Session 5 presentation from the 3rd Strategic Dialogue of the Carbon Market, 21-22 September 2018

1. SINGAPORE’S
CARBON TAX
2018 Strategic Dialogue of the Carbon
Market Platform
22 September 2018
Joseph TEO
Chief Negotiator for Climate Change
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2. OUTLINE
Context
Singapore’s Carbon Tax
Key Considerations
Key takeaways
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3. CONTEXT: NATIONAL CIRCUMSTANCES
Dense Urban City & Economic Hub
◦ Small, low-lying, island city-state of
around 720 km2
◦ Accommodate housing, commercial
centres, air/sea ports, etc.
◦ Export Oriented Economy
◦ High population density of 7,650 per km2
Limited Alternative Energy Options
◦ Limited land area
◦ Low wind speeds
◦ Low tidal range
◦ Lack geothermal resources
◦ No large river systems for hydropower
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4. CONTEXT: EMISSIONS PROFILE
Breakdown of Emissions from Fuel Combustion in
Energy Sector
Energy and
Transformation
Industries
40.76%
Industry
43.59%
Transport
14.36%
Commercial
Institutional
0.86%
Residential
0.43%
Total emissions in 2014: 50.49MT
(<0.1 global emissions)
• CO2 emissions: 48.25MT
• Non CO2 emissions: 2.24MT
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5. Reduce Emissions Intensity (EI)* by 36% below 2005
levels by 2030, and stabilise emissions with the aim of
peaking around 2030
NATIONALLY DETERMINED CONTRIBUTION
(2030 PLEDGE)
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2020 PLEDGE
Reduce GHG emissions by 16% below
Business-As-Usual (BAU)
*Emissions Intensity (EI) is defined as GHG emissions per S$GDP

6. KEY MITIGATION MEASