BY KAVICKUMAR MURUGANATHAN

Businesses , especially in the utilities and petrochemical sectors , can use the lead time to build their case for investments in low-carbon technologies and strategise their entry into carbon markets to reduce payable carbon tax .”

Hikes bring risks and opportunities alike for Singapore and Singaporeans

The announcement has won plaudits . According to the World Bank Carbon Pricing Dashboard , the bold hikes put Singapore ahead of its regional counterparts such as Japan , China and South Korea while lagging behind European pacesetters such as Switzerland and Sweden for carbon taxes per tonne of emissions .

Implications of carbon tax

The carbon tax hike brings risks and opportunities alike for Singapore and Singaporeans . While being deemed aggressive by implicated industry members , the move provides businesses with a concrete , wellpaced , timebound pathway to plan their transition towards a low-carbon future .

Implementing the tax hike in 2024 will allow businesses ample time to map their carbon footprint and identify transitional risks associated with a low-carbon operational shift . It will be an opportune time to reinvent themselves and explore green growth solutions strategically .

Businesses , especially in the utilities and petrochemical sectors , can use the lead time to build their case for investments in low-carbon technologies and strategise their entry into carbon markets to reduce payable carbon tax .

The government will introduce a transition framework to give emissions-intensive trade-exposed ( EITE ) companies , such as those in the petrochemical and energy production sectors , additional time to shift to a low-carbon economy .

To maintain their business competitiveness in the short term and mitigate the risk of carbon leakage , -companies in EITE sectors will receive transitory allowances for part of their emissions based on efficiency standards and their decarbonisation goals .

Other vital stakeholders implicated by carbon tax hikes are electricity retailers and households .

Tax hikes will be passed on to households via increased electricity prices . While the government will be providing Goods and Services Tax vouchers and U-Save rebates to cushion the impact , households must also seek means where they can reduce their electricity consumption .

This would entail taking stock of their current household appliances and exploring more efficient ones for future purchases . Private households might even want to consider the installation of solar panels to offset electricity use , especially for air conditioning . After all , carbon taxes can spur behavioural change among taxpayers toward sustainable energy use .

Carbon services & capacity-building

The carbon tax hikes are expected to lead to a flurry of activities in the carbon services market . The carbon services market comprises firms providing consulting and verification services and brokers who facilitate the sale of carbon credits .

There are already about 30 firms here providing carbon consulting services . With Singapore being a regional hub for business and trade , we can expect a broader carbon services ecosystem to take flight here .

There will be a growing demand for carbon-related advisory services among corporations with taxable facilities under the Carbon Pricing Act . Corporates that do not have in-house solid carbon expertise will hunt for talent to drive their decarbonisation strategy and explore other strategic levers towards decarbonisation .

This would mean finding and developing talent proficient in low-carbon technological solutions and alternative energy solutions such as solar and carbon capture & storage .

For Singapore , it means building our carbon literacy among a more incredible pool of corporates and ordinary citizens in the carbon services space to future proof and build self-resiliency around its decarbonisation ambition . It will have to happen in all hierarchies of our society .

Education institutions at all levels will have to have subjects and modules around carbon emissions , measurement , verification and reporting .

Household education will also have to take place to get households socialised with the notion of carbon footprint and the ancillary aspects that come along with it .

This provides an opportunity for government agencies and , potentially , civil society to have greater stakeholder engagement with everyday Singaporeans and enable more household ownership over national decarbonisation efforts .

Voluntary carbon markets

As part of the carbon tax hikes , it was also announced that businesses would be able to use “ high-quality , international carbon credits ” to offset up to five per cent of taxable emissions instead of paying carbon tax .

Businesses can obtain carbon credits from brokers who facilitate transactions between sellers and buyers . Carbon credits are generated from activities that reduce carbon emissions from our atmosphere .

Every tonne of emissions reduced

results in the generation of one carbon credit . Organisations that generate these credits then sell it to companies looking to offset their carbon emissions via traders or brokers .

The carbon credits to be purchased would ideally be cheaper than the prevailing carbon tax level . While a nascent carbon marketplace took off in Singapore last year , the hike in carbon tax levels will spur greater local demand for carbon credits and strategic implementation of a well-functioning and regulated carbon trading scheme

While the definition of “ high-quality international credits ” remains unclear , the key is that carbon credits must be verified to ascertain their credibility and transparency .

It would require a regulatory standards framework to be established and defined for Singapore . The process to develop this framework should be consultative . Industry players with taxable facilities , carbon service providers , and other key stakeholders must be engaged to build a contextually relevant regulatory standards framework .

Mechanisms for recognition and verification must be established to create a wide-ranging pool of transboundary carbon credits for end buyers to choose from .

The carbon credits issued must also fulfil the other fundamental aspects of additionality , permanence , leakage avoidance and measurability . This means that carbon emissions removed cannot be reintroduced to the atmosphere or result in an increase in carbon emissions in another part of the world . The carbon emissions reduction must also be solely generated by the incentive provided by the carbon credits .

Numerous established carbon emissions trading schemes , such as those in Kazakhstan , New Zealand , and the European Union ( EU ), uphold these principles . Singapore can draw lessons from its drive towards net zero emissions by or around mid-century .

A common thread among these schemes is that they create incentives to reduce emissions cost-effectively . These schemes are also regularly reviewed to include more eligible industry sectors and ensure there are no supply-demand imbalances . — @ Green

Kavickumar Muruganathan is a sustainability professional & part-time lecturer at National University of Singapore on environmental economics and sustainable development