is the ICC framework. I believe that real emission reduction should be pursued before carbon credits can be used. The Government's effort to manage and control carbon credit to ensure quality of the carbon credit to be used to offset carbon tax is applaudable. I believe there is an opportunity for the Singapore Carbon Credit Registry to help to govern and ensure good quality carbon credit for the world, perhaps, by providing a list of accepted ICCs, providing a clear criteria and assessment for qualified projects.

That said, I do have some questions which I hope MSE can clarify.

What are the Government's plans to enhance the population's understanding of the opportunities and pitfalls of using carbon credits to meet the net-zero emissions target by 2050 and carbon tax obligations under the CPA, especially for carbon credits sourced from nature-based carbon projects that may have far-reaching implications for the climate, biodiversity and local communities?

Earlier on, I had filed a Parliamentary Question about the efforts undertaken to ensure the credibility of carbon products to be traded through Singapore and to reduce Singapore's exposure to the risks of carbon trading. Can the Ministry share an update of how this is progressing?

Of the more than 20 countries that Singapore has begun exploring carbon credit agreements with, what is the portfolio of carbon projects the Government is focusing on to diversify and safeguard our carbon credit security?

What are the carbon offset criteria that companies can use to offset their carbon tax liabilities, and will the use of such carbon credits affect the amount of emissions that Singapore reports to the UNFCCC?

Industry advocates for the Government to consider prescribing an appropriate limit for ICC, or FPCC, that can be used to offset carbon tax. From the Budget announcement, companies will have the option to use eligible ICCs in lieu of paying carbon tax for up to 5% of their taxable emissions from 2024 onwards. The industry feels that this 5% of taxable emission is rather insufficient. A company with high abatement solution will achieve maximum 90% emission reduction limited by the existing technology. For such a company, only 5% of the remaining 10% can be offset using carbon credit. What are the reasons as to why the Government is not allowing for a higher than 5% of a company's taxable emissions to be paid for with qualified ICCs?

The third point is an implementation plan to the rest of Singapore. To further cascade the change of behaviours to one of a low-carbon economy, especially with Singapore's updated climate ambitions, what is the Government's implementation plan for carbon tax for companies beyond the large emitters? Does the Government plan to incentivise individuals to reduce our individual carbon footprint? I have to confess that I am still living in 24 degree celsius air-conditioning.

Let me start to wrap up. Deputy Prime Minister Lawrence Wong, in a post-Budget 2022 panel discussion, said, "It is with a combination of these different tools – taxes, incentives and standards – that Singapore can achieve its net-zero ambitions. Moving early will, in fact, give Singapore a first-mover advantage to seize the opportunities that will arise from the new green economy."

We would have all read in the news that during Prime Minister Lee Hsien Loong's recent visit to Australia, Singapore signed a trailblazing Green Economy Agreement with Australia. I understand that several other jurisdictions are also exploring to do the same with us. This is indeed testimony of first-mover advantage.

Carbon tax is the necessary price to pay in order to get serious decarbonisation actions and CO₂ emission reduction underway. At the same time, however, carbon tax is an evolving issue globally and we need to be able to be agile and adaptable, in order to respond to global trends.

It is, therefore, unwise to be over-prescriptive in our laws at this stage and it is also in my opinion unwise to have to share everything – all details and full disclosure. I think we have to draw a line between being transparent and getting everyone to be accountable versus showing everything, because that is going to not be practical in the first place; and secondly, there is companies' competitiveness at stake.

I am encouraged to see that a sensible, practical transition framework is built into the amendment Bill for allowances to balance our competitiveness, even as we green our way forward with the two sets of targeted policies, regulations, fiscal incentives and taxes, as is the subject of our debate today.

It is imperative that we do not throw the baby out with the bath water. Our competitiveness cannot be taken for granted as our economy and jobs are dependent on our attractiveness as a location for investments.

Climate change is the crisis of the same scale as COVID-19, even as it is different. For me, I would liken climate change to be as if we are the frog in the water in a pot over a slow, simmering flame. It has been cooking for a long time and act together now we must, to jump out of that pot.

I am confident that Singapore can emerge very well just as we did from COVID-19 and just as our pioneers did after separation from Malaysia, because our people, our businesses and our Government work hand-in-hand in our unique tripartite relationship to seize the first-mover advantage to transition to a green economy. Notwithstanding my clarifications, I support the Carbon Tax (Amendment) Bill.

Mr Speaker: Mr Mark Chay.

3.48 pm

Mr Mark Chay (Nominated Member): Mr Speaker, I would like to applaud the steps that Singapore is taking to build a greener future and it is especially commendable in today's context that private enterprises, such as Surbana Jurong and Keppel Corporation are implementing policies with sustainability as one of the top agendas.

The proposed amendments to the CPA are a positive step in the right direction and I stand in support of the Bill. I would, however, like to clarify the following points.

The carbon price is proposed to increase five times to $25 per tonne of emissions by 2024 and $45 by 2026. According to the World Bank's State and Trends of Carbon Pricing 2022, this would mean that Singapore would lead Asia in carbon prices. I would like to ask what this would mean to companies that are eligible to be taxed, in terms of Singapore's competitiveness as a destination to set up operations.

In addition, with the significant increases in carbon tax, I would like to ask the Minister what the plans are for these additional revenues. One suggestion would be to allocate some of these to research and development (R&D) programmes related to green energy and sustainability, or education programmes to prepare companies for carbon tax reporting. I understand that there are programmes already in place to incentivise and support environmental sustainability. I would like to ask the Minister what the take-up rate of these grants are and how we can increase the utilisation of such grants.

I am also concerned about how the increase in carbon prices will impact the daily living costs in Singapore and what are the Government's plans to ensure that energy prices remain stable. I recognise that there are opportunities for Singapore to pivot importing renewable energy from nearby countries; however, this would increase the reliance from overseas sources and affect our energy security.

Lastly, Mr Speaker, I would like to reiterate my firm support of the Bill. It reinforces Singapore's commitment to a net-zero emissions country by 2050 and forces us to find solutions to demonstrate competitiveness in a low-carbon future.

Mr Speaker: Mr Xie Yao Quan.

3.50 pm

Mr Xie Yao Quan (Jurong): Mr Speaker, Sir, it is quite apt that after a long debate yesterday on the GST increase – whether it is necessary, and whether it is the right timing to do this next year and in 2024 – we are debating today about a higher carbon tax, from 2024 onwards.

Just as we need a higher GST to help fund the healthcare needs of a population that is ageing surely and quickly with every passing day, we need a right price signal for carbon across the whole of our economy and our society, in a world that is heading quickly towards temperatures that are 1.5 to 2 degree celsius above pre-industrial levels, a world in which extreme weather has become more and more real for more and more people.

Climate change is an existential threat, so we need the right price signal for carbon in Singapore urgently to drive the necessary changes in behaviour, by both individual consumers and businesses and producers.

Singapore introduced the carbon tax in 2019 at a nominal $5 per tonne of CO₂ emission to help the whole of our society transit and adjust. Three years on, there is an urgent need to do more, to ensure that "the price is right" – that the price signal for carbon is right. Yet, this could not have come at a more challenging time.

In what Senior Minister Tharman has described as a "perfect long storm", climate change is converging with other structural fragilities, like rising interest rates and inflation. And the need to bear a higher but right cost of carbon – now – is competing with very real concerns about costs of living, concerns that are immediate and real.

Of course, in the medium term, by the end of a few years, we hope that individuals' consumption patterns would have changed and businesses would be well on their way to transit to low-carbon business models and practices, and the cost impact of carbon to both individuals and businesses and across the whole economy would have reached a new equilibrium, plateau, or even come down.

But there is no avoiding that we are raising carbon tax soon in the eye of this "perfect long storm" and a cost impact – higher costs – now and in the near term is almost unavoidable, coinciding with a period in which costs of living are sharply rising.

Electricity prices will go up because of the higher price of carbon. Public transport costs will likely go up too.

So, I like to ask and seek clarification on how does the Government plan to help Singaporeans cope with and adjust to this new normal of low carbon? How do we cushion the impact – and for which groups – yet maintain the integrity of the price signal of carbon across the whole of society and bring all segments in our society along in this journey towards a low-carbon future?

It is heartening to hear the Government's commitment to use part of the carbon tax revenues to help Singaporeans cushion the impact, by way of, for example, more utilities rebates and public transport vouchers (PTVs), but can the Government share more of its thinking about how it plans to deploy this, for whom, how much and what would be its guiding principles and key considerations as it moves ahead in this direction?

Beyond the impact on costs of living, another very real concern of a higher carbon tax is the potential impact on Singapore's economic competitiveness, especially for traditionally emission-intensive trade-exposed industries.

Singapore was the first to introduce a carbon tax in the region. And in very short order, Singapore will have the highest carbon tax in the region. How do we make sure we remain competitive in the region and that whole industries, like petrochemicals and electronics, do not lift and shift out of Singapore?

How do we ensure that Singaporeans can continue to look forward to good jobs in these industries in a low-carbon future? Can the Government share more details about how it plans to work with industry to build new capabilities, and indeed, turn this strategic challenge into new and exciting opportunities for Singapore and Singaporeans?

Indeed, traditionally, emission-intensive industries can, and must, become a part of our future green economy.

And while the competition may be regional, markets for these emission-intensive trade-exposed industries are, in fact, global. And these markets will lead and define the demand for low-carbon products and services in the future.

And so, we have an opportunity in Singapore to build future green capabilities for the world, position Singapore as a global hub to leapfrog the status quo and help the world produce green products and services.

How might we better communicate this vision to all Singaporeans and make all of us part of this journey to turn the carbon constraint into exciting opportunities, and to turn the low-carbon challenge into a whole new world of possibilities in the next chapter of our Singapore Story, just as we have done for water, gas and land, in the Singapore Story thus far.

