Carbon Pricing Bill

Order for Second Reading read.

The Minister for the Environment and Water Resources (Mr Masagos Zulkifli B M M): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Carbon Pricing (CP) Bill seeks to impose a carbon tax on certain greenhouse gas emissions (GHG) of business facilities, measured from 2019 onwards. The Bill also imposes obligations concerning the reporting of GHG emissions of business facilities, in place of the obligations currently in the Energy Conservation Act.

I have spoken in this House about how climate change poses existential challenges for Singapore. We are already experiencing its impacts – changing weather patterns, more intense rainfall and rising sea levels. Singapore is thus an active advocate and contributor to global climate action, as this is the only way to preserve a habitable planet for our children.

This is also why we are rallying Singaporeans in this Year of Climate Action. Since launching in January, about 50,000 individuals, organisations and educational institutions have taken the Climate Action pledge. Our Climate Action video has been viewed more than a quarter million times. We are encouraged by the passion and activism of our fellow Singaporeans and businesses doing their part for climate action.

Our 2016 Climate Action Plan outlines the climate adaptation measures we are taking to build Singapore’s resilience to climate change, as well as the climate mitigation measures to reduce GHG emissions in every sector through driving energy efficiency, robust transport policies around what we call "car-lite" policies for a "car-lite Singapore" and waste management policies aiming for a "Zero Waste Nation".

The carbon tax is thus an integral part of this suite of mitigation measures to nudge our industries towards a low carbon footprint. Put together, it will enable Singapore to meet our commitments under the Paris Agreement.

But climate change also presents new opportunities for our companies. The World Bank estimates that climate-smart investments amounting to US$23 trillion will be needed to meet the Paris commitments, that means, US$23 trillion in demand for clean energy, low-emissions transport and sustainable urban solutions. Investors are moving in this direction.

Under the Climate Action 100+ Initiative, 256 investors managing US$28 trillion in assets have committed to work with companies to reduce emissions. Companies that adopt greener technologies and climate-friendly practices will find it easier to operate and thrive. China has already made a strategic choice and stated its ambition to transform its economic development and shift towards a low-carbon economy.

Globally, many companies are following suit. To maintain our competitive edge, Singapore companies must also transform. Consumers all over the world will soon demand products and services that use the smallest carbon footprint. We must move early. The Government will help. The Minister for Finance has clearly stated that we are prepared to spend more than what we collect in carbon taxes over the next five years to help our companies, including small and medium enterprises (SMEs), improve their carbon efficiency and shift to the low-carbon economy.

Our companies reported an energy efficiency (EE) improvement rate of 0.4% in 2014 and 0.6% in 2015. I am happy that our EE improvement rates continue to rise and, for 2016, we have achieved an EE improvement rate of 0.8%. This means reduced carbon emissions from industry. However, we still have some way to go, as leading jurisdictions, such as Belgium and the Netherlands, achieve annual improvement rates of 1% to 2%.

The carbon tax will incentivise companies to improve energy and carbon efficiency, while giving them the flexibility to take action where it makes business sense. My Ministry held a consultation session recently with industry and non-government organisation (NGO) participants. Many participants agreed on the need for climate action and supported pricing carbon.

This is consistent with the views expressed by business leaders worldwide. For example, the Chairman and Chief Executive Officer (CEO) of ExxonMobil, Darren Woods, blogged that, "A uniform price of carbon applied consistently across the economy is a sensible approach to emissions reduction. This would promote greater energy efficiency and the use of today’s lower carbon options, avoid further burdening the economy, and also provide incentives for markets to develop additional low-carbon energy solutions for the future".

Since the Finance Minister announced the carbon tax at Budget 2017, we have been consulting stakeholders closely on implementation. To manage compliance costs for companies, the Bill builds on the existing requirements in the Energy Conservation Act (ECA). Similar to ECA, the Carbon Pricing Act will be administered by the National Environment Agency (NEA).

Keeping in mind companies' compliance costs and our international competitiveness, we studied the laws in other carbon pricing jurisdictions, such as the European Union (EU), California and South Korea, to ensure that our requirements are appropriately calibrated and aligned to international practices. We also took reference from the requirements and associated penalties in relevant domestic legislation, including the ECA, as well as the Income Tax Act and the Goods and Services Tax Act.

We have also transferred all the GHG emissions reporting requirements from the ECA to the CP Bill. Through many rounds of consultations with potentially affected companies, NGOs and the general public since early 2017, we have received constructive and useful feedback to refine the Bill. I would like to thank everyone who participated.

Mr Speaker, allow me to go through the key components of the Bill which are contained in Parts 3 to 5.

Part 3 – coverage and definition of facility. Part 3 of the Bill identifies the persons and business facilities that must be registered under the Bill. Facilities from the manufacturing, power generation, water supply and waste management sectors will be covered.

We have made refinements to how the ECA defines a "business facility" to provide greater clarity to companies and to align our definition with international practices. A business facility is a single site where a business activity that involves the emission of GHG and forms a single undertaking or enterprise is carried out.

The "person", which can be a company or other legal person, having operational control over the facility must be registered under the Bill, and will be responsible for fulfilling the obligations under the Bill.

A "business activity" can be an activity or a series of activities. The Bill allows for business activities that are carried out at two or more parcels of land separated from one another to be treated as carried out at a single site in certain instances, including if the activities are under the operational control of the same person and are carried out in an integrated manner and clear dependencies between the activities.

Other jurisdictions have similar practices, where separate installations with technical connections or in physical contact, can form a single facility. This was also requested by the industry. We hope that this exception will encourage companies to consider the synergies across plants in order to reap greater emissions reduction and improve resource efficiency. It will also lower compliance cost as only one emissions report needs to be submitted for a single business facility spanning multiple premises.

The Bill imposes obligations in relation to two types of facilities – taxable facilities and reportable facilities.

Taxable facilities are those that emit 25,000 metric tonnes of carbon dioxide-equivalent (tCO2e) and above of GHG emissions annually. This threshold does not include the GHG emissions listed in Part 2 of the Second Schedule which I will elaborate on later.

These facilities will have to undertake more rigorous measurement, reporting and verification (MRV) processes and will have a carbon tax imposed on their GHG emissions. Together, the facilities that cross this threshold account for about 80% of Singapore's GHG emissions.

We took reference from key jurisdictions, such as the EU and South Korea, in deciding on the threshold level of 25,000 tonnes. We aim to strike a balance between maximising our emissions coverage while managing the compliance cost for smaller emitters.

Nevertheless, we still want to encourage smaller emitters to monitor and reduce their emissions. Hence, the second category called "reportable facilities", that is, those that emit at least 2,000 tonnes but less than 25,000 tonnes, must have their GHG emissions measured and reported, but will not be taxed.

Part 4 – MRV. A robust MRV regime forms the foundation of an effective CP scheme. For reportable facilities, the measurement and reporting requirements will be similar to their existing ECA reporting practices, whereas taxable facilities will adhere to a more stringent set of MRV requirements.

Emissions reports for taxable facilities must be submitted annually based on a monitoring plan. The monitoring plan sets out data management practices to ensure that GHG emissions data is measured and reported accurately and robustly. The registered person having operational control of a taxable facility will also be required to engage a qualified independent third party, accredited by NEA, to verify the emissions reports. This provides an independent review of the measurements and reporting of a facility's GHG emissions, akin to a company engaging an external auditor to audit its financial statements.

Part 5 – tax and mechanism. The details of the carbon tax can be found in Part 5 of the Bill. As announced by the Finance Minister in the 2018 Budget, the carbon tax rate will start at S$5 per tonne of GHG emissions, which the Government intends to raise to between S$10 to S$15 by 2030. The initial rate of S$5 per tonne has been specified in the Third Schedule and can only be amended by an Act of Parliament.

Our carbon tax will be applied uniformly without exemptions. It will take the form of a fixed-price credits-based mechanism. This means registered persons will pay the carbon tax by surrendering carbon credits equivalent to their carbon tax liability. These carbon credits can only be bought from NEA at a fixed price.

We have designed our carbon tax this way to give us the flexibility to introduce international credits or link to other emissions trading systems, if and when there are opportunities to do so. However, in the initial phase, international credits or offsets will not be allowed as we want our companies to focus on reducing their emissions. That said, we recognise that companies welcome the potential use of international credits. We are monitoring the global discussions on the use of and accounting of international credits and will continue to study this issue.

First and Second Schedule – coverage of GHG emissions. The carbon tax will be levied on the direct emissions of six types of GHGs, namely, carbon dioxide, methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride. These are the six gases that Singapore is required to report under the United Nations Framework Convention on Climate Change.

To reduce compliance costs, there will be a list of GHG emissions that are excluded from the carbon tax, similar to the practice in other CP jurisdictions. The list comprises small sources of emissions which have a disproportionately high cost to measure and report compared to the amount of carbon tax collected. These sources of emissions are typically from ancillary processes and are insignificant compared to a facility's total GHG emissions.

The list of excluded emissions is specified in Part 2 of the Second Schedule. It includes GHGs emitted from fire extinguishers, and HFC and PFC emissions from air-conditioning equipment used for non-manufacturing purposes, such as in office buildings.

The list also includes GHG emissions that, in line with international GHG reporting protocols, are not counted towards a company's emissions, such as the carbon dioxide emissions from biofuels. Furthermore, we will exclude emissions arising from the use of petrol, diesel and compressed natural gas (CNG). As highlighted by the Finance Minister in his recent Budget Statement, excise duties have been levied on these fuels, which already encourage reduction of their use and, therefore, reduce GHG emissions and, hence, no additional carbon tax will be levied.

Although the excluded emissions are not taxed, registered persons will still be required to measure and report most of this data, using simpler methods to estimate such emissions. This data will enable us to track whether these emissions have grown over time and review the list of excluded emissions, if necessary.

Let me now touch on penalties and appeal mechanisms. Given that we are imposing a tax on GHG emissions, for parity, the penalties on taxable facilities relating to reporting and tax payment have been pegged to the equivalent penalties for fraud and tax evasion in the Income Tax Act.

The Bill also provides an avenue for a registered person to appeal to the Minister against NEA's decision pertaining to the deregistration of taxable facilities, approval of verified emissions reports or monitoring plans, or tax assessments and refunds. These disputes may involve highly technical and specialised industrial processes. Hence, the Bill allows the Minister to delegate the appeal to a Panel that must comprise at least one person with the requisite technical expertise.

Mr Speaker, to conclude, the carbon tax is a key part of our measures to achieve Singapore's climate pledge and enhance the competitiveness of our companies and economy. It will provide a price signal to incentivise energy and carbon efficiency improvement across the economy and encourage investment in clean, sustainable solutions.

It is a significant step to bring us closer to a liveable and sustainable Singapore, where thriving businesses have low carbon footprints and where climate action is a way of life for all. Through this transformation, our companies will be able to remain internationally competitive and capture opportunities in the low-carbon economy of the future. Sir, I beg to move.

Question proposed.

Mr Speaker: Er Dr Lee Bee Wah.

2.11 pm

Er Dr Lee Bee Wah (Nee Soon): Mr Speaker, reducing carbon footprint is the way to go for our future. This Bill will be a good step forward to get our people to be in sync with the international trend. We need to position Singapore for a low-carbon future as that will be the new norm. Taking climate action need not be a tradeoff against economic development. Rather, we should recognise that taking climate action today is important and can reduce business risk and open new opportunities and growth for businesses, especially in the eco-industry. It can also spur businesses to move up and upgrade themselves and be more efficient in the use of energy. It is a necessary step that will enable Singapore to stay competitive as we move towards a carbon-constrained world.

NEA noted that our companies achieved an EE improvement rate of only 0.4% in 2014 and 0.6% in 2015 and, as the Minister mentioned just now, 0.8% in 2016, compared to the 1%-2% per annum achieved in leading countries, such as Belgium and the Netherlands. I would like to ask, with the carbon tax, how much improvement are we targeting for Singapore?

During Budget 2018, the Finance Minister announced that support for companies will be enhanced through schemes like the Productivity Grant and EE Fund. I would like to ask the Minister, so far, how many companies have tapped on these grants? How effective have they been in encouraging improvements in EE? What outreach efforts are employed to get more companies on board? Also, are there any "standard packages" or success stories that the Ministry can recommend to companies that do not know how to go about doing it?

While charging a flat rate of $5 carbon tax helps simplify matters, companies are concerned about the lack of a clear benchmark. They are concerned that if the tax fails to reduce carbon emissions, the tax rate will eventually be increased across the board, thus penalising those who have been reducing their carbon emissions and reducing competitiveness overall. In this regard, can we be more open with regard to how the MRV requirements are done? I would like to propose that all these reports under the MRV requirements be made available to the public. This will offer greater transparency and awareness. On this subject, I understand that the reports have been a mandatory requirement even before this Bill.

NEA has been working with companies to familiarise them with the new measurement and reporting requirements on large emitters in the Energy Conservation (Amendments) Act passed last year.

The CP Bill introduces a new requirement for additional third-party verification on emissions reports, which will ensure greater fairness and accuracy. I would like to ask if the MRV requirements in the CP Bill differ from the reporting requirements under ECA.

The carbon tax will put a price signal to encourage consumers to reduce their emissions. However, improving our EE continues to be a key strategy in reducing our carbon footprint whilst improving our competitiveness. It is, hence, important for companies to be more ambitious in their EE improvements.

The carbon tax and ECA will work hand in hand, together with other mitigation measures, to reduce our emissions intensity and meet our Paris pledge.

The Government has been laying the groundwork. With the new Singapore Energy Centre to be launched in early 2019 to explore innovative ideas and develop talent to meet future energy needs, I am confident that this will further elevate our regional and global standing as a leader for eco-solutions. This is good news for businesses which will find our nation's reputation stands them in good stead. Can the Government share further details about the Singapore Energy Centre, as well as other future investments in eco-solutions?

While I am optimistic for businesses, I have some concerns for households. With the current carbon tax rate of S$5 per tonne, on average, the impact of the carbon tax is expected to be small, at about 1% on total electricity and gas expense, or about S$0.30 per month for an HDB 1-room flat to about S$1.10 per month for an HDB executive flat.

This may not seem significant but, with the increase in price of water and other items, it will all add up. One major public concern is how it will affect our cost of living. How to ensure that businesses do not profiteer? Is the Government going to monitor this?

From the second half of this year, consumers will be free to switch from Singapore Power to other energy providers. This is in line with the move to increase competitiveness in the energy solution industry and give consumers the freedom to choose a company whose package complements their principles and budget. Many households and small businesses have been using Singapore Power for a long time. So, making the move might be challenging, especially among the elderly. I hope the Government can do more to increase public awareness.

In conclusion, we pledged to reduce emissions intensity by 36% from 2005 levels, and to stabilise and peak GHG emissions by around 2030, under the United Nations Framework Convention on Climate Change (UNFCCC).The CP Bill is a signal of our fulfilment to abide by it, and it will put us in good standing in the international community.

As the first country in Southeast Asia to implement such a tax, we send a crucial signal to our Southeast Asian neighbours the significance we place on transparency when it comes to environmental issues. Personally, I have made the Climate Action Pledge, and I am also looking into how to put in place measures to reduce the energy usage of our Community Club in the coming CC upgrading. I hope to get more residents on board this worthy initiative. Mr Speaker, Sir, in Chinese, please.

(In Mandarin): [Please refer to Vernacular Speech.] Reducing reliance on energy is not just for protecting the environment, it also helps to reduce the impact of energy prices on our economy. Experiences from other countries have shown that carbon tax can effectively promote companies to save energy. Therefore, I support implementing the carbon tax. I thank the Government for using the tax money on the grants. May I ask how many companies have already used the Government’s energy-saving grants? Are there any success stories that the Government can share with the companies? In particular, how would the oil refining industry be affected by the carbon tax, and will the Singaporeans working in this industry be affected as well?

Although it is estimated that the impact of carbon tax on the household is only about 1%, however, for low-income families, it may still be a heavy burden. Can the Government rebate cover the increase in utility prices? In the event that the carbon tax increases in the future, will the Government increase the rebate amount?

The Ministry of Environment and Water Resources (MEWR) mentioned earlier that it will help the 1-room and 2-room households to switch to energy-saving bulbs. I feel that if we allow companies to receive carbon tax rebate if they help the households to change bulbs, we can then tap on the effort of the business community to help all the households to change to energy-saving bulbs.

(In English): Sir, I support the Bill.

Mr Speaker: Mr Leon Perera.

2.21 pm

Mr Leon Perera (Non-Constituency Member): Mr Speaker, Sir, excessive carbon emissions and climate change threaten to pose a grave danger to humanity. Those most endangered are young Singaporeans and future generations of Singaporeans yet unborn.

The Paris Accord which Singapore supports represents what is best in the international community, namely, a determination to halt this dangerous slide towards anthropogenic climate change. Hence, as a nation, we need to set a good example to the world community. As a civilised country, Singapore should reject the unfortunate notion, fashionable in some quarters now, that carbon emissions do not cause climate change.

The evidence that carbon emissions are causally related to climate change is overwhelming and represents far and away the consensus among scientists. Not only is the evidence of carbon emissions accelerating climate change overwhelming, history has shown that nations of the world can find the resolve to act in concert so as to reverse the negative effects of human activity.

The best example of this was the damage to the ozone layer caused by chlorofluorocarbons (CFCs) which was effectively halted by the global agreement on CFCs. The Montreal Protocol in 1987, which took effect in 1989, banned CFCs, halons and other ozone-depleting chemicals. Ozone levels began to stabilise in the mid-1990s and recover in the 2000s.

Nations can find the political will to act in unison against the threat to the shared future of humanity. It is vital to keep in mind the prospect of success in facing important global challenges like climate change and not to give in to the kind of pessimism that guarantees defeat. Anthropogenic climate change could bring about great harm to many millions of human beings through practical consequences like rising sea levels, swamping coastal and inhabited areas, increasing frequency of freakish weather events and the spread of infectious diseases. Singapore, being a low-lying island nation, would be particularly vulnerable.

Singapore's first intended nationally determined contribution under the Paris Agreement states that we intend to reduce our emissions intensity by 36% from 2005 levels by 2030 and to stabilise our emissions with the aim of peaking around 2030. In starting the journey towards imposing a cost to carbon emissions in line with this commitment and in line with the long-term externalities that carbon creates, this Bill is a step in the right direction.

In the rest of my speech, I will make a few suggestions in relation to this Bill.

Firstly, will the Government consider creating a balanced scorecard for measuring the extent to which we are moving towards a society that mitigates the sources as well as the effects of climate change? Measuring our resilience to climate change recognises the possibility that the world may, indeed, get climate change wrong. And Singapore needs to plan for that eventuality by ensuring resilience.

Indeed, the world was reminded of this possibility when President Trump pulled the US out of the Paris Agreement on Carbon Emissions though one hopes that the US will eventually re-enter the agreement.

Such a scorecard for broader climate change contributions and resilience could be populated with data and published at regular intervals for public debate. This is worthwhile to do, given the importance of this issue to Singapore and the world, particularly the future generations of Singaporeans who will be the ones who really pay the price if the world gets climate change wrong.

Emissions intensity is one relevant and important indicator. Other indicators of climate change contributions and resilience may include, firstly, our drainage capacity and technologies to withstand possibly higher levels of rainfall in future to avoid flooding and minimise ponding.

Secondly, urban planning measures to reduce the impact of the urban heat island effect so as to maintain liveability in Singapore's highly urbanised environment. The urban heat island effect refers to how certain types of building materials, technologies and urban plans can inadvertently lead to significantly higher temperatures in particular areas of the city.

Thirdly, the extent to which we maintain our terrestrial fresh water and marine biodiversity so that our nature reserves and marine parks can become sights for sustainable eco-tourism and research.

Fourthly, the extent to which we improve and strengthen our local farming sector to better guard against the threat of unpredictable overseas weather patterns affecting our imported food supply.

And, lastly, the extent to which we adopt or even use research and development (R&D) to develop solutions in the fight against vector-borne diseases like dengue that may be worsened by climate change.

Mr Speaker, Sir, next, the carbon price for taxable emitters is now specified at $5 per tonne of GHG emission equivalent which the Government has said will last from 2019 to 2023, and the Government stated that it will review the carbon tax rate by 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030.

Other than the price, our CP plan would seem to have a number of parallels with the Australian CP plan that was enforced from 2011 to 2014. Some key similarities are using the device for paying for carbon units issued by the Government called "carbon credits" in our legislation rather than direct taxation on fuel sources, imposing this only on firms and excepting households and only taxing facilities with 25,000 tonnes of CO2 equivalent emissions. However, Australia had set its carbon price at A$23 at their plan's inception.

