Singapore’s Carbon Tax A Step Towards a Greener Future

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Singapore has always been at the forefront of innovation and sustainability. In the field of sustainability, the country has already implemented various policies and initiatives to address the challenges of climate change and reduce its GHG emissions. One of the key measures is the Singapore Carbon Tax. In this article, we will explore what the Carbon Tax is, why it is important, and how it will affect businesses in Singapore.


What is the Carbon Tax?

The Carbon Tax is a fee imposed on the GHG emissions from industrial facilities that emit more than 25,000 tons of tCO2e per year, which account for about 80% of Singapore’s total GHG emissions. The Tax is levied based on the “polluter pays” principle, where the more GHG you emit, the more you pay.

Introduced in 2019 through the Carbon Pricing Act (CPA) and in alignment with Singapore’s national climate goals, the tax will be increased gradually over the next decade. From 2019 to 2023, the initial tax rate was set at S$5 per ton. This period is considered a transition period for businesses so they can adjust the business model to the new policy.

Why is the Carbon Tax important?

Singapore’s goal is to be net zero nation by 2050 and this Carbon Tax is an essential part of the plan. By putting a price on carbon, the country creates an economic incentive for businesses and individuals to reduce their GHG emissions and switch to cleaner and more efficient technologies and practices. The policy also enhances Singapore’s competitiveness and attractiveness as a green economy, as it signals its commitment to sustainability and encourages innovation in low-carbon solutions.

What are Singapore’s climate targets?

Under the Paris Agreement, Singapore has pledged to peak its GHG emissions at 65 million tCO2e by around 2030, reduce its emissions intensity by 36% from 2005 levels by 2030, and achieve net zero emissions as soon as viable in the second half of the century.

How will the Carbon Tax affect businesses?

To support Singapore’s raised climate ambition and accelerate its transition to a low-carbon economy, the government applied several changes to the Carbon Tax in November 2022:

According to the Singapore government, the revenue collected from the Carbon Tax will support decarbonization efforts, cushion the impact on businesses and households, and aid the transition to a green economy.

Singapore’s Carbon Tax is a significant step towards achieving its climate goals and creating a greener future for itself and the world. By providing an economic incentive for reducing GHG emissions, it holds businesses accountable for their emissions and enhances the business case for developing low-carbon solutions. As we move towards a greener future, such initiatives play a crucial role in steering both producers and consumers away from carbon-intensive goods and services and towards more sustainable alternatives.

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At STRIVE by STX we help companies understand their impact and map actionable mitigation plans. If you wish to learn more, contact us.

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