Sir, before I conclude, I would also just like to make a quick response to Member Mr Louis Chua's suggestion just now, if I heard him correctly, he was suggesting a US$100 carbon tax. I would just like to ask if he has considered the impact of this proposal on both cost of living and economic competitiveness, as so many of our Members have raised.

Sir, in summary, notwithstanding the concerns about cost of living and economic competitiveness, this Bill raises the curtain on exciting opportunities and possibilities for Singapore, and I support the Bill.

Mr Speaker: Mr Louis Chua.

3.57 pm

Mr Chua Kheng Wee Louis: I like to thank the Member Mr Xie for his question. In terms of the carbon tax rates, I quoted a series of various numbers – by the World Bank, the OECD and various sources, and I think that is also consistent with what some of the feedback that was provided through the MSE consultations. There are views that based on the existing level of carbon taxes that we have proposed, it is actually on the low end of both the scientific recommendations as well as what is proposed by some of these other organisations in their studies.

More importantly, I do recognise and agree with the Member's point in terms of supporting households in this transition and this is something which we have spoken about in the earlier debates as well. In particular, when it comes to supporting households, we have talked about, for example, reducing the impact of higher carbon taxes on households, such as via a green dividend and a green fund. These are mechanisms which can be potentially put in place on top of the various utilities rebates which the Government has also put forth.

Mr Speaker: Ms Poh Li San.

3.59 pm

Ms Poh Li San (Sembawang): Mr Speaker, Sir, Deputy Prime Minister and Finance Minister Lawrence Wong announced at the recent Singapore International Energy Week, ahead of the ongoing COP27 climate talks in Egypt, that Singapore will step up our Nationally Determined Contribution (NDC) targets.

Instead of peaking at 65 million tonnes CO₂ in 2030, Singapore will step up our efforts to peak earlier and reduce carbon emissions to 60 million tonnes CO₂ in 2030. And instead of just halving our long-term carbon emissions to 33 million tonnes CO₂, we will aim for a stretched target of net-zero carbon in 2050.

This is a bold announcement, given Singapore's alternative energy disadvantaged position and our absolute dependence on the imported LNG for 95% of our country's electricity generation.

However, as a responsible member of the international community committed to fight the climate emergency, Singapore's strategic commitment to achieve net zero by 2050 is a necessary undertaking.

What does Singapore have to do differently in order to meet the net-zero goal? In the long term, we will have to scale-up the use of emerging technologies in low-carbon hydrogen, carbon capture utilisation and storage and maybe, light nuclear energy production.

In the medium term, we will have to purchase clean electricity imports and step-up utilisation of solar energy, to progressively decarbonise the power sector.

In the short term, we will have to aggressively abate carbon emissions in our economy. Therefore, the carbon tax is an important price signal and also an instrument to nudge industries, to internalise the cost of carbon emissions into their business costs and to adopt low-carbon business practices.

The Government is cognisant of the cost burden of the carbon tax on businesses and the consequential impact on cost of living that will be passed onto the consumers. Hence, only facilities that produces more than 25,000 kilotonne CO₂ emissions annually, will be subjected to the carbon tax.

Also, the carbon tax will be implemented in a progressive manner. It will be increased from $5 per tonne CO₂ emissions to $25 next year, and to $45 in 2026. Even the long-term carbon tax of $50 to $80 expected in 2030, will still be considered comparable to the tax rates in other jurisdictions, for example in Europe, where carbon taxes can go beyond $100 per tonne CO₂ emissions.

In general, the business community here is appreciative that the introduction of carbon tax has been gradual, so that there is sufficient response time to prepare for this transition.

And I am heartened to learn from the Minister that the revenue collected from carbon taxes are not meant for the purposes of deriving additional Government revenue. Instead, the collection will be ploughed back to support decarbonisation efforts and transition to a green economy.

However, perhaps more could be done to enable this green transition, to help the industries and to achieve better decarbonisation results. I would like to ask the Minister what is the projected revenue from carbon taxes that will be collected annually over the next 10 years? What are the additional decarbonisation programmes, incentives and subsidies that would be implemented to help industries, especially SMEs and large local enterprises (LLEs), transit into the green economy? What is the budget that is set aside for these programmes and incentives?

In Singapore, 40% of our national carbon emissions come from the power sector while another 45% is attributed to the industries. Together with the transport sector – which contributes 14% of carbon emissions – these are the three key sectors that account for almost all of Singapore's carbon emissions.

Clearly, the increase in carbon taxes in 2023 will add greater cost pressures to industries that are already facing the triple whammy of the COVID-19 pandemic, higher energy costs and GST increase next year.

Hence, I agree that the transition framework is a prudent strategy to help the EITE sectors ride out this cost increase wave, so that they can remain competitive against rivals in other jurisdictions that have nil or lower carbon taxes.

Indeed, it will require a fine balance and sound judgement to use the carbon tax as a stick for some industries while for other companies, the carbon tax can be waived to help them with transition. As outlined in section 20D and 20E of the amended Bill, discretionary powers are vested with the Minister for Trade and Industry and appointed public bodies to assess each company's decarbonisation plans and determine if they are eligible for carbon tax exemption.

On this note, may I ask the Minister if an impact analysis of carbon taxes on the overall business costs of affected companies has been carried out, in particular, for our SMEs and LLEs? Also, how much transition time will companies in the EITE sectors be given before they are subjected to the full-blown effect of the carbon tax increase?

For companies outside the EITE sectors, given that Singapore's transition to cleaner green energy may only materialise well beyond 2030, how will companies, whose carbon emissions result mainly from the brownout electricity needed for their operations, be assisted in the next decade?

These companies may be paying both higher electricity tariffs due to the current energy crisis as well as increased carbon taxes for the carbon emissions generated. Otherwise, they may have to purchase renewable energies through private purchase agreements in order to meet carbon targets. Does MTI know the number of companies that will be in such a predicament and how can they be assisted in the energy transition?

Also, as carbon emissions accounting and ESG standards are still not fully harmonised, are there adequate well-qualified consultants in the market to help companies, especially the SMEs and LLEs, to account for their carbon emissions footprint, to advise them on the sustainability strategies and to project the corresponding carbon taxes? Will these consultants need to be accredited by the Ministry? If so, will there be guidelines on consultancy fees chargeable to prevent companies from being subjected to paying yet another hefty layer of cost?

I hope the Minister can shed some light on these implementation considerations so that businesses and their sustainability officers can have a clearer idea as they plan for next year's financial budget and dedicate resources for their decarbonisation plans.

Mr Speaker, just like how charitable tax deductions can help reduce one's tax bills, carbon credits can also help a company reduce carbon taxes. Carbon credits provide a decarbonisation pathway for hard-to-abate sectors and represent an opportunity to support emissions reductions globally.

However, under the ICC framework, only up to 5% of the carbon emissions is eligible for ICC surrender. Moreover, only high-quality ICCs that are compliant with Article 6 of the Paris Agreement under the UNFCCC and fulfill the ICAO CORSIA standards as the minimum standards, will be considered eligible for surrender.

I understand that the rationale is to set a high bar, so as to prevent greenwashing and also to ensure that industries prioritise carbon emissions reduction as the main pathway for decarbonisation.

However, there will be three issues to consider. Firstly, for such high-quality ICCs to become meaningful carbon offsets options for companies, the price points must be comparable with the carbon taxes of $20 per tonne CO₂, starting in 2023, and eventually, trending towards being $50 to $80 by 2030. According to the Bloomberg market analysis, under tighter regulations, carbon credit prices may rise 30 times by 2029 to $224 per tonne CO₂ before tapering to $120 in 2050. Should such high prices prevail, then ICCs would become irrelevant for businesses as an alternative to paying carbon tax.

Secondly, if only 5% of taxable emissions are eligible for ICC surrender, will there be adequate critical mass to support a vibrant carbon trading market in Singapore and meet our aspirations to develop Singapore as a carbon services and trading hub?

Singapore is well-placed to be a leading carbon services and trading hub. Singapore's robust legislative framework and position as an established professional services, trading and financial hub, will put us in a good position to support the development of an internationally trusted carbon services and trading ecosystem in Asia. To jumpstart this carbon trading hub, there should also be substantial domestic demand for carbon credits. Hence, I hope the Minister would consider increasing the limit beyond 5% of taxable emissions in the longer term.

Thirdly, there are currently only two international exchanges in Singapore trading voluntary carbon credits, namely AirCarbon Exchange (ACX), established in 2019, and Climate Impact X (CIX), established in May 2021. The primary concern is that carbon credits are still not sufficiently reliable in quality because of multiple certification standards and processes. How will the ICC framework help these carbon credit exchanges ensure that the quality and consistency of carbon credits traded comply with global standards? How will the ICC help to further develop the domestic carbon credits market?

To this end, I hope the Minister will clarify the impact of the ICC framework on the future of carbon credit exchanges and our plans to develop Singapore as a leading carbon services and trading hub.

Mr Speaker, given the urgency of the global climate crisis, the carbon tax is a necessary evil in the short- and medium-term to steer industries towards carbon emissions abatement. However, the long-term energy strategy to reach net-zero goals will be much more challenging.

Alongside the revised NDC to achieve net zero by 2050, Deputy Prime Minister Lawrence Wong also announced the National Hydrogen Strategy. A lot of effort and resources will be needed for research and technology, as well as for new storage and distribution infrastructure, amongst others.

Unfortunately, Singapore just does not have sufficient renewable energy. To overcome the twin-wicked problems of climate crisis and energy crisis, we will have to leverage technological breakthroughs and succeed in delivering hydrogen solutions, in order to address our long-term energy needs.