Currently, many countries which practise CP set the price at around US$20 mark, though many countries running pilot schemes also price it much lower than that. It is, of course, necessary to balance the goal of disincentivising carbon emissions with the goal of ensuring that our economy has time and resources to adapt to the tax while remaining competitive. Therefore, it is prudent to set the price at a low level initially.

Having said that, it is not clear if setting the carbon price at such a low level and the pass-through change in terms of end-user prices that that brings about will nudge end-users to substantially change their behaviour with regard to energy conservation or the deployment of carbon-lite energy-efficient technologies.

I do not argue that we should set the carbon price higher at this stage to balance the effect on the economy and the people. However, so as to nudge the economic ecosystem towards a smaller carbon footprint in the longer term, which is the goal of any CP regime, I have the following suggestions.

Would the Government − and this is my second broad point − consider setting a goal for the share of renewable contribution to total energy production in the longer term? I have called for this in the House previously. Such a goal, even if expressed as arranged, has the effect of focusing minds both in the Government and in the private sector, and may nudge decisions to trial tests and, ultimately, adopt cleaner technologies knowing the tougher measures are inevitable. Note that this is not the same as arguing for subsidising renewable technologies using devices like feed-in tariffs.

It is useful to announce a longer-term renewables target because that sends a signal that the regime for incentivising renewables and disincentivising carbon-intensive technologies will gradually and, over time, become more rigorous even if the timeframe is fairly long. This may embolden and encourage companies thinking of investing in new and innovative renewal projects, would-be entrepreneurs thinking of setting up startups in the field, and workers considering developing their skills and careers in the renewables field.

Thirdly, the Finance Minister said that he is willing to invest even more than the revenue generated by this carbon tax in low carbon technologies and practices. Presumably, the goal here is to nudge the economy into lower world-class levels of carbon use per unit of gross domestic product (GDP).

Will the Government consider setting aside part of the funds from the carbon tax into a vehicle like a fund or even a green infrastructure bank offering low-interest loans that has a mission to fund the development, testing and deployment of green technologies in Singapore? This could, in the longer term, bring about new greener possibilities for the economy and help nudge economic actors towards adopting them.

One criterion for funding projects could be that they testbed new technologies in Singapore, so that the knowhow from deploying and maintaining such technologies resides in Singapore and diffuses through our workers and companies, creating knowledge that will enhance our economic competitiveness.

The economic benefits so derived, such as new investments and jobs, may even increase tax revenues and turn out to be revenue-positive in the longer term. Such broad economic measures could be coupled with administrative measures to nudge economic actors towards new technology adoption. For example, developers could be required to install a certain minimum capacity for solar panels on roofs, with exceptions given on a case-by-case basis, for those buildings with minimal rooftop sunlight or which have the case for setting aside some rooftop space for other uses like rooftop gardens.

Lastly, Mr Speaker, Sir, will the Government consider making data on individual large emitters' emissions publicly available? The benefits of this are two-fold. Firstly, this may nudge large emitters to do better in their efforts to reduce emissions. Secondly, it would give researchers in environmental policy and science the opportunity to access data to track Singapore's progress to meeting our commitments under the Paris Agreement, and to scrutinise the effectiveness of the carbon tax and other green measures amongst other possibilities.

The notion of publishing carbon emissions data is not novel. Many large global companies publish emissions data and this is a trend that is likely to grow. Publishing the data from large emitters may be in line with where global trends are heading anyway. In fact, it is possible that some of the global companies registering emissions data under the CP Bill would be publishing global submissions data in any case.

If there are concerns about commercial sensitivity if individual company data is released, will the Government consider releasing emissions data for clusters of firms in specific sectors, such as oil refining and the manufacturing of specific categories of chemicals? For example, this goes beyond the datasets released by the National Climate Change Secretariat (NCCS) for broad sectors like transport industry, power generation and buildings at the moment. Such data would help the public to benchmark the carbon intensity of our economic activities against global norms.

Mr Speaker: Asst Prof Mahdev Mohan.

2.33 pm

Asst Prof Mahdev Mohan (Nominated Member): Mr Speaker, I support the Government's commitment to reduce emissions despite the fact that we rank very favourably among the least 20% of carbon emitters in the world.

I also support this Bill and celebrate the Ministry's commitment to a cap on the quantity of emissions by 2030, taking into account population and economic growth at that point.

It is clear when I hear the Second Reading speech of the Minister that the Ministry has clearly thought of and studied the possibility of an optimal mix of solutions in technology and policy for what is currently the best position that we could take, as well as going forward, what we need to take if we need to achieve that 2030 commitment.

But allow me, Mr Speaker, to ask a couple of questions. I understand that these new regulatory measures, including the MRV for taxable or reportable facilities, may incur costs, and that may have an impact on industry competitiveness.

Companies may not regard EE improvements as a priority. Instead, they may regard these new requirements as an additional compliance cost when they are trying to maintain product quality.

In ensuring product specifications are met, more energy could be needed to complete the manufacturing process, as an example. Some experts have suggested that there could be a misalignment between the Government's policies and business sentiments. How does the Ministry plan to allay this concern that the corporate sector has, and how would they encourage corporations to play their part as we pledge to meet 2030?

With these new policy changes, Mr Speaker, much of the responsibility will be on these companies to step up and adhere to the enhanced regulations under both ECA as well as the CP Bill, if it becomes law. If done satisfactorily and in line with international standards, Singapore will be in a good position to participate in the external carbon markets in the future. What does the Ministry and NEA envision – of course, acting in concert with the Ministry of Finance (MOF) and the Ministry of Trade and Industry (MTI) – to actually have us take a role in the international carbon market?

This is important, Mr Speaker, given that international market mechanisms that are currently being developed under the Paris Agreement commitments and rulebook are expected to play a significant role in facilitating countries in meeting their climate commitments and goals.

The Council for the EU recently released a diplomatic statement calling for urgent action. They say that the window for global warming to reach the 2-degree Celsius target, the upper temperature limit that was agreed and committed to in Paris, is "fast closing", and they ask parties to the Paris Agreement to create "a uniform regime with rules applicable to all". On the other hand, however, Mr Speaker, developing countries, including China, are calling for a bifurcated, two-tier rulebook, with less stringent reporting requirements for developing countries.

This will be one of the key issues for negotiators to thrash out at the 24th Conference of the Parties (COP24) to the United Nations (UN) Framework Convention on Climate Change (UNFCCC) later this year in December. I understand that Singapore has taken a position in Paris preferring a uniform approach at that point. But given that we have such huge trade partners in both the EU member states as well as China, what is our current position as we prepare for COP24?

I ask this as well because we are not just an early adopter of this uniform approach at that time, but through the commitment that we see in this Bill before us, we are an early adopter of the commitments as a whole in the Paris Agreement, and I celebrate this. I support this Bill, Mr Speaker.

Mr Speaker: Mr Henry Kwek.

2.37 pm

Mr Kwek Hian Chuan Henry (Nee Soon): Mr Speaker, Sir, I rise in support of the Bill. The CP Bill is welcomed as a useful tool to help us meet our obligations under the Paris Agreement. With regard to the Bill, I would like to raise several points.

