TL;DR – Carbon tax appears to be inevitable.
Starting from 2019, a household living in a four-room flat will see an increase of about S$1.70 to S$3.30 per month in electricity tariffs. The increase in electricity tariffs will be a result of power generators passing on the cost of carbon tax to consumers. This will be on top of any other increases that may come because of increases in the price of fuel.
Huh, what’s this carbon tax thing?
The carbon tax is a tax that large emitters of greenhouse gases have to pay. All facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year will have to pay a carbon tax from 2020, Finance Minister Heng Swee Keat announced in his Budget Statement on Monday (Feb 19).
The carbon tax will initially be $5 per tonne of greenhouse gas emissions from 2019 to 2023.
The Government will review the carbon tax rate by 2023, and the plan is to increase it to between $10 and $15 per tonne of emissions by 2030.
The tax will affect 30 to 40 large emitters, defined as those that emit 25,000 or more tonnes of greenhouse gases annually. These will include the power generation companies. These 30 to 40 large emitters contribute 80 per cent of Singapore’s greenhouse gas emissions.
The tax will create a “price signal” to incentivise industries to reduce emissions. Revenue from the tax will help to fund measures by industries to reduce emissions and will also create “new opportunities” in green growth industries such as clean energy.
Why do we have to do it?
Implementing a carbon tax is one of the things that Singapore committed to as part of Paris Climate Agreement. The Paris climate agreement is a milestone in global efforts to reverse the damage done to the Earth’s environment that was caused by mankind’s activities.
It aims to keep global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
The Paris Agreement is a bridge between today’s policies and climate-neutrality before the end of the century. At the Paris climate conference (COP21) in December 2015, 195 countries adopted the first-ever universal, legally binding global climate deal.
The agreement sets out a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C. There are a few major elements to the Paris Climate Agreement, but one of the key components is on Mitigation: Reducing Emissions.
Back in late 2015, the Paris Agreement was hailed as a landmark international deal when 194 countries, including the EU and China, signed up to sweeping pledges on the environment at a UN meeting in the French capital in late 2015.
You might have heard about US’ on-again-and-off-again stance regarding the Paris Agreement. They had previously signed the Agreement, only to have President Trump withdraw in July 2017 and then he’s now giving signals that US might rejoin the Paris deal.
A noteworthy point is that the US is the second biggest polluter behind China and its exit had previously raised questions over whether the goals set by the Paris Agreement could still be met. So the world is now watching on to see if it will, indeed, rejoin the deal.
Click here for a quick catch-up of everything you need to know about the Paris Agreement.
Singapore played a crucial role during the negotiations of the Paris climate agreement. A topic seen as a deal-breaker during the negotiations was about differentiation – how countries are divided in the UNFCCC as Annex One developed countries and Non-Annex One developing countries, with the former expected to take on greater responsibilities.
Dr Vivian Balakrishnan, our Foreign Minister, was roped in to helm informal consultations among the ministers on differentiation. That Singapore – whose greenhouse gas emissions account for only 0.11% of the world’s – was entrusted with such heavy responsibilities underscored its outsized role in the talks.
Wait. Singapore’s greenhouse gas emissions account for only 0.11% of the world’s? So even if we completely stop emitting greenhouse gases, we won’t make a dent in global greenhouse gas emission, which means that nothing we do will likely make any difference in the world’s temperature.
So why do we bother?
It is vital for Singapore’s long term interest for countries that emit large amounts of greenhouse gas to reduce their emissions. If all countries, large and small, don’t reduce greenhouse gas emissions, global temperatures will continue to rise at a fast rate. With rising global temperatures, the oceans get hotter. As the ocean gets hotter, water expands, and the ice caps melts. As a result, sea levels rise.
Singapore is a low-lying island. Most of Singapore is below 15m above sea level and around 30% is below 5m. The 1km stretch of Nicoll Drive, which hugs the shoreline near Changi Beach, was raised by 0.8m in 2016. This just clears the Singapore Government’s 0.76m sea level rise projection by 2100.
If temperatures rise faster than what we used for our projections, there is a good chance that in the not too distant future, parts of Singapore will be underwater.
Another concern that is closer to the present is that warmer oceans result in more extreme weathers. That means that we’ll see heavier rains and more violent storms. Flooding (or is it ponding?) will occur more frequently.
Impact of carbon tax on households will be small
For households, the cost impact of the carbon tax is estimated to be 1 per cent of total electricity and gas expenses on average.
During his Budget Statement announcement, Minister Heng had mentioned that an additional U-Save rebate will be provided for three years to help HDB households. Eligible HDB households will each receive $20 more per year, from 2019 to 2021.
The additional U-Save rebate will cover the expected average increase in electricity and gas expenses arising from the carbon tax.
Pay tax, save the world
It’s true that Singapore alone can’t make a significant difference to climate change. We need the rest of the world to be committed to it. But in order for us to convince the rest of the world to be committed to it, we too must put our money where our mouths are. We need to implement the Paris Climate Agreement so that we have the moral authority to persuade other countries to implement measures to reduce their carbon emissions.
So, unless you want to deal with more floods and trees being blown over, unless you want your great-grandchildren to live underwater, carbon tax appears to be inevitable.