Hence, I hope that part of the revenue collected from carbon tax will be channelled to fund the National Hydrogen Strategy. That way, the carbon taxes collected will play a meaningful role to help Singapore achieve a much more sustainable and a secured energy solution portfolio that is needed to achieve net-zero emissions. Mr Speaker, Sir, notwithstanding my queries, I support the Bill.

Mr Speaker: Minister of State Low Yen Ling.

4.12 pm

The Minister of State for Trade and Industry (Ms Low Yen Ling): Mr Speaker, I thank all the Members for their support of the Bill.

Earlier, Minister Grace Fu has highlighted the urgent need for the world to address climate change. Singapore is firmly committed to doing our part in the global effort to reduce GHGs emissions. And to meet our climate commitments, we have put in place a robust suite of measures to spur and support our companies to decarbonise.

The carbon tax forms a key part of this effort. It prices carbon to guide investment decisions by companies and spurs company to reduce their emissions, while giving them the flexibility to do so in a way that makes the most economic sense.

As climate action gains greater urgency globally, the transition towards lower carbon and carbon neutral operations will increasingly become a pre-requisite for consumers, for investors. Hence, it is in the company's commercial interest to decarbonise and, in the same way, it is also critical for Singapore to transit to a low-carbon economy to maintain our long-term economic competitiveness, to remain an attractive investment and business destination as reminded by Ms Janet Ang, Mr Xie Yao Quan and many other Members during their very passionate speeches earlier, and to ensure good jobs for Singaporeans and good jobs created here in Singapore.

We have sought public and the industry feedback on the draft Carbon Pricing (Amendment) Bill. The majority of the respondents acknowledged the role of an appropriate price signal for carbon in order to enable the low-carbon transition.

For example, some respondents will favour a more aggressive carbon tax trajectory, given the latest recommendations by the IPCC for stronger actions to reach the Paris Agreement goals and the urgency to reduce rising greenhouse gas emissions.

On the other hand, some companies are concerned that the higher carbon tax will add to cost pressures, especially for the export-oriented companies that have to compete with those from jurisdictions with lower or no effective carbon price.

Apart from the public consultation and since the announcement of the changes to carbon tax earlier this year, we have been engaging businesses that will be directly impacted by the increase. We appreciate their feedback that they recognise the need for an appropriate carbon price, but they are also concerned about the impact of higher carbon taxes on their operating costs and competitiveness.

We hear and we understand their need for time to make the necessary investments and changes to transit towards greener operations. This is especially so for companies that depend on low-carbon technologies which are still under development, such as CCUS, like low-carbon hydrogen that some of the Members talked about – Ms Poh Li San, Mr Cheng Hsing Yao and Mr Xie Yao Quan.

I want to assure the House that in designing the carbon tax framework, we have taken into consideration all these varying views and feedback. And I want to assure the House that we will continue engaging companies on their sustainability journey, including our SMEs and LLEs. Let me now respond to the points raised by Members on the impact of the carbon tax on businesses and how the Government is committed to actively supporting our companies as they adjust to the revised carbon tax regime.

Firstly, I wish to highlight that under the carbon tax regime, only facilities that directly emit at least 25,000 tonnes of CO₂-equivalent of GHGs annually will be subject to the carbon tax. In this way, the carbon tax is targeted to apply to the key nodes of emissions in our economy. It will cover about 80% of our total carbon emissions. Businesses that are large emitters, for example in the energy and chemical sectors, will be directly impacted by the carbon tax.

We recognise the challenges that companies face, especially amid other increasingly tough operating conditions. The impact of the revised carbon tax regime will be especially pronounced for companies in the EITE sectors, such as the chemicals as well as the semiconductor sectors.

Ms Janet Ang, and also Mr Xie Yao Quan – during their speeches, reminded us that these companies compete globally and face competition from counterparts in jurisdictions which have lower or, in fact, no carbon prices. In addition, many jurisdictions with carbon prices offer generous allowances and support to companies in EITE sectors to protect their business competitiveness. The allowances provided could cover as high as 100% of the companies' emissions in some of these countries.

It is with these factors in mind that the Government decided to announce the changes to our carbon tax rates ahead of time. We have spelt out the rates for up to 2027 and provided a range for up to 2030. This demonstrates our commitment to work closely with the industries to make the green transition as smooth as possible and by providing companies with advance notice, we hope it will facilitate their business decisions and plans for decarbonisation.

During her passionate speech, Ms Janet Ang reminded us that many EITE companies have placed significant and substantial investments in Singapore that continue to provide good jobs and secured jobs for Singaporeans and contribute to our economic growth. The sustainability journey is one that we walk together – and we seek to smoothen the transition path for companies – by providing the necessary support for their decarbonisation while maintaining Singapore's competitive edge.

Hence, we will introduce a transition framework which will provide eligible companies with transitory allowances for a portion of their emissions.

Members Mr Don Wee and Mr Leon Perera have asked if the transition framework will erode the price signal for companies to decarbonise and if the framework should be tightened. Let me reassure Members that the transition framework will not give a "free pass" to the companies. Singapore has committed to enhancing our 2030 NDCs to reduce our emissions to around 60 million tonnes of CO₂ equivalent in 2030 and that is after peaking emissions earlier and to achieve net zero by year 2050.

This means that the Singapore Government is accountable to these international climate commitments, and hence, we will ensure that the transition framework will effectively, robustly drive companies to decarbonise. To address Mr Don Wee's concern, we will work with companies, including the large emitters, to ensure they have decarbonisation plans aligned with Singapore's net-zero commitment.

We are mindful that the transition allowances provided will not run counter to our long-term goals. I want to ensure and emphasise that the amount of allowances provided will only be for a portion of the companies' emissions. This will be determined based on internationally recognised efficiency benchmarks where available or based on the facilities' decarbonisation plans.

This means that any emissions above the allowances will still be taxed at the prevailing carbon tax rate. In time, when appropriate, the Government will also release aggregated information on the number of allowances provided, but I think Members have also raised, and they understand, that we will need to bear in mind considerations, such as whether such disclosures inadvertently divulge commercially sensitive information.

To address Mr Don Wee's query, the allowances are only provided for the carbon tax and are not tradable. In addition, the allowances will also be reviewed regularly against how the companies have fared against the efficiency benchmarks where available or based on their decarbonisation plans.

Earlier in their speeches, Mr Cheng Hsing Yao and Ms Janet Ang spoke about the need to ensure that we are not being too prescriptive. We agree with them. We need to ensure that the framework retains some flexibility, adaptability to ensure that as we transit into a low-carbon future, Singapore remains a compelling and attractive business and investment location here, so that we can create good jobs, including new green jobs for Singaporeans.

We will also take into consideration international developments as well as technological developments of decarbonisation technologies, including CCUS, low-carbon hydrogen, much like how Ms Janet Ang spoke about the need to consider the state of technology development in determining the allowances. So, I can assure her that we will keep our eyes and ears very close on the global development, not just the efficiency standards, but also low-carbon technology developments.

Furthermore, only existing investments and commitments will be eligible for transitory allowances. Many of these investments were made amidst a different operating context and would require time for them to transit, for them to make the necessary investment to ease into lower carbon operations.

Without transitory support, there will be a significant near-term impact on their competitiveness. So, the transitionary support would especially help companies that have made large capital investments in Singapore, and have contributed to our economic story and the growth of jobs here in Singapore.

The transition framework will also help to mitigate the risk of carbon leakage – a risk that many Members spoke about in their speeches – so that we avoid companies shifting operations to other jurisdictions with lower or no effective carbon prices. Members reminded us that today, as we debate this Bill, Singapore is the only country within Southeast Asia to implement a carbon price regime. So, we want to make sure we mitigate any risks of carbon leakage because such an outcome would actually lead to loss of jobs and loss of economic value in Singapore, with no overall global reduction in emissions, if there is carbon leakage.

Mr Louis Ng, in his earlier speech, and Ms Poh Li San asked about the period of transition that will be provided to companies in the EITE sectors. I want to assure them that we will calibrate the duration of the transition framework based on international standards, developments and technological developments or decarbonisation techniques. We are aware that the carbon prices in other jurisdictions are not static – some may continue to maintain very low and, in some cases, no carbon prices for certain sectors at all, while others may raise carbon prices more aggressively. We are keeping a very close eye on that.

We also recognise that companies will need time to transition to low-carbon operations. The Government will consider all these factors when calibrating the transition framework. We will also inform companies in advance of the changes to facilitate business planning.

Mr Leon Perera earlier proposed that the allowances be awarded only to facilities that have received allowances for no more than one of the four preceding emissions' years. I want to share with him that companies had shared with us during the consultation that they need time to develop and implement new technologies to decarbonise and transform their operations. This effort could take a couple of years. Hence, restricting allowances in the manner suggested will not provide the support that is needed by the companies, nor meet the intended objective of the transition framework.

Mr Leon Perera also proposed that the awards of allowances, includes information such as reasons for awarding the allowances, be listed on a public registry. Earlier on, Ms Janet Ang shared that doing this might be unwise. Members will appreciate that doing so may reveal commercially sensitive information about a facility's scale of operations, revenue and so on, and over time really erode Singapore's competitiveness as a business and investment location and then at the end of the day, it will affect our ability to create good jobs for Singaporeans. Earlier, I said that the Government will, in time, release aggregated information on the amount of allowances provided. I have also explained the reasons and the basis for awarding the allowances earlier.

Mr Don Wee earlier also asked if Singapore is considering a Carbon Border Adjustment Mechanism (CBAM). A CBAM proposes a carbon tariff on carbon-intensive imports to stem carbon leakage to countries without a carbon price. We currently have no plans to introduce a CBAM because as a small market, putting in place tariff barriers would disadvantage our own companies and have a limited impact on stemming carbon leakage. Having said that, we will continue to monitor the global developments on CBAM and calibrate our position accordingly.