First, it would be helpful if, at regular intervals, the Government can share the results of the carbon tax on lowering the energy consumption of residents of Singapore, which should exclude the manufacturers' energy consumption. This will allow us to know whether the carbon tax is effective in abating consumption, and whether there is a need to either finetune the tax amount or postpone a further increase.

Second, I hope that the Government will consider mitigating the additional cost of living not just for the most vulnerable Singaporeans, which the Minister for Finance has announced, but also for our retirees and our sandwich class.

Third, I hope the Government can bear in mind the potential cost increase in business. By that, I mean, beyond the carbon price itself, including the indirect costs. Can the Government share with us the likely indirect compliance and administrative cost that carbon-emitting industries will have to incur? Have we worked hard to ensure that the compliance and administrative costs are not too onerous? For example, will companies have to hire dedicated and specific resources to see through this, in addition to their core operation?

Perhaps the Government or NCCS can also help beef up our companies' capabilities by providing some technical support or assistance in the short run, so that companies can develop their own capabilities to do compliance in a very cost-effective way.

Fourth, I hope that the Government can also communicate the carbon price design and necessary procedures early on, so that companies can invest early to be compliant.

Fifth, I hope the Government can also share how it will impact the competitiveness of our industry, especially for, let us say, the petrochemicals industry. Given the fact that most of our petrochemicals industry's output are exported, and their competitors based in other countries may not need to price in their carbon emission, is there anything more we can do to mitigate their challenges overseas?

Notwithstanding the concerns I have, I agree with the approach of embarking on carbon tax, rather than other alternatives, such as carbon trading. I would like to highlight my concern about the suitability of carbon trading in Singapore, should that be considered in the future.

Carbon trading is ideal in countries where there are low-cost as well as high-cost ways of reducing emissions. Low-cost ways could include environmentally friendly forestry and farming practices. In this way, carbon trading encourages the society to do two things: one, to reduce carbon emission and, two, find a way for companies to negotiate among one another and to find the cheapest way to achieve the reduction.

However, I would like to point out that for Singapore, our carbon emission companies are concentrated in, I believe, petrochemical, power-generation and manufacturing sectors. So, they are quite homogenous in their carbon emission approaches. We do not have forestry and farming industries. So, there is very little arbitrage opportunities for us from different industries.

Therefore, there is limited upside for us. Of course, there is always the option of buying carbon credits from outside Singapore. But I have real concerns about the integrity and effectiveness of some of these carbon credit schemes and we have to watch very carefully how this evolves in real life.

In comparison, I like the clear CP approach; it is clear and effective, and it can be easily rolled out, and the revenues can be directly applied to better our society. Sir, with that, I stand in support of the Bill.

Mr Speaker: Ms Thanaletchimi.

2.42 pm

Ms K Thanaletchimi (Nominated Member): Mr Speaker, Sir, the CP Bill is a wake-up call for companies, industries, communities and individuals to be mindful of the indiscriminate waste we discharge into our environment that destroys our planet earth slowly but surely. Though Singaporeans understand the need to embrace a low-carbon economy by reducing GHG emission, Singaporeans are still concerned that companies will pass down the cost of the carbon tax to the consumers, therefore, increasing the cost of goods and consumer spending.

The introduction of the carbon tax will incur cost that affects industry competitiveness. As a small nation that relies heavily on trade and foreign investment, how is the Government going to ensure that the economy remains competitive with the introduction of the carbon tax? How can we help SMEs to be energy-efficient and to go green with the use of renewable energy? How can we stop exploitation of consumers by some unscrupulous companies?

While it is important to reduce carbon emission for climate change, the companies generally do not regard EE as a priority and may regard the new requirements as an extra step to maintain product quality. Instead of viewing the carbon tax as an additional cost, how do we encourage companies to bear in mind the EEs they get to reap at the process or product design stage, if they pay attention to low- or no-carbon emission processes?

With the verified emission reports submitted by companies, would the Government analyse the data and look into areas where companies with high carbon emission can do better and provide the required advice or suggestions so that companies can act on proactively? The Government can also consider engaging the company more regularly to follow up on their high emission, or even include conducting an audit on their carbon dioxide emission level. Will some of this highly classified information from the companies be kept safe under the Personal Data Protection Act (PDPA)?

The carbon tax rate is $5 per tonne of carbon dioxide in the Bill. How is this tax rate derived and determined? Does the CP framework follow international benchmarks? Is it simple enough for companies, especially SMEs, to understand? Are there industries or processes that are exempted from this carbon tax? I think earlier the Minister did say that some of the areas are exempted. I thank the Minister for the information.

Lastly, it is good for the Government to provide predictable carbon tax rate increases over time. This allows companies to better manage their operating cost, and workers, especially those in the petrochemical industries, will be minimally affected by this additional cost if such cost can be factored in earlier, in a predictable manner.

The Government should also provide incentives for companies to adopt renewable energy sources and for those that innovate their processes. The carbon tax revenue generated can be used to further the cause of "Going Green" by investing in appropriate relevant "green" projects using the revenue generated. For consumers, we should discourage the use of plastic bags in a robust manner. After all, reducing carbon emission is the responsibility of every one and it starts with "I". Sir, notwithstanding those clarifications, I stand in support of the Bill.

Mr Speaker: Mr Louis Ng.

2.46 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, I am in favour of establishing a framework for taxing businesses responsible for high GHG emissions. Climate change is one of the most serious problems of our time, and the consequences of unchecked climate change for every country, including Singapore, are likely to be grave.

In Singapore, industries are the largest emitters of GHG. This Bill is thus an important and necessary step to manage Singapore’s carbon emissions and is aligned with our commitment to the Paris Agreement.

Nevertheless, many green groups have raised queries and concerns with me. Please allow me to share some of them and seek a few short clarifications on details of the implementation of our carbon tax.

Green groups have shared concerns on the implementation of the Fixed Price Credit Based (FPCB) system, as it seems to require companies to purchase credits at the beginning of each reporting period. If this is so, companies would thus have to make an accurate estimate of how much emissions the facility would produce for the reporting period and buy the corresponding number of credits. Can the Minister confirm this?

The main concern here is whether any unused credits can be used in the next reporting period. Can the Minister clarify this? What would happen to the unused credits? Would they be wasted? Do the credits ever expire?

If unused credits do expire before the next reporting period, I am concerned that facilities that have over-bought credits may be compelled to use less energy-efficient technologies, so as to use up the credits they have already purchased and are unable to transfer or sell. This is the worst-case scenario.

However, it is also possible that companies in this situation would feel no incentive to reduce emissions as they have bought more than enough credits. Whichever the case, it would go against the primary objective of this Bill, which is to promote more energy-efficient methods of production to drive down carbon emissions. This is certainly not what we want.

Next, greener alternatives for industries and power generation will require substantial investments and all-round support. The Ministry has said that revenue from the tax will fund the green initiatives via two existing schemes: the Productivity Grant (Energy Efficiency) (PG (EE)), and the Energy Efficiency Fund (E2F).

The green community is heartened to know that the funds from the tax will go back into the green initiatives. With a new stream of funds available, there are hopes that greater support can be given to promote the use of clean energy.

