SINGAPORE – Carbon tax-liable companies in Singapore, which have been able to use eligible carbon credits to offset up to 5 per cent of their emissions each year, will be allowed to roll over their unused offset limit in 2024 to 2025.
This means that if any of the roughly 50 such tax-paying facilities here did not use any carbon offsets in 2024, they may be able to offset up to 10 per cent of their emissions in 2025.
The National Environment Agency (NEA), which is the carbon tax-administering agency, announced this on its website, saying it was allowing this due to the “constrained supply of international carbon credits for emissions year 2024.”
Singapore is making headway in its quest to source carbon credits from its partners around the world, and has inked carbon trading agreements with seven countries since 2023, including Paraguay, Bhutan and Ghana. However, no credits have come online yet.
Singapore’s carbon tax covers around 70 per cent of Singapore’s greenhouse gas emissions, which come from about 50 facilities in the manufacturing, power, waste and water sectors, according to the National Climate Change Secretariat’s website.
These tax-liable facilities emit more than 25,000 tonnes of greenhouse gases annually, and since 2024, have been paying $25 a tonne. This was up from the $5 a tonne rate imposed between 2019 and 2023.
The tax will subsequently go up to $45 a tonne in 2026 and 2027, with a view to reaching between $50 and $80 a tonne by 2030.
It is not immediately clear whether the unused 2024 offset limit will be a fixed amount based on that year’s emissions, or a percentage of 2025 emissions.
A carbon tax aims to reduce the use of fossil fuels by putting a price on planet-warming carbon emissions.
By making fossil fuel use costlier, a carbon tax incentivises large emitters to switch to cleaner energy, improve efficiency or adopt low-carbon technologies.
The latest development comes after a “carbon tax relief” offered by the Government in 2024 to Singapore’s largest carbon emitters.
Reuters reported in 2024 that refiners and petrochemical companies were offered rebates of up to 76 per cent for the carbon tax for 2024 and 2025 to help them ease cost strains and remain competitive.
The Government had said then that these transitory allowances will help trade-exposed companies cope with the increase in the carbon tax, while remaining competitive.
In 2022, the Government said these tax-liable companies will from 2024 be able to offset up to 5 per cent of their taxable emissions by buying eligible carbon credits.
Such credits could be cheaper than the $25 a tonne carbon tax rate, allowing these companies to reap economic savings, much like a discount on the tax.
Other than the seven carbon trading deals already signed, Singapore is also negotiating with more than 15 other countries, including Malaysia, the Philippines and Sri Lanka, to sign similar carbon trading pacts.
Carbon credits eventually produced by projects in those countries can be purchased by carbon tax-liable companies, as well as the Singapore Government to meet the country’s climate targets.
One carbon credit represents one tonne of carbon dioxide that is either removed from the atmosphere, such as through a forest restoration project, or prevented from being released, such as when a forest is saved from the axe.
There are two main types of carbon credits – nature-based ones and technological ones, such as switching from pollutive firewood to cleaner cooking stoves. Nature-based credits could come from projects such as forest restoration and conservation, as well as sustainable agriculture.
Of the country-to-country pacts Singapore has, most progress appears to have been made with Ghana.
In September 2024, Singapore and Ghana called for project developers to submit applications for their carbon credit projects in Ghana to be authorised.
A Singapore Government spokesperson told The Straits Times in March that some possible project types that may be authorised in Ghana are related to clean water supply and clean cooking.
In addition to the pacts with countries, Singapore is seeking to buy its first set of nature-based carbon offsets. The Government had in September 2024 called on carbon project developers and credit suppliers to propose nature-based projects that can deliver at least 500,000 credits each.
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