Mr Cheng Hsing Yao and Mr Mark Chay spoke about the need to ensure energy security, resilience and to preserve optionality as Singapore moves towards our net-zero emissions. I fully agree with them because energy security is always at the top of our minds even as we seek to decarbonise our grid. For example, as we scale up electricity imports, we will put in place sufficient backup generation capacity to ensure a continuous supply, even in the event of disruptions. Many Members also spoke about how we recently announced our National Hydrogen Strategy.

Indeed, like what Mr Cheng Hsing Yao, Ms Poh Li San and other Members have said, hydrogen can complement and diversify our power mix alongside with solar, alongside with imported electricity as well as other potential low-carbon energy sources. In importing hydrogen, like other energy sources, we will adopt a diversified portfolio to ensure energy security and to ensure energy resilience.

We are pressing ahead with the development of such low-carbon alternatives, which will provide more options for businesses and consumers seeking to purchase renewable energy. But even so, and especially in the interim, I think Members will agree with us that both businesses and consumers – and in fact – all of us must play a part and improve energy efficiency and optimise and reduce energy consumption.

Ms Poh Li San, Mr Xie Yao Quan, Ms Janet Ang and Mr Mark Chay asked about the support for companies that are paying higher electricity prices either due to the current energy situation, or indirectly, due to the carbon tax. We understand the challenges that our businesses are facing. We recognise that the companies will be affected by the indirect impact of the carbon tax, through electricity prices.

Earlier on, Second Minister Tan See Leng addressed many of these energy Parliamentary Questions and shared with the House that as Singapore imports more than 90% of our energy needs, we cannot be fully insulated from developments, including volatilities in the global energy market. This is why we have adopted a calibrated approach of right-pricing electricity to help encourage prudent use of electricity.

At the same time, we will continue to support our businesses and SMEs to make more sustainable business decisions. For instance, we have schemes to help our companies like our SMEs improve their energy efficiency, which will, in turn, reduce their energy costs as well as the impact of the carbon tax. These include the Resource Efficiency Grant for Emissions (REG(E)) administered by EDB as well as the Energy Efficiency Fund (E2F) administered by NEA.

Let me just cite two projects very quickly. One project under the REG(E) scheme supported the replacement of a facility's existing chiller system with a more energy-efficient one, achieving energy savings of more than 3,600MWh. What does this mean? This is equivalent to an abatement of over 1,700 tonnes of carbon emissions annually. This is one REG(E) project and we want to encourage our companies to come on board the various schemes, whether it is the REG(E) or E2F, or the more recently rolled out Energy Efficiency Grant (EEG).

To Mr Mark Chay's query, we also periodically review these schemes to assess if updates and refinements are needed. We want to make sure they are relevant and accessible to our SMEs. For example, the E2F was just enhanced about six months ago in April this year. What did we do? We raised the grant support cap for the adoption of energy-efficient technologies, from what used to be 50%, we raised it to 70% of the qualifying costs. NEA has also recently simplified the grant application as well as the disbursement process for the standard retrofit projects. So, this makes it easier for SMEs and companies to apply and to benefit from the E2F.

Let me give Members another quick example to show that even micro enterprises and smaller SMEs can come on board. This example is of a local company that has benefited from the E2F. The company's name is Kawarin Enterprise Pte Ltd. This is a local steel manufacturing company. With the support from the Energy Efficiency Fund, Kawarin upgraded their old air compressors to more energy-efficient models. Members may ask what the benefits are. This has allowed Kawarin Enterprise Pte Ltd to enjoy annual cost savings of more than S$30,000 and abated about 48 tonnes of carbon annually. This is just one E2F project. So, I hope that Members of the House will help us to share this information and allow more SMEs and local companies to benefit from all this array of programmes that we have availed to them.

I want to assure the House that the Government will continue to monitor overall costs for businesses, which could be driven by many factors. We have discussed about that besides the carbon tax, and MTI and the economic agencies stand ready to provide more assistance when needed.

Mr Speaker, Sir, the Government remains fully committed to working with our industries on their decarbonisation journey to become more sustainable and more competitive in a low-carbon economy. Because by working in partnership and taking the necessary bold steps today, we can chart Singapore's transformation towards a greener and more sustainable future together. [Applause.]

Mr Speaker: Minister Grace Fu.

4.34 pm

Ms Grace Fu Hai Yien: Mr Speaker, I thank Members for their support and constructive views on this Bill. I am heartened that all Members agree that the revised carbon tax regime set out in the Bill is a decisive step in climate action.

The revised carbon tax levels will incentivise energy and carbon efficiency in all sectors and tilt the scales in favour of additional decarbonisation solutions, such as CCUS and low-carbon hydrogen. They have been calibrated to enable the pace of transformation needed to achieve our net-zero ambition, while allowing businesses to stay economically competitive as they embark on their low-carbon transition. Our approach provides certainty by giving advance notice to companies and announcing the rates ahead of time.

I will respond to Members' questions on the issues raised, under three broad themes.

First, the environment. How do we maintain a strong impetus, ensuring that the allowances granted under the transition framework do not blunt the purpose of the carbon price and that the ICC regime is robust?

Minister of State Low Yen Ling has addressed Members' questions on the transition framework and industry support schemes. I will speak about the ICC regime shortly.

Second, the economy. Members spoke on the need to maintain our economic competitiveness amidst the transition to a low-carbon economy, which Minister of State Low Yen Ling has spoken on. Many Members have also highlighted how this new carbon tax regime can create new growth opportunities. How can we support a vibrant carbon services ecosystem in Singapore which can create good, green jobs for Singaporeans?

Third, the society. As we update the carbon tax regime, how do we deliver an inclusive transition towards a low-carbon society?

Let me address these issues in turn.

First, on the environment. As Ms Janet Ang has highlighted, we must ensure that the carbon credits surrendered, or "offset", are of high environmental integrity. Ms He Ting Ru brought up the same point.

Our ICC framework will be underpinned by a set of robust criteria, which will, minimally, be aligned to the CORSIA standards which have been endorsed internationally. CORSIA standards are amongst the most rigorous in carbon markets worldwide and they include criteria, such as additionality and permanence – issues that Ms He Ting Ru has mentioned. "Additionality" means that emission reductions must be "above business as usual" levels. Permanence requires emission reductions to be durable and irreversible.

Furthermore, we will ensure alignment with international rules, such as Article 6 of the Paris Agreement. One such requirement is "no double counting". Double counting occurs when an eligible ICC accrues to both Singapore and the host country producing this ICC. To prevent this ICC from being double counted, the host country must authorise a corresponding adjustment, to "give up" the emissions reduction to Singapore. These are standards which must be mutually agreed upon when we conclude carbon credits collaboration with partner countries.

We will publish a whitelist of ICCs that are acceptable, which will highlight the eligible host countries, carbon crediting programmes and methodologies. This will provide more clarity to companies and to the public on what our eligibility criteria entail. By placing emphasis on the quality of eligible ICC surrendered, we ensure that companies exercise care and due diligence in sourcing high-quality ICC responsibly and avoid the associated pitfalls, as Ms Janet Ang and Ms He Ting Ru have highlighted.

On the carbon credits registry, later this week, NEA will be calling a tender for the development of the International Carbon Credits Registry, or ICC Registry. When ready, the registry will serve as a record-keeping system to track and account for the usage of ICC by carbon tax-liable companies to offset their taxable emissions.

The ICC registry will be an integral part of our ICC framework.

In developing and implementing our ICC framework, we have been and will continue to work closely with industry players, green groups and other key stakeholders.

Sir, I have explained quite extensively how we developed our ICC framework with high standards – CORSIA, additionality, permanence, Paris Agreement Article 6, no double-counting, registry and so on. There is also a parallel work stream that is going on on the voluntary market side. So, MAS, the Singapore Exchange (SGX), for example, are hard at work to contribute to credible and robust taxonomies. This is a very nascent area and I think many parties, many different organisations, different sectors, are working very quickly to get alignment and harmonisation of standards. Singapore must be there in order to have the first-mover advantage that Ms Janet Ang has talked about.

In this way, we hope that by having the ICC as a foundation, the voluntary markets can take guidance and also benefit from the carbon services competencies that we will help develop in Singapore. So, although this Bill does not address the voluntary carbon market, which I will talk about later on, I hope that my explanation on what we are doing on ICC will help address some of the concerns over greenwashing.

Second, on the economy and creating growth opportunities, specifically, how the Government will unlock supply of ICC and support the growth of the carbon services and trading ecosystem in Singapore.

I agree with Ms Janet Ang on the importance of diversifying our sources of credit supply, including our source countries and the types of carbon credit projects. I spoke earlier about our Government-to-Government engagements, which are progressing well. We will advance talks with like-minded countries to establish implementation agreements and bilateral frameworks to guide interested parties to procure and trade in high-quality credits.

At the technical level, we are working closely with key players in the carbon services and trading ecosystem to develop the ICC framework. In July, NEA signed MOUs with leading carbon crediting programmes, namely, Verra and Gold Standard, which, together, account for over 70% of global carbon credit issuances. With these MOUs in place, companies will be able to acquire eligible ICC from projects registered with these programmes and surrender them to offset part of their carbon tax liabilities.

Our intent is for the ICC framework to catalyse local demand in carbon markets and support our vision of establishing Singapore as a carbon services and trading hub. Carbon services are a promising potential growth area for Singapore that can create good, green jobs for Singaporeans, while contributing to the global agenda on climate change. Growth in carbon markets will drive demand for jobs related to low-carbon project development, financing, consultancy and measurement, reporting and verification, or MRV.