I would like to ask the Ministry if it intends to develop new schemes with the new stream of funds, to further assist industries in the transition towards a low-carbon future and, specifically, if it would consider using these funds to directly subsidise the production, R&D of clean energy in Singapore. Sir, notwithstanding the above clarifications, I stand in support of this Bill.

Mr Speaker: Ms Rahayu Mahzam.

2.48 pm

Ms Rahayu Mahzam (Jurong): Mr Speaker, I am a board member of the Singapore Environment Council (SEC). I must confess that prior to being on the council, my awareness of environmental issues was low. I still have much to learn but, at least now, I am more conscious about the effect my actions have on the environment and the need to take steps to reduce my carbon footprint. The consciousness to protect our environment is not just a lofty ideal but an essential value, which should be present in all of us. This value should be nurtured, and we need to continue to educate people, young and old, about the role each of us plays in protecting the environment.

The introduction of this Bill is an opportunity to further inform and edify people about the environment. This Bill is premised on the desire and need to create a sustainable future for our children. In addressing the common feedback and concerns about the Bill, we should continue to remind the public and various stakeholders of this pertinent vision. At the same time, there also needs to be support to the people, businesses and stakeholders in adjusting to the changes put in place and the knock-on effects of the same.

There are clearly challenges in implementing such a bold and new initiative to regulate conduct and practices which have been in place for a long time. It is understandable and commendable, therefore, that the Government has chosen a soft start and an incremental approach by imposing a lower tax per tonne of emission at the beginning and increasing the same over time. The carbon credit system has also been lauded for allowing for some flexibility. There were some queries as to whether there is a plan to move towards a carbon trading system in the future where companies with low emissions could sell off their credits to larger emitters. It does allow for flexibility, but we do need to think about the overall impact to the effort in reducing emissions.

I also note that the Minister had made reference to the International Credit System and that Singapore will carefully study the feasibility of linking our carbon tax framework to other CP jurisdictions with high environmental integrity.

The implementation of this Act, if it comes to pass, will clearly change the way businesses are run. There will be administrative work to be done, mechanisms which need to be put in place to track emissions, as well as auditing to be carried out to ensure compliance. Given that this is a completely new regime that the businesses are facing, would the Government be providing support, perhaps in the form of business consultancy, to help the affected entities manage the change?

Following from this, perhaps the expected revenue from the carbon tax could be channelled towards supporting or incentivising companies to stay through the course in their efforts to reduce emissions. While we show the stick, it is also useful to dangle the carrot to encourage positive development in this sector. There is a lot of potential to harness green innovation. But some further funding may need to be allocated to this cause.

The Government is expected to collect carbon tax revenues of about S$1 billion over the next five years. I note that the Minister for Finance had indicated that the Government is prepared to spend more than the revenue generated from the carbon tax within the same period to support worthwhile projects which deliver the necessary abatement in emissions, and the Minister had earlier repeated this in his speech. This is heartening. In this regard, I would like to know from the Minister if there will be any new or enhanced grants in place to encourage green innovation.

Aside from the concerns and feedback from the businesses, we have also heard a lot of comments from the public about their fear on how the carbon tax will impact the cost of living. There has already been a buzz about increases in prices of food and drinks at coffee shops. Some businesses have attributed the increases in cost to the cost of water as well as to the prospective increase in Goods and Services Tax (GST) and the carbon tax, even when they have yet to be imposed. I, therefore, wonder if there is any way for the Government to monitor the knock-on effect of the implementation of the carbon tax on consumers and put in place some regulation to avoid unfair profiteering. It is necessary to note that in our effort to protect the environment, that we do not inadvertently hurt the very people whom we are protecting the environment for. Mr Speaker, allow me to say a few words in Malay.

(In Malay): [Please refer to Vernacular Speech.] We often talk about the importance of protecting the environment; preserving it for future generations. However, this is not about just paying lip-service but rather something that we should embody. It is an essential value which should be present in all of us and we must take actions in our daily lives to execute this vision.

The Bill before us today is an important measure that can encourage people to be more concerned about the impact of our lives on the environment. Our daily activities usually generate carbon that will pollute the air and destroy the environment. Most of the carbon in the air is emitted by certain industries. Under this new legislation, certain companies will be taxed based on their carbon emissions. The money that needs to be set aside for this carbon tax will nudge these companies into paying more attention to carbon emissions and find new ways to be more productive and environmentally-friendly.

Many have voiced concern that the cost of living will rise due to this carbon tax. Perhaps the Government can try to monitor this and do something so that companies and businesses do not take the opportunity to engage in unfair profiteering.

However, I think that people should also be aware and change their way of life gradually and reduce our carbon footprint. We can cut waste, reduce usage of electrical devices, we can walk more instead of taking the car, and so on. We will save money and, at the same time, we save the environment.

I am sure that with fair and balanced legislation, and sustained educational efforts, we can realise our vision of preserving a beautiful environment for our children.

(In English): Mr Speaker, in English.

It is important for us to do our part to protect the environment, but this needs to go beyond platitudes and be translated into actual action. This Bill is a show of action. However, having rules alone is not enough. We really need to take the opportunity to continue educating the public so that everyone can embrace changes positively and work towards developing more eco-friendly habits. Mr Speaker, Sir, I support the Bill.

Mr Speaker: Mr Gan Thiam Poh.

2.55 pm

Mr Gan Thiam Poh (Ang Mo Kio): Speaker, Sir, this year being designated our Year of Climate Action, it is fitting that we, as a nation, take meaningful and significant steps towards reducing our carbon footprint and GHG emissions.

For too long, GHG emissions had been an externality on our environment. It is timely that our Government has chosen to implement various policies, including CP, to "internalise" the externalities of GHG emissions, so that the costs and benefits will impact those who choose to incur them.

I certainly support CP to incentivise both industries and consumers to do the right things to reduce our contribution to GHG emissions. The transition period should be bearable as the taxes will result in slightly higher prices for consumers but not enough to impact our economy's competitiveness. Mr Speaker, in Mandarin.

(In Mandarin): [Please refer to Vernacular Speech.] Imposing carbon tax on major GHG emitters is a wise move by the Government. The GHG emission from these 30 major emitters accounts for 80% of our total carbon emission. I agree that this measure can help reduce environment pollution and hence help do our part for the environment and the next generation.

All electricity consumers, big or small, will somewhat be affected by the rise of electricity tariff. However, the increase is estimated to be bearable for the general households. The Government has estimated that for a 1-room flat, electricity costs will increase by only 30 cents per month and for an executive flat, $1.10. I believe all of us will work together to reduce electricity usage, which is good for the environment and can save money as well.

(In English): I would like to ask the Minister how the Ministry determines what standard of measurement of carbon emissions to use, and the types and quantities of classified substances. Going forward, how would the Ministry decide when to increase or decrease the minimum taxable quantums and the appropriate tax levels? I would like to conclude with my support for the Bill.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 3.20 pm.

Sitting accordingly suspended

at 2.58 pm until 3.20 pm.

