Higher carbon tax won't hurt green transition but caution urged

2030 rate expected at lower end of $50 to $80 range.

A carbon tax rate at the lower end of the $50-$80 range by 2030 is not expected to hinder Singapore's green transition, though caution is urged over regional and global competitiveness considerations. 

“The carbon tax ending up at the lower end of the S$50-80 range in 2030 is unlikely to derail Singapore’s energy transition,” as businesses have already embedded decarbonisation into their strategies, according to Amandeep Bedi, partner, climate change and sustainability services at Ernst & Young (EY) LLP.

He added that complementing the tax with targeted measures, including “setting eligibility criteria to incentivize low-carbon technologies like biomethane-based power in the data centre sector,” continuing grants and rebates to accelerate energy efficiency, solar and electric mobility adoption, and enabling renewable energy imports, can strengthen the business case for low-carbon projects.

Bedi said “Despite the softening of global commitments in addressing climate change, the consistent stance of the government sends a clear signal towards maintaining Singapore’s green transition plan,” adding that raising the local solar deployment target to 3 gigawatt peak will spur further investments and provide additional options for businesses to decarbonise.

Mark Addy, Partner, Energy & Natural Resources at KPMG in Singapore, said it is encouraging that the government remains committed to its climate strategy despite slowing global momentum, adding that monitoring international developments before committing to the next carbon tax rate rise is a sensible approach given regional and global competitiveness considerations.

“The carbon tax increase this year marks a fundamental shift in the economics of the built environment,” Sim Ker Song, country director, Singapore at AtkinsRéalis said as the government hiked this year's carbon tax rate to $45.

“The ‘cost of carbon’ is no longer external, it is now embedded in every infrastructure and real estate decision,” he said, adding that the long-term resilience will depend on moving beyond compliance by embedding whole-life carbon modelling, low-carbon materials and energy-efficient design from the earliest project stages, as carbon pricing rises and emissions targets tighten towards 2035.