Singapore is well-placed to leverage these opportunities. One notable example is the Climate Action Data Trust, or CAD Trust, which will be officially launched next month as a global market infrastructure supported by the World Bank, the International Emissions Trading Association and the Singapore Government. The CAD Trust will be anchored in Singapore to provide an open-source system to link and harmonise information about carbon credits and projects across registries globally. This initiative will drive market transparency, strengthen trust and advance global climate action. And Singapore, I think, is well-placed because we have developed trust and confidence with investors over decades, and we will maintain this confidence and high-level integrity in this new area that we go into as well. The CAD Trust will join a thriving ecosystem of over 70 organisations in Singapore, providing carbon services to the region and beyond.

Ms Janet Ang asked if the Government plans to ensure the credibility of voluntary carbon trading activities in Singapore and manage related risks. Other Members also asked about the development of voluntary carbon trading activities. I would like to clarify again that the ICC framework does not apply to the voluntary carbon market. It is not envisaged for this Bill to address that.

Our approach is to build up a vibrant carbon services ecosystem and provide the space for leading international and corporate initiatives to shape the voluntary marketplace. These include the Voluntary Carbon Markets Integrity Initiative and the Integrity Council for the Voluntary Carbon Market, which develop guidelines that promote the trading of voluntary carbon credits with high environmental integrity. As companies' use of voluntary carbon credits evolves, we will continue to study whether there is a need to adopt a more prescriptive approach.

Ms Poh Li San and Ms Janet Ang raised concerns that setting the facility-level limit for the use of ICCs at 5% might be too low, considering the current limitations in technologies that can achieve emissions reduction at scale and the need to support a vibrant carbon market. As mentioned earlier, we are starting with 5% as the facility-level limit to prioritise domestic abatement efforts. Are we right? Does it have to be 5%? Can it be 8%? Can it be 3%? Nobody knows. We are in a new area. So, what we will do is to start at 5% as the limit that we think that we can manage and then, as the market develops, we will see how it goes and we will make changes along the way.

So, I would just like to say to Members that in this phase, let us not be too prescriptive. Let us have an effective system that can help us grow from a very nascent stage to something that we can be proud of. If we start putting too many rules, it may make the scheme ineffective even if it can be the most transparent in the world. We will review the facility-level limit over time and align with international best practices, as carbon markets develop.

This brings me to Ms He Ting Ru's proposed amendment pertaining to instances where the prescribed facility-level limit is lifted. We are not able to support this proposed amendment, as it involves the publication of identifiable information relating to the registered business facility and breaches the confidentiality of carbon tax data which companies are accorded under the CPA.

I hope that I have explained sufficiently how our overall framework supports transactions of high environmental standards and that there are sufficient safeguards in terms of the registry, in terms of standards that will allow a nascent system to grow.

I understand that Ms He Ting Ru has suggested that perhaps we can have disclosure without financial details. But imagine if we are in a situation where we are discussing with companies on what type of ICC they are going to engage in and if a company has something that is groundbreaking, that requires significant ICC to justify the investment, but the system up there says that "Look, anything above 5% – disclosure, disclosure – even though details are not there, your names will be flashed on the papers". Do you think there will be more companies stepping forward or there will be fewer companies stepping forward?

So, we have to be quite practical at this stage, feel our way through and then, if we find that 5% is, indeed, not sufficient, Members can be assured that I will come back to this Chamber to ask for this level to be increased because we are all in the same boat, we want the same thing, which is a well-functioning carbon credit system that has environmental integrity.

I will now address the final group of issues which deal with balancing the interests of all stakeholders as we manage a fair and inclusive transition.

Ms Janet Ang and Mr Louis Ng asked about the Government's plan for the carbon tax to be imposed on more emitters, beyond the large emitters.

The current carbon tax threshold of 25,000 tonnes ensures that the carbon price is efficiently applied at key nodes of the economy and maximises coverage while it minimises – I would say optimises – the administrative burden on businesses. This covers around 80% of Singapore's emissions, one of the most comprehensive in the world. Coupled with our existing taxes on transport fuels, which are not subjected to carbon tax – we have separate taxes on fuels – we are achieving around 90% coverage. We are one of the world's highest.

Mr Louis Ng asked how compliance costs would increase if the next tier of facilities – that is, the reportable facilities – were taxed as well. Such facilities would have to incur not just the cost of reporting or the cost of paying taxes. They will have to get their reported emissions verified because, once you have to pay tax, we will need you to have it checked by experts, by auditors, and this will be a cost burden for a company, perhaps with a much lower carbon tax. So, it will be disproportionate to the carbon tax payable. Furthermore, as reportable facilities contribute only about 1% of Singapore's emissions, it would add little to the already high coverage of 80%.

I thank Mr Louis Ng and Mr Leon Perera for their suggestions on publishing carbon tax data, including those proposed as amendments to the Bill. Public disclosure of data needs to be contextualised, so that it can be interpreted fairly and meaningfully.

Our large emitters have products and production processes that are often heterogenous, specialised and proprietary. Publishing the emissions or ranking of top emitters without providing context of the business and the nature or the size of its operation may not be helpful in understanding how well a company is doing in mitigating its emissions.

Two refineries, same products altogether, both getting the same kind of allowances, is that definitely fair? What if I tell you that one refinery is actually adopting very, very carbon-inefficient processes, the other one is way ahead? Without background information, without understanding its processes, you cannot just look at two numbers and say, "This is fair" or "this is not fair" and "Why are you all giving this?"

There must be a workable system and I think, as Minister of State Low Yen Ling has explained, companies have to be benchmarked, they will have to produce their decarbonisation plans so that we can support them on a multi-year decarbonisation journey.

For accountability to their stakeholders, we encourage all companies to size, analyse and publish their environmental impact to explain how they are managing emissions-related risks, in relation to their commitment to decarbonisation. Companies listed locally are already subjected to SGX requirements to do so, as in many jurisdictions globally. Nonetheless, we will study possible ways to better facilitate environmental impact disclosure in a manner that respects commercial sensitivity.

We appreciate the concerns from Mr Gan Thiam Poh, Mr Xie Yao Quan, Mr Mark Chay and Assoc Prof Jamus Lim that the revised carbon tax levels will lead to higher costs amidst rising inflationary pressures.

Members of both sides of the House recognise that the effectiveness of a carbon tax to drive decarbonisation depends on the price level and have spoken in support of a raise in the carbon tax. We all agree that $5 is not right. So, we need to move.

And global warming does not pause because of inflation. So, rather than holding back our plans, the Government has been and will continue to provide support in a targeted manner to affected businesses and households as part of our longstanding commitment to an inclusive low-carbon transition. And this is where I listened very carefully to Assoc Prof Jamus Lim, and I have difficulty accepting his recommendations on implementation.

First, he has acknowledged that he has actually asked for a higher carbon tax range. He quoted, if I am not wrong, $80 to $133 as a range and with $100 as a useful midpoint or benchmark for our carbon tax level. So, this $80 to $133 is significantly higher than what we have stated, which is $50 to $80.

So, I am glad that the Workers' Party is supporting an even higher carbon tax range. As the Minister for Sustainability and the Environment, you are my best champion along with me.

Second, Assoc Prof Jamus Lim went on to say that this is not a very good time, like many of the Members as well, because we have inflation, we have energy shortages. So, perhaps, instead of giving a fixed number that may bind the hands of policymakers of the future, he has suggested that the carbon tax adhere to a central rate but with a variable component that varies over time according to conditions of the economy. In other hands, scale back when the economy is in recession, raise when the economy is strong. I will have much difficulty in implementation. As much as Assoc Prof Jamus Lim has suggested this as a way to ease implementation, I would find it hard to implement.

First of all, I would like Assoc Prof Jamus Lim to give me a three-year projection of what the economic conditions will be and then what that variation would be.

Secondly, he said that MAS would be able to project that. Nobody can project what has happened. We have all seen how exogenous factors have affected our economic conditions. Who had expected COVID-19? Who has thought about the Ukraine war? So, what do we do? We go out to the market, stand in the Chamber here and say, "By the way, we are going to raise carbon tax. But we cannot be really sure. It is somewhere around $80 to $133 per tonne. But, you know, there is some middle number and then you can move around a bit."

How can companies make plans like that? When you want them to invest in a plant that is energy-efficient, that captures carbon or uses green hydrogen, you have to tell them what is likely going to be the prevailing carbon tax so that when they do a multi-year calculation, as Member Leon Perera has stated that is what companies would do, sometimes even up to 10, 20 years, they need to have certainty. Otherwise, they will not be able to price in the effect of a higher carbon price. Otherwise, it will be unfair to companies who have invested in hydrogen and then turn around and find that there are no takers because the carbon price differential is missing. The Government said that it was going to do it, but because of the economic situation, is now not doing. So, we find it very hard to accept his suggestion.

Also, he has suggested that maybe we should push back the tax. We are suggesting that we raise the carbon tax in 2024 and that leaves us six years to 2030. So, if you are going to push back one, two years until the recession is completely over – which I really do not know when that is going to be – that means that it leaves us with about four years to raise it from $5 to $100 per tonne. Is that better or not for companies? So, with humility, I would say that I find it hard to accept his suggestion for implementation.

Ms Poh Li San and Mr Don Wee have pointed out that the Government does not expect to derive additional revenue from the upcoming revisions to the carbon tax and that is correct. The carbon tax revenue will be used to accelerate decarbonisation efforts and Singapore's inclusive transition to a green economy.