Sitting resumed at 3.20 pm

[Deputy Speaker (Mr Charles Chong) in the Chair]

CARBON PRICING BILL

Debate resumed.

Mr Deputy Speaker: Minister Masagos.

Mr Masagos Zulkifli B M M: Mr Deputy Speaker, I would like to thank Members for their support and comments on the CP Bill.

Last week, The Business Times published an article entitled "A powerful, effective strategy to combat climate change" which featured the views of top executives of companies and professional associations on the carbon tax.

I was heartened by their strong support for the carbon tax. Many executives recognised that pursuing environmental sustainability and economic growth are not a matter of tradeoffs, but a strategy to stay competitive; they can do good and do well at the same time.

Mr Paul Henaghan, Vice President from Dell DMC, noted, and I quote, "Industries need to look beyond the perceived economic loss from taxation and recognise that it ultimately contributes to the long-term prosperity of companies". Mr Damien Dhellemmes, Country President of Schneider Electric Singapore, said and I quote, "Going green can, in fact, lead to greater economic growth in the longer term. We strongly believe that sustainability is the end game of any company in today's world".

This is why we are introducing the carbon tax. As our companies are nudged towards more carbon-efficient and greener practices, they will strengthen their competitive edge and thrive in a low-carbon global future.

Let me first address Members' questions on the carbon tax framework.

Er Dr Lee Bee Wah asked whether our proposed carbon tax rate of S$5 per tonne of GHG emissions will affect our ability to meet our goals. I would like to assure the House that the carbon tax rate of S$5 per tonne of GHG emissions was decided on very carefully, taking into account both economic competitiveness and environmental considerations.

To Asst Prof Madhev Mohan's query, the carbon tax should not be viewed in isolation. It works in tandem with the comprehensive mitigation measures that we have developed to reduce emissions and meet our obligations under the Paris Agreement. This package has been carefully designed, taking into consideration our international competitiveness as well as our pledge, and will be reviewed regularly.

Our initial carbon tax level of S$5 per tonne cannot be directly compared with that of other jurisdictions. While they may have higher headline carbon prices, they often give significant exemptions to particular sectors and companies. These effectively pay a lower carbon price than the published rate.

Rather than imposing differing tax levels on different sectors and companies, we have opted for a simple and transparent carbon tax with no exemptions. This maintains a fair and consistent price signal to incentivise emissions reduction across the entire economy.

I also want to assure the House that we are mindful of our international competitiveness when introducing this tax, given that we are an export-oriented economy, as highlighted by Mr Henry Kwek and Ms K Thanaletchimi.

Together with MTI, the Economic Development Board (EDB) and NCCS, my Ministry and NEA have consulted companies extensively over the past year on the design of our carbon tax framework. Whilst companies understood the need to price carbon, they asked for a transition period to adjust to the impact of the tax. This is why we are starting with S$5 per tonne for the first five years; companies will have time to adjust, for example, by upgrading to more energy-efficient equipment.

In response to Mr Gan Thiam Poh, the Minister for Finance has said that we will, in fact, review the carbon tax rate by 2023. We intend to increase the level to S$10 to S$15 per tonne of GHG emissions by 2030. Our review will take into account international climate change developments, our progress towards our climate pledge and our economic competitiveness.

As highlighted by Mr Henry Kwek and Ms Rahayu Mahzam, we are mindful of the need to manage compliance costs, which was also a key feedback from companies. We have done the following.

Firstly, we have built on existing MRV requirements that we have set out in the ECA which companies are already familiar with. These requirements take reference from international standards like the International Organization for Standardization (ISO) and GHG Protocols, which are used by many companies for corporate sustainability reporting. This approach streamlines requirements and aligns with international practices.

Second, we have identified a list of excluded emissions so that companies need not incur disproportionately high costs to measure and report these small emissions sources.

Third, NEA is actively growing the pool of third-party verifiers in Singapore to ensure that companies can access competitive offerings. NEA has been organising briefings to familiarise companies with the new MRV requirements and carbon tax obligations and will continue to help companies build up their capability. The detailed MRV requirements will be made publicly available.

Ms Rahayu Mahzam also asked if there is a plan to move towards an emissions trading scheme (ETS) in the future. For a small domestic market like Singapore, a carbon tax could achieve the same objective as an ETS in a simpler way. It provides greater price certainty and stability.

Nonetheless, we recognise that there may be benefits in linking our market with other jurisdictions in the longer term. It is a complex endeavour, as Ms Rahayu Mahzam has pointed out, and we are still studying the feasibility. We will need to build up key capabilities both in the Government and companies. We, therefore, decided to introduce the Fixed-Price Credit-Based (FPCB) system as this will put in place the key building blocks should we decide to link our market to other jurisdictions in the longer term. We will continue to monitor international developments and consult companies.

Mr Louis Ng asked about the FPCB mechanism. Companies can buy credits from NEA at a fixed price throughout the year but must surrender credits equivalent to their preceding year's tax liability by 30 September.

There is no expiry date on the credits in this initial phase. Nevertheless, companies have told us that they are likely to buy the required credits only after they receive the notice of tax assessment, so as not to tie up their liquidity. Hence, the scenario whereby companies operate their plants in a less efficient manner in order to, as Mr Louis Ng has stated, "use up unused credits", is highly unlikely.

Er Dr Lee Bee Wah and Mr Leon Perera also asked if the Government will share the data from the emissions reports, and Ms Thanaletchimi asked about the measures we have to ensure data security. As the emissions reports contain commercially-sensitive information, they will not be shared publicly. We have strict provisions in the Bill to ensure the confidentiality and security of the data reported.

That said, I note that the Members are concerned about tracking the effectiveness of our policies in lowering our energy consumption and efficiency, and emissions. I would like to clarify that we already track and publish the improvements in energy consumption per dollar GDP from 2005 levels in the Budget Book. We also regularly report our emissions to the UNFCCC and will continue to do so. And these are all publicly available.

Er Dr Lee Bee Wah and Mr Henry Kwek spoke about the impact of the carbon tax on households. This is expected to be small, at about 1% of total electricity and gas expenses, on average.

As the Minister for Finance announced at Budget 2018, eligible HDB households will receive additional U-Save rebates of S$20 per year, from 2019 to 2021. On average, the additional U-Save rebates will cover the expected increase in electricity and gas expenses arising from the carbon tax. This will help HDB households to adjust to the carbon tax, as they reduce their utilities consumption over time. We will assess the impact of the carbon tax at a later stage and review the need to extend these rebates.

More importantly, we want to encourage energy-saving habits among households on a sustained basis. We are working with the community on a Lamp Replacement Programme to assist 1- and 2-room HDB households to replace their lamps with more energy-efficient Light Emitting Diode (LED) ones. NEA will also be organising an Energy Savings Challenge this year to raise awareness on energy conservation.

I would also like to assure Ms Thanaletchimi and Ms Rahayu Mahzam that Government agencies will work closely with the Consumers Association of Singapore (CASE) and the Competition Commission of Singapore (CCS) to monitor the market for unfair pricing and coordinated price hikes which are anti-competitive. CASE will look into feedback of any alleged profiteering.

