Singapore publishes bill stipulating a gradual increase in carbon tax after 2024, and solicits comments

NOTE:
Singapore officially published an amendment act on carbon pricing. See more details below.
Singapore promulgates act stipulating a gradual increase in carbon tax rate after 2024

On July 8, 2022, Singapore’s Ministry of Sustainability and Environment (MSE) released the Carbon Pricing (Amendment) Bill 2022 and began soliciting comments. The bill will codify the gradual increase in carbon taxes and the use of international carbon credits from 2024 onwards announced by the government in the 2022 budget. As before, taxable facilities are those that emitted 25,000 tons or more of GHG in the previous year (calendar year) on a CO2 equivalent basis. The period for soliciting comments is until August 5, 2022.

Principal amendments in the bill

• Amendment to carbon tax rate. Currently set at 5 SGD per tonne of CO2 equivalent , it will be raised to 25 SGD in 2024 and 2025, and 45 SGD after 2026.
• In order to give emissions-intensive trade-exposed (EITE) companies time to adjust to a low-carbon economy, the bill newly establishes an emission allowance to reduce the carbon tax.
• The bill provides the option to use government-certified “international carbon credits” instead of fixed-price carbon credits to pay the carbon tax.
• The bill amends the registration and emissions reporting obligations (especially when the facility’s management control is transferred).

Addition of a regulation on emission allowance (Part 5 Division 1A)

The newly-established Part 5, Division 1A, defines the emission allowance.

Definition: “Allowance” refers to the amount of total greenhouse gas emissions that can be calculated for a taxable facility in the emission year, that can be reduced only for the purpose of determining the amount of tax imposed in an emission year.

Target Facilities: Taxable facilities that the Minister of Trade and Industry determines are engaged in export or supply goods to other parties that are engaged in export, and are of sufficient economic or strategic importance for the growth, expansion, development, and soundness of the Singapore economy.

Emission allowances will be available from emission year 2024 onwards. The Minister of Trade and Industry shall notify the registrant of target taxable facilities to that effect, and grant an emission allowance to the registrant. The carbon tax is calculated by the following formula.

(Equivalent value of CO2 of total calculable GHG emissions * – Emission allowance) * x Carbon tax rate

* Rounded up to nearest ton

The carbon tax rate is determined in Schedule 3 Part 1, and the following changes to the tax rate are proposed in the bill.

Addition of international carbon credit provisions (Part 5 Divisions 5 and 6)

The newly established Divisions 5 and 6 of Part 5 provide for international carbon credits. A taxable facility may use eligible international carbon credits instead of fixed-price carbon credits to pay the carbon tax. Eligible international carbon credits are those that meet the prescribed criteria and are recognized as eligible international carbon credits by the Singapore National Environment Agency (NEA) as directed by the Minister of Sustainability and Environment. Eligible international carbon credit criteria and details of NEA approval of eligible international carbon credits are to be specified in separate regulations.

The carbon price of fixed price carbon credits is determined in Schedule 3 Part 2, and the following price changes are proposed in the bill.

In addition, this bill proposes the removal of nitrogen trifluoride from GHGs that cannot be calculated.

Further, the Minister of Sustainability and Environment may prescribe transitional measures by setting regulations for a period of two years from the enforcement of the bill.

Further information on the solicitation of comments on this matter can be found at the following URL:
https://www.reach.gov.sg/Participate/Public-Consultation/Ministry-of-Sustainability-and-the-Environment/public-consultation-on-the–draft-carbon-pricing-(amendment)-bill

The carbon pricing bill can be viewed at the following URL:
https://sso.agc.gov.sg//Act/CPA2018