Minister of State Low Yen Ling has spoken about how the Government is supporting our industry along their decarbonisation journey,

In addition to energy efficiency support measures for businesses, Mr Mark Chay will be pleased to note that we have earmarked funds under the Research, Innovation and Enterprise 2025 (RIE2025) plan for the research, development and demonstration of low-carbon technologies that can drive deeper decarbonisation.

We will cushion the impact on our households.

So, while I cannot accept Assoc Prof Jamus Lim's suggestion, we will have to, from time to time, evaluate our carbon tax. Maybe we have it too high, maybe we have it too low, maybe we can move faster, maybe there are already technologies out there that can make carbon capture cost-effective. We will have to change, but we need to give companies sufficient notice. And in a year when business is bad, or utilities' costs are high like what we are experiencing now, you can be assured that the Government will have very targeted measures that are relevant for that time and the same with households.

Just for Members' information, $25 per tonne, is really our next step – from $5 to $25 in 2024. We have not even raised carbon tax yet. So, none of the higher utilities costs today is attributable to carbon tax – it is only to come in 2024. At $25 per tonne, the rise in carbon tax would translate to an estimated increase of about $4 per month in the utilities bill for an average 4-room Housing and Development Board (HDB) household.

When the carbon tax was first introduced in 2019, U-Save rebates were provided to offer transitional support to help affected households adjust. We have been and will continue to support households with U-Save rebates.

As Members would know, I think in the last six to 12 months, we have been supporting our households because of inflation, because of higher utilities costs. And it is no secret that we support households in 4-room flats for up to five months of utilities bills.

And just to put things into context again, carbon tax as it stands now, for a year, every year, we are collecting to the grand tune of $200 million. That is all – $200 million. So, it is not enough to affect the costs of goods. Other effects, other inflationary pressures are coming in because of other factors.

And just the utilities bills support, the U-Save rebates that I mentioned that go to households, cost the Government $580 million for FY2022.

This is to give you a measure of the scale that we are talking about. We are prepared to support households even way above what we are collecting, whether it is GST or whether it is carbon tax.

Members have the assurance that while we have fixed the carbon tax according to a schedule to give companies certainty, we will always be mindful about the needs of companies, the needs of households, the needs of society when the increase is implemented.

We are also reviewing ongoing schemes, such as the Climate Friendly Households Programme, to encourage more households to mitigate the long-term cost impact by making the switch to energy-efficient appliances and water-saving fittings. So, if Members have residents who fit the criteria who want to reduce their utilities bills by switching to more energy-efficient appliances, please step forward, please ask them to apply to NEA.

Mr Speaker, the Carbon Pricing Bill was first introduced in this House in 2018 as a key step in readying our economy and strengthening our competitiveness as the world transitions to a low-carbon future. Since then, we have accelerated our sustainability journey and stepped up our climate ambition. As Ms Poh Li San noted, achieving net zero by 2050 will be a daunting, but necessary undertaking.

With our enhanced climate targets, our carbon pricing regime must evolve in tandem. As Members have noted in today's debate, our carbon tax regime must strike a fine balance between three imperatives: the environment, our economy and our society.

To reach our ambition of net-zero emissions by 2050, we must drive decarbonisation while ensuring that ICCs are sourced from projects of high environmental integrity. And here again, I would like to thank all Members who have spoken in support of a higher carbon tax rate, and particularly, I note Workers' Party's position. All Workers' Party Members – Ms He Ting Ru, Assoc Prof Jamus Lim, Mr Leon Perera and Mr Louis Chua – supported the need for carbon tax and want an even higher carbon tax. They think that we are still too low at $50 to $80 per tonne.

So, we have considered all that. As the Minister for Sustainability and the Environment, I would really want to raise it as high as possible. So, I would say that you really are along with me on this journey. But we have to take into consideration the next point, which is really the economy.

So, we note your suggestions. We have announced the carbon tax and we have repeatedly been telling companies that these are the levels that are going to come. In the last 12 months. We will stick with these, but we will take your suggestions into consideration.

And as we make the transition to a low-carbon economy, we must keep an eye on our economic competitiveness, so that Singapore remains an attractive investment and business destination and generates green growth opportunities and good jobs for Singaporeans. We must strive to deliver an inclusive transition for our society, spur action across the whole of society and catalyse partnerships across the people, public and private sectors.

The proposed changes, as set out in this Bill, have been carefully considered in close consultation with the industry and the public. Taken together, they will enable the next lap of our green transition and lay the building blocks for Singapore as an economically competitive global sustainability hub.

With an effective carbon price as the cornerstone of our climate mitigation efforts, the Government will continue to push the envelope on all fronts, to secure a climate resilient and sustainable future for Singapore. I call on all Members of the House to give your support to this Bill. [Applause.]

Mr Speaker: Mr Leon Perera.

5.06 pm

Mr Leon Perera: I thank the Minister for her round-up speech. And, like the Minister, I would also emphasise that there is agreement from Members of both the ruling party and the Opposition on the need for us to hike the carbon price and on the broad thrusts of this Bill. I just have a few clarifications on the points that the Minister mentioned in relation to some of the amendments that we have filed.

Firstly, on the limitations on time for the allowance regime, the changes that we have proposed, I do take the point made by Minister of State Low Yen Ling that the Government has set a more ambitious target overall in aggregate for carbon emissions to achieve a certain target by 2030, and that puts pressure on the Government to curb and curtail allowances.

Nevertheless, having a more ambitious aggregate target may still allow either this Government or some future Government, in theory, in principle, to prop up a company with a fairly generous level of allowances in perpetuity, for a long time, and to do so in a manner that is not transparent. Were that to happen, were that possibility to be left open in the legislation, that possibility would undermine wider public acceptance of a much-needed carbon price hike, and perhaps, acceptance within the business community itself. If I am a company that is a large emitter, I would want to know that there is a certain amount of transparency about which entities are being given allowances.

So, I would like to pose this clarification, which is that, is the Government open to having some kind of legislative mechanism that would limit the allowances, in terms of time, to prevent this possibility of a company in perpetuity getting allowances up to the maximum that is referred to in the point of reference. That is my first clarification.

The second clarification is, would the Government acknowledge that, notwithstanding the changes that we have suggested to the allowance regime, the Government possesses other tools through other laws, other powers that allow it to apply economic incentives in cases where it may really be necessary to prevent disinvestment for job creation, job defence. And that would allow us to have a carbon pricing regime where the curtailment on the allowance regime is a bit clearer and the transparency level is a bit better, but at the same time, we are still able to retain and win these strategically important projects. That is my second clarification.

My third clarification is, in terms of the public registry that we have suggested. I want to stress again that we are not calling for the amounts of allowances to be disclosed or the amounts of ICCs being used to be disclosed. But I would like to ask again whether the Government would consider that a public registry may actually strengthen confidence in the regime buy-in to a new carbon price hike, which does impose significant burdens on companies and on households, and would impose a certain amount of public accountability, for the public to know that these are the entities that are getting allowances and we are able to see that these entities are doing their best or they are contributing back to the country, they are making progress towards lowering their emissions and so on. Would the Government acknowledge that there are some benefits to that transparency?

And my last clarification is, if the Government does not wish to have this public register, I believe both Minister of State Low Yen Ling and Minister Grace Fu referred to the Government is studying, publishing some kind of aggregate data in the future. Would the Government be open to publishing the number of allowances that have been awarded, just in aggregate, and the extent of emissions that are covered by allowances in aggregate, in the future, if they do not want this public registry proposal?

Ms Low Yen Ling: Mr Speaker, I want to thank the Member Mr Leon Perera for his clarifications. I want to assure him, and also the House, that even as we put in place the transition framework to support the EITE companies to transit to low-carbon future, I want to assure him that we maintain the impetus for them to decarbonise as quickly as possible. In fact, we want to catalyse the process for them to do so. And certainly, as we roll out the transition framework, it will not give any companies a free pass.

I just want to reiterate again. The Singapore Government just updated our 2030 NDC commitment. And Members said that, as far as Singapore is concerned, people know that when we say we will do it, we will achieve it. In fact, we will put in place interim milestones to make sure we get there by 2030 and by 2050. And so, the Singapore Government is certainly accountable to this international climate commitment. That is why the transition framework that we put in place is meant to ensure that the EITE companies are able to catalyse their decarbonisation journey.

I want to assure him that even as we avail the allowance, it is really only for a portion of the emissions. It is given based on internationally recognised efficiency standards, where available, as well as the individual facilities' decarbonisation plans. All these plans, I can assure you, will be scrutinised and there will be checks and balances within the relevant authority and within the Ministry, and in fact, across Ministries, because as far as climate change is concerned, we have an Inter-Ministerial Committee on Climate Change (IMCCC). So, there are checks and balances, there is accountability, there is transparency.

I shared with the House earlier in my speech, in time, where appropriate, the Government will certainly release aggregated information on the amount of allowances provided. But I urge everyone to have a care. And I think Ms Janet Ang and many Members reminded us that at this very nascent stage, as we are creating this, to make sure that we are well-placed to capture the green opportunities, not just for SMEs, but also for Singaporean workers, our youths, our mid-career hires, and so on. We want to make sure that we do not overly constrain our ability to respond to the emerging market opportunities and the trends as well. So, we need to bear in mind whether such disclosures may inadvertently divulge commercially sensitive information now.

Mr Speaker, I want to share some numbers very quickly. We talked about some of these sectors and Ms Janet Ang reminded us that the EITE companies have poured in significant, in fact, billions of dollars of investment in Singapore over the decades, creating very good jobs for Singaporeans. These EITE companies are key investors and are global leaders that collectively contribute about S$21 billion in value-add and employ about 29,000 workers here in Singapore. Not just that, not just economic value-add, not just jobs, but they also form an important ecosystem for our local SMEs as their suppliers, as their business partners.

