Carbon Tax Will Quintuple in 2024 - It's time for Decarbonisation Singapore!

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The Carbon tax in Singapore will rise from $5-$25/tonne in 2024. If your business has deferred energy-efficiency upgrades now is the time to get them started. Time for decarbonisation Singapore!

According to the Prime Minister's office, "On average, with every $5/tCO2e increase in the carbon tax level, electricity tariffs could rise by 1%." That means your facility's energy bill could increase by 4% starting in January and at least 10% in the next six years.

In this article, we will explain what carbon tax is and how energy-efficiency upgrades can help cushion these increases.

Centropi manufactures investment-grade LED light fittings. Installing these lights helps businesses decarbonise. But maybe you are not ready to buy lights, that's OK. Our aim is to provide understandable, accurate information on decarbonisation in large-scale real estate.

Help Me Decarbonise!

What is a Carbon Tax?

A carbon tax is a tool used by governments to address climate change by putting a price on carbon emissions.

In Singapore, the tax specifically targets industry sectors of:

  1. manufacturing and manufacturing-related services;
  2. supply of electricity, gas, steam, compressed air, and chilled water for air-conditioning; and
  3. water supply and sewage and waste management.

Even if your business is not being directly taxed by the government, as mentioned above, it is likely that Gencos will pass on the increased costs in the coming years.

It is designed to incentivise individuals and businesses to reduce their greenhouse gas emissions. The more you produce, the more you will pay.

How does Carbon Tax work?

Tax on Carbon Emissions

At a high level, the Singaporean government imposes a tax on the largest Gencos, manufacturers, and utilities companies for their use of fossil fuels such as coal, oil, and natural gas. Given this tax does not just apply to Gencos, it can be applied at various points in the supply chain, such as at the point of production, distribution, or consumption.

This tax is calculated based on the amount of carbon dioxide (CO2) emitted when these fuels are burned or used.

Pricing Carbon

The tax sets a price per ton of CO2 emissions. For example, if the carbon tax is $30 per ton of CO2, a company or individual would pay $30 for every ton of CO2 they emit through their activities.

Revenue Generation

The revenue generated from the carbon tax can be used in various ways, depending on government policy. It can be reinvested in renewable energy projects, used to fund climate adaptation measures, or returned to the public through credits to offset potential utility bill increases. The specific use of revenue varies from one place to another.

How has the Carbon Tax changed in Singapore?

Singapore implemented a carbon tax, Southeast Asia's first carbon pricing scheme, on 1 January 2019. The carbon tax level was set at S$5/tCO2e for the first five years from 2019 to 2023 to provide a transitional period for emitters to adjust.

However, from 2024, the carbon tax rates will be raised to:

  • $25 per tonne in 2024 and 2025
  • $45 per tonne in 2026 and 2027
  • with a view of reaching $50 to $80 per tonne by 2030
Increasing Carbon Tax Rates incentivise decarbonisation in Singapore

Source: NCCS

This significant increase has started to put Singapore on the map for carbon taxation.

Global carbon tax pricing

Source (Today Online)

How will it affect my energy bill?

Singapore is still heavily reliant on non-renewable sources of energy. With more than 80% coming from carbon-emitting sources.

Singapore is still heavily reliant on energy from fossil fuels

Although the Gencos will be paying this carbon tax on your behalf, they will probably pass on the increases to you in your utility bills.

According to the Prime Minister's office

"On average, with every $5/tCO2e increase in the carbon tax level, electricity tariffs could rise by 1%."

That means your facility's energy bill could increase by 4% starting in January and at least 10% in the next six years.

Decarbonisation - Can energy-efficiency upgrades help?

The short answer is yes. The less energy you use, the less you will feel the pinch of these increases. So upgrading your facilities and looking at how your business could generate its own power can really help.

Upgrades don't have to cost a cent!

It's true, they don't. Take some time to check out the viable sources of funding, and understanding what is involved in specific upgrades is a great place to start.

Can you give me an Example of Decarbonisation?

Yes! Rooftop Solar paired with investment-grade LED Lighting.

Step One - Generate Your Own Energy

Currently, you rely on others to generate your electricity for your business. Given that more than 80% of energy in Singapore comes from non-renewable sources, your energy supply has a big carbon footprint. However,  If you create your own power via rooftop solar, you can become less reliant on gencos for your energy needs.

Numerous companies in Singapore can make this happen. The majority of them offer PPA (Power Purchase Agreement) and Solar as a Service. This means they will install and manage the solar for you, producing energy. You will then benefit from the energy produced via reduced electricity bills

Step Two - Use Less Energy

There are many ways to use less energy. For example, an investment-grade LED lighting upgrade is low-hanging fruit and can save you 30% on your energy usage.

This combination is powerful and will set your business up to reduce the impacts of the carbon tax increase.

To find out more. Reach out to Ivan.

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