As Members have highlighted, a key reason for the carbon tax is to encourage our companies to transform and ready themselves for the low-carbon economy. To achieve this, I agree with Er Dr Lee Bee Wah that we must be more ambitious and bolder in improving EE. Many developed countries are achieving an EE improvement rate of 1% to 2% per year. We must do just as well.

The industrial sector, which accounts for about 60% of Singapore’s GHG emissions, has been a key focus of our efforts. Last year, we amended the ECA to enhance the frameworks and tools to support companies’ EE improvement. One new requirement is for new industrial facilities and major expansion projects to undergo reviews at the design phase to identify and incorporate EE opportunities at the start of the project, thereby avoiding more expensive retrofitting and operational disruption later on.

This year, we are moving the CP Bill to provide the added motivation – the motor fuel if you like – to spur companies to actively pursue emissions reduction. The Government has been providing support to continue to improve EE and many have forged ahead. Let me just share two stories.

Globalfoundries, a semiconductor company, has been innovating and investing in new technologies to improve EE and reduce emissions. For example, it redesigned the combustion chamber in its thermal abatement units and reduced its liquefied petroleum gas (LPG) consumption by 31%. This resulted in annual cost savings of about S$260,000 and an annual carbon abatement of about 640 tonnes.

With further support from the Government, Globalfoundries is working to replace a process chamber cleaning gas that has high global warming potential with one that has no global warming potential. This will reduce their emissions significantly by more than 400,000 tonnes, when completed in 2019.

Another role model is Chevron Oronite Pte Ltd which has consistently achieved EE improvement rates above the industry average. To improve EE, it installed a boiler system to recover waste heat from its thermal-oxidiser for steam generation. It also installed a mechanical vapour recompression system to lower the energy use of its new manufacturing unit. These projects have resulted in energy savings of S$1.8 million and carbon abatement of 4,800 tonnes each year.

Members have asked what the Government is doing to support companies in this transition to a low-carbon future. The Government is prepared to spend more than the estimated S$1 billion in carbon tax revenue that will be collected in the first five years, on worthwhile carbon abatement projects.

Existing EE incentive schemes, such as PG (EE) and E2F will be enhanced. Enhanced support will also be extended to SMEs to encourage them to improve their EE, including basic measures, such as upgrading to more efficient lighting. More support will go to projects that achieve greater emissions abatement, beyond basic enhancements.

Mr Leon Perera has asked whether part of the revenue from the carbon tax will be used to provide loans to companies. EDB has been piloting an EE Financing Programme whereby companies that are not able to afford the upfront costs of EE projects can apply for loans through a third-party financier. The potential benefits of such a programme are that industrial facilities will not have to pay for the upfront costs of these projects but can still enjoy part of the energy savings. Part of the risk is transferred to the third-party financier.

Beyond financial support, the Government will also grow the wider industrial EE ecosystem in Singapore to develop greater expertise in the energy services sector. Initiatives include engaging Institutes of Higher Learning (IHLs) to train and upskill energy services professionals, and working with professional bodies, such as the Institution of Engineers Singapore to develop Chartered Engineer certification for EE professionals.

At the same time, NEA officers have been and will continue to engage the companies to help them to identify areas for EE improvements. Besides driving EE improvement, the carbon tax will help spur investment in and take-up of low-carbon solutions.

Ms Thanaletchimi asked if the Government can provide incentives for companies to adopt renewable energy sources. The Government’s policy is to ensure that energy, regardless of source of generation, is correctly priced to fully reflect the cost of generation and let the market work out the equilibrium. Instead of providing subsidies, what we have done is to invest in the R&D of renewable, clean energy technologies.

We set up the Solar Energy Research Institute of Singapore (SERIS) in 2008 to conduct R&D on solar technologies. One of its projects is a collaboration with the Renewable Energy Corporation (REC) Group to develop high-performance solar cells, which I understand, is among the world’s highest-performing solar cells.

We are also studying the deployment of solar panels beyond our rooftops onto our water bodies. In 2016, the Public Utilities Board (PUB) launched the largest testbed at Tengeh Reservoir.

Addressing intermittency issues and ensuring grid stability are important as we increase solar deployment. The Energy Market Authority (EMA) and Singapore Power launched the Energy Storage System testbed in 2016 to better understand the feasibility of deploying grid-level energy storage technologies locally.

Last October, EMA also awarded a S$6.2 million research grant to develop our solar forecasting capabilities. I assure Mr Louis Ng that the Government will continue to support and invest in such R&D efforts.

Er Dr Lee Bee Wah asked about the impact on the refining sector in Singapore. In my interactions with our refinery companies, I have been impressed by their bold and transformational moves. Since 2000, ExxonMobil has spent about US$8 billion to develop low-carbon technologies and are a global leader in carbon capture and storage technology. In Singapore, I officiated the opening of their third co-generation plant which improved the refinery’s EE by 4% to 5% and reduces their carbon emissions by 265,000 tonnes. Similarly, Shell has been reaching into the next energy frontier with renewables and hydrogen.

They intend to increase their spending in their new energies business arm to about US$1 billion to US$2 billion per year until 2020. These oil giants are showing us the way by taking destiny in their own hands and transforming earlier, rather than later, to stay competitive and maintain their lead in the low-carbon global economy.

Mr Leon Perera asked whether we regularly measure our climate change resilience. We do. To ensure that Singapore is well-prepared for climate change, we have set up an interagency Resilience Working Group (RWG) that is responsible for studying and monitoring Singapore’s vulnerabilities to the effects of climate change, such as sea level rise, and developing appropriate response measures.

Our climate scientists are also plugged into relevant global scientific forums that develop climate change projections. Our adaptation measures are reviewed whenever there are new findings.

Lastly, Asst Prof Mahdev Mohan also asked about our position in the development of the Paris Rulebook, given the positions taken by the EU and China. As one would expect in a multilateral framework, negotiations are complex. Publicised positions may be transitional and do not reflect the landing points. Singapore participates actively in these negotiations to get countries to focus on a fair and consistent implementation of their Nationally Determined Contributions (NDCs), what they commit to reduce and mitigate GHG emissions.

At the end of the day, for the Paris Agreement to work, all countries must meet their commitments that they have committed to. We will continue to participate actively to this end.

Indeed, Singapore’s active involvement in previous rounds had been impactful. Singapore was the advocate for the very concept of the NDC and worked with other like-minded countries to get it adopted by UNFCCC under the Paris Agreement. We must continue to be active and impactful because climate change is an existential issue for Singapore.

Mr Deputy Speaker, let me conclude. The carbon tax has been deliberated carefully and extensively within the Government. We have also made a concerted effort to consult and engage the industry.

The Bill is an important step forward, not only in encouraging industry to do their part for the climate, but also in readying our economy and strengthening our competitiveness as the world transitions to a low-carbon economy. Companies ignore these realities at their peril. Therefore, I call on Members of the House to give their support to this Bill. Thank you.

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. – [Mr Masagos Zulkifli B M M.]

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