So, these are really what is at stake. To make sure that we take a very calibrated approach as we put in place a transition framework, as we catalyse their transition to a low-carbon future, we want to make sure that we do not inadvertently diminish our competitiveness as a business and investment location, thereby hurting our ability to create good jobs for people in Singapore.

Ms Grace Fu Hai Yien: I would like to add on to Minister of State Low Yen Ling's reply. We are an accountable Government and we are prepared to be accountable to the people. We are accountable with our results.

So, you are going to look at our commitments in 2030, our year-to-year carbon emissions and hold us accountable.

I think the line of questioning that the Member has taken, seems to suggest that we have something to hide and we need to hide some incentives somewhere else. There is really no need. What we want is to make sure that our public officers have the ability to engage companies confidently, keeping in mind their obligation to maintain commercial confidentiality for the simple reasons that the companies may be competitors themselves. Secondly, we may have competitors outside Singapore.

So, like many of these discussions, like many of these plans, we want to respect each other's requirements, so we have taken the stand that we will keep individual disclosure confidential.

Ultimately, you look at our Budget, every year – have we overspent? Do we have items that are not accounted for? Do we have schemes that cannot be explained to people? I think our track record speaks for itself. We will stand in this House again, year after year, to justify to you how we have been doing on our Green Plan and our carbon emissions.

Mr Speaker: Assoc Prof Jamus Lim.

Assoc Prof Jamus Jerome Lim: Thank you, Speaker. Just two clarifications to Minister Grace Fu. The first has to do with the notion of whether we are indeed calling for a higher rate. And the median I suggested was $100 a tonne. It is true, certainly, that in the long run, we seek for something of that nature for good reason, as I had explained. It was the mid-point of what is scientifically credible and defensible.

That said, I think it is important to distinguish between the appropriate level versus the manner by which we get to that level – the glide path, if you will. The analogy is to think about how one might choose to target one's weight loss journey. First, you choose a target weight. Let us say, I really wish to be 65 kilogrammes.

Mr Speaker: Assoc Prof Jamus Lim, what is your clarification?

Assoc Prof Jamus Jerome Lim: Yes, so, the clarification then is whether the Ministry sees or does not see the merits of separating these two decisions – about the appropriate level of the carbon tax versus the glide path to get there.

My second clarification has to do with something that she said about how businesses cannot operate without certainty, when we do not know what the carbon tax is going to be. I am befuddled. Even now, the Government routinely alters levers of policy such as the interest rate when there is uncertainty on a year-to-year basis, about the level of interest rates, yet businesses continue to invest. Put it another way, let us say the Ministry telegraphed that it was originally going for —

Mr Speaker: Again, what is the clarification?

Assoc Prof Jamus Jerome Lim: I am getting there, Sir. So, originally the Ministry telegraphed the $25 a tonne rate next year. And we entered into a recession. Would she believe that businesses would then be very upset if we said that we would scale this $25 a tonne back to something lower, to eventually raise it subsequently?

Ms Grace Fu Hai Yien: Mr Speaker, Assoc Prof Lim started his speech earlier saying that we have the theory right, but we need to get the implementation right. So, I would like to maybe ask him for his suggestion of how the Government should be positioning the carbon tax in his way. What will be the target – it is $100, so, if it is long run, which year? Is it 2030 still?

Assoc Prof Jamus Jerome Lim: Just to be clear, the Government has not also committed to a $50 a tonne —

Ms Grace Fu Hai Yien: Oh, we have – $50 to $80 is our range. So, what is your range?

Assoc Prof Jamus Jerome Lim: It was well stated: $58 to $133, with the mid-point being $100.

Ms Grace Fu Hai Yien: Okay. So, your range is higher than the Government, is it correct?

Assoc Prof Jamus Jerome Lim: The lower bound is lower than the Government's upper bound.

Ms Grace Fu Hai Yien: Our range is $50 to $80; your range is $58 to $133.

Assoc Prof Jamus Jerome Lim: Yes, the lower bound that I gave you is lower than the Government's upper bound.

Ms Grace Fu Hai Yien: Alright, okay. Can you please try to tell me, if you are the Minister for Sustainability and the Environment, how would you glide to this number? How would you glide? We are at the end of 2022. You are going to go out and say, "Company, this is the new glide path." How would you describe your glide path?

Assoc Prof Jamus Jerome Lim: That was the content of my speech. I suggested that we could do it incrementally, the way that the Ministry has suggested. But I also suggested that we could allow the specific level to adjust upward and downward, according to economic conditions.

Ms Grace Fu Hai Yien: So, are you then saying that we can go out to the world, and say, "Sorry, I have made the 2030 NDC on the basis of certain economic conditions. And now that the economic conditions are bad, there is a war out there, there is high inflation in energy costs, my NDCs do not count because I need to glide further out"?

Assoc Prof Jamus Jerome Lim: No, but I think I was clear that the adjustments upwards and downwards are the same way that business cycles go upward and downward. So, you would have it lower in a given year, because of economic conditions. But when things pick up, you would raise it back so that you met the original targets.

Ms Grace Fu Hai Yien: So, you are suggesting a very variable carbon tax rate, ends with $58 to $133, but without knowing how it is going to get there. Not even knowing what 2024 is going to be.

Assoc Prof Jamus Jerome Lim: I think you would set a target, but be able to adapt to economic conditions. The same way the interest rates are —

Ms Grace Fu Hai Yien: Are you going to say what is your target rate for 2024?

Assoc Prof Jamus Jerome Lim: As I said, it is not complicated. You set the target —

Ms Grace Fu Hai Yien: What is that rate? What is the number?

Assoc Prof Jamus Jerome Lim: We can go with the Government's proposed number. Say, start with $25, as I said in my speech.

Ms Grace Fu Hai Yien: Okay, so in 2025, are you going to stay with $25 as well?

Assoc Prof Jamus Jerome Lim: We would have to look at economic conditions.

Ms Grace Fu Hai Yien: So, I would like to repeat —

Mr Pritam Singh (Aljunied): Point of order, Mr Speaker. I understand that when a Member asks a question, the other Member sits down; question is answered, vice versa. There is some decorum between both parties.

Ms Grace Fu Hai Yien: I apologise for that. I will sit down. Okay. Can you please tell me, describe to me your carbon tax glide path in numbers. Because I am a business, I need to know. Can you please tell me, with some certainty, what is that variable portion – even if you say $25 for two years to come, $45 I am not too sure, but what will be the variation?

Assoc Prof Jamus Jerome Lim: So, I am happy to clarify. Again, we are not opposed to the original path. So, for the next year and the subsequent year, we are comfortable with going with that $25 that was originally there. But I am pushing for the flexibility to adjust it upward or downward just to take into account of the fact that economic conditions may alter. The same way we do for interest rates.

Ms Grace Fu Hai Yien: Mr Speaker, this is not a fiscal policy. This is a policy to change our energy mix and our energy use. So, whether there is going to be an economic downturn or not, this is a change that we all need to make. And Members have spoken so passionately about the need to address the tragedy of the commons, climate change that is confronting us. So, are we going to delay it further? No. The answer is we all need to change.

If there is an economic problem, if there is an interest rate problem, of course we have to deal with it. We have to deal with it in other ways.

But the signal to the companies must be that this is a path that the Government is going ahead with. We will have to make investments with these numbers in mind, bearing in mind that our investments in the petrochemical industry or in the power generation industry are multi-year. So, if we have targets, carbon tax rates that cannot be even certain for the next four, five, six years, how can they make long-term projections?

I find it very difficult for companies to do that, I find it very difficult for financiers, for banks to also do that.

And here, I think I am receiving slightly mixed messages. The message is, "We want to fly the environmental flag. We want to be sustainable. We want to be able to address our constituents who want us to be as green as possible". But when it comes to the hard decision of making changes, of making companies change and invest in renewables, reduce efficiency, reduce utilities, reduce water, circular economy, reduce waste – "Hang on, I think there is an economic condition and, therefore, we change".

So, we have to decide for ourselves. Is the carbon tax something that we need to do and if we need to do it, do we need certainty? If we need certainty, how do we address conditions that we do not foresee? If we have a COVID-19 again – touch wood, hope that we will never have it – but if we have a COVID-19, or we have a major recession; of course, we will have to think about ways to cushion it. But that does not mean that we are turning back to fossil again. That is the message that we have been telling all the large emitters in the world at COP27. Even though there is an energy crisis out there, please do not turn your eyes away from the problem.

So, I hope that Members will support what we are doing, understand that we are not blind to concerns, accept that we need to give clarity to companies to invest, to change, to adopt a way of low-carbon production that we cannot delay anymore, even as we are confronting some major challenges out there. [Applause.]

Mr Speaker: Ms He Ting Ru.

Ms He Ting Ru: Thank you, Mr Speaker. Just a clarification for the Minister. If I am not wrong, the Minister said earlier that our proposed registry would breach confidentiality protections afforded under the carbon pricing regime.

May I ask for further details about the specific provisions or maybe the law that they would breach? Or was she saying that there is a risk of some deduction being made to allow people to make inferences, bearing in mind again that we are not asking for details about the amount surrendered in excess of the 5%, which is the currently proposed threshold?

And if she is saying that the Government is unable to support the registry, what safeguards are there to make sure that there is better accountability for the ICCs surrender regime? It is important for us to get this balance right, so that it does not end up making it look like entities can buy their way out of the decarbonisation process, even when that really is not the case under the regime?

Also, just to follow on from my colleague, Mr Perera's point earlier, can we have a bit more details about what aggregate data will be published to address concerns that were previously mentioned?

Ms Grace Fu Hai Yien: Mr Speaker, I believe that I have addressed Ms He's clarification questions earlier in my speech, that it is really not in our interest at this point in time. Hold us accountable eventually for our overall performance on carbon abatement and carbon mitigation, but let us run an effective, flexible, nimble system, so that we can really catch the wind and be as effective as we can in developing a new green economy.

Mr Speaker: Ms He Ting Ru.

Ms He Ting Ru: Sorry, just to clarify. Is the Minister saying that the confidentiality provisions that will be breached are specific legal provisions that would be breached? Sorry, if I missed that point.

Ms Grace Fu Hai Yien: I believe the Fourth Schedule of the CPA restricts disclosure to specified public officers.

Mr Speaker: Mr Patrick Tay? Mr Louis Ng? Was there an arm that was raised? No? Okay.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Grace Fu Hai Yien].

Bill considered in Committee.

[Mr Speaker in the Chair]

Clauses 1 to 12 inclusive ordered to stand part of the Bill.

Clause 13 –

The Chairman: There are 12 amendments standing in the name of Mr Leon Perera, as indicated in the Order Paper Supplement. The Minister for Finance has signified that the President's recommendation under Article 59(2) of the Constitution is required for amendments (1) to (3)* and (8) to (12)**.

*The amendments read as follow:

(1) In page 13, line 15: to leave out "and".

(2) In page 13, line 20: to leave out the full-stop, and insert "; and".

(3) In page 13, after line 20: to insert —

"(c) the taxable facility has been awarded allowances in no more than one of the preceding four emissions years.".

**The amendments read as follow:

(8) In page 14, line 14: to leave out the em-dash.

(9) In page 14, line 15: to leave out "(i)".

(10) In page 14, line 19: after "less than", to insert "double".

(11) In page 14, line 20: to leave out "; or", and insert a full-stop.

(12) In page 14: to leave out lines 21 to 24.

The Chairman: Do these amendments have the recommendation of the President?

The Second Minister for Finance (Ms Indranee Rajah): No, Sir.

The Chairman: As the President’s recommendation is not forthcoming for amendments (1) to (3) and (8) to (12) standing in Mr Leon Perera's name, as indicated in the Order Paper Supplement, these amendments cannot be moved.

Amendments (4) to (7). Mr Perera, please proceed to move these amendments together.

Mr Leon Perera: Mr Chairman, Sir, on a point of order, may I pose some questions to the hon Minister, the Leader of the House, on the process surrounding how the President was approached and how the recommendation was sought? May I do that at this stage?

The Chairman: Yes, would you like to explain?

Mr Leon Perera: Specifically, what I would like to ask is when was the concurrence of the President sought for my amendments? And is it correct to say that the advice of the President was sought, but at the same time, the advice could only be given from the Office of the President based on the advice of the relevant Minister or the advice of the Cabinet?

Ms Indranee Rajah: Mr Chairman, Sir, the specific amendments in question that Mr Leon Perera has asked me about, are the amendments in his Notice of Amendments, for clause 13, amendments (1) to (3) and amendments (8) to (12), in the Order Paper Supplement.

Article 59(2) of the Constitution provides that the recommendation of the President is required for a Bill or an amendment that makes provision, whether directly or indirectly, for one of the stated financial matters. Those financial matters would include, for example, increasing or reducing taxes.

When a Bill has such fiscal implications, or when an amendment to a Bill has such fiscal implications, the President's recommendation is required. That is provided for under Standing Order 67(1), which provides that it is the duty of the Minister for Finance to inform the Speaker before moving amendments to a Bill, whether the recommendation of the President is required by law. This has been done. It was done by way of notification to Parliament, which was circulated by way of Notice Paper No 1522 to all Members. So, Members would have received that.

Which means that all Members, including Mr Leon Perera and the Workers' Party would be aware that the President's recommendation is necessary.

Just in terms of timing, though, I need to remind Members that the Notice of Amendments actually came in two clear days before the Sitting, which means on Wednesday. So, it came in on Wednesday evening. And that means, on Thursday and Friday, the Government had to look at the amendments and assess to see whether or not such amendments had any fiscal implications. It was not, I should add, notified to us by the Workers' Party, who had prepared the amendments, that it would have fiscal implications – which one would actually expect you to do, knowing that the President's recommendation is to be signified. So, we had to check that through and that took some time.

Then, Mr Leon Perera's next question really is whether the President's recommendation was sought, and if so, when and so on.

I must say I do find that when you give the Government less than 48 hours' notice, and not to mention the fact that there was no follow-up on the part of the Workers' Party even to find out whether anything would be done in this respect, I have to say that I find that it was somewhat — let us put it this way: you gave less than 48 hours and somebody had to do the running for you.

But in any event, the President's recommendation is not given for the Member's amendments. This is because the Government has assessed that the amendments in question – that is amendments (1) to (3) and (8) to (12) – could not be supported on the merits. We determined that they could not be supported for the reasons explained earlier by my colleagues, in the Second Reading debate.

And as the amendments could not be supported, they were not put forward to the President for the President's recommendation.

This is perfectly in order as the Constitutional requirement, for the President's recommendation to be sought for amendments with financial implications, is a procedure that safeguards the Government's financial initiative. The President would act in accordance with the Government's advice in giving, or not giving, the required recommendation.

It is not unique to us. It is a long-established feature of Westminster parliaments that the government of the day has the sole right and responsibility to initiate financial legislation. The Government may, therefore, also take the decision not to put forward amendments with financial implications for the recommendation.

The Chairman: Mr Leon Perera.

Mr Leon Perera: Mr Chairman, can I just give a brief response to Minister Indranee Rajah's points on procedure?

The Chairman: We are not having a debate on this issue. If you have any clarifications, you can pose that. Otherwise, I suggest you move on to amendments (4) to (7), please?

Mr Leon Perera: Mr Chairman, Sir, can I briefly respond to Minister Indranee Rajah on her observations about the process of filing? Not to reopen the substantive debate, but just to respond to one or two of her observations.

The Chairman: Keep it short.

Mr Leon Perera: Yes. So, Ms He Ting Ru and I filed the amendments with the Clerk of Parliament on Monday. I do understand the point the Minister is making that the Notice was sent out to all Members of Parliament on the Wednesday. But I just want to make the point that we did file the amendments that we planned to move on the Monday.

I do also want to make the observation that we received the notification that the President's recommendation was necessary on the Saturday at about 1.00 pm. So, we worked on it from that point on. Anyway, those are just some brief observations.

Mr Chairman, Sir, I would like to move amendments (4) to (7)* standing in the Order Paper Supplement in my name. I beg to move those amendments.

*The amendments read as follows:

(4) In page 13, line 26: to leave out "specify", and insert "ensure the award is listed on a registry that is provided free-of-charge and easily accessible to the public through electronic means, specifying".

(5) In page 13, line 28: to leave out "and".

(6) In page 13, line 30: to leave out the full-stop, and insert a semi-colon.

(7) In page 13, after line 30: to insert —

"(c) the registered person of the taxable facility who has received allowances; and

(d) the Minister's reasons for deciding to award the allowances.".

The Chairman: Leader.

Ms Indranee Rajah: Sorry, Mr Chairman, just a very quick response and not to belabour the matter. I understand that the Member may have put in the amendments earlier.

All I am saying is that it would be helpful, even though the Standing Orders have a specific procedural requirement of time, that you can, of your own volition, also notify the Government ahead of time so that it would actually give us a little bit more time. So, that is all I am saying, in terms of just a matter of adequate time and preparation.

In this case, we had taken a decision and looked at it, and decided not to put forward the recommendation. But I would just like to remind Members that one does not go to the President with less than 48 hours and say, "Here it is, please make a decision." If something was put forward, the President would have to consider it and it would take some time. But in this case, as the Government, having taken the decision, had made the decision not to put it forward for the reasons stated.

The Chairman: Leader of the Opposition.

Mr Pritam Singh: Just to respond to the Leader of the House, thank you for the clarification.

There was no intention to give the Government very little time to respond. I think this is a novel process insofar as at least my time in the House is concerned. I do not think such an amendment has come up. I think the intention was to make sure we filed on time as per the Standing Order, which we did. And thereafter, on the Saturday, after Mr Perera received the note from the Clerk of Parliament, I think he followed up with the Clerk of Parliament with a list of questions as to procedure and so forth.

So, there was no intention to try and give the Government very little time to respond or anything of that sort. I just thought I ought to put that on the record.

The Chairman: Leader.

Ms Indranee Rajah: I thank the Leader of the Opposition for his clarification. Thank you.

The Chairman: The question is as proposed by the Member.

Question put, and amendment negatived.

Clause 13 ordered to stand part of the Bill.

Clauses 14 to 28 inclusive ordered to stand part of the Bill.

Clause 29 –

The Chairman: Clause 29, Ms He Ting Ru.

Ms He Ting Ru: Sir, I beg to move amendments* to clause 29 standing in my name, as indicated in the Order Paper Supplement.

*The amendments read as follows:

In page 25, after line 10: to insert —

"(3) Where the Minister permits eligible international carbon credits to be surrendered in excess of the prescribed limit pursuant to subsection (2), the decision shall be listed on a registry that is provided free-of-charge and easily accessible to the public through electronic means. The register shall contain information that includes information relating to the registered person, the emissions year where the registered person was permitted to exceed the prescribed limit for international carbon credit usage, and the Minister's reason for deciding to lift the prescribed limit.".

Consequential amendment:

In page 25, line 11: to re-number subsection (3) as subsection (4).

The Chairman: The question is as proposed by the Member.

Question put, and amendment negatived.

Clause 29 ordered to stand part of the Bill.

Clauses 30 to 43 inclusive ordered to stand part of the Bill.

Bill considered in Committee; reported without amendment; read a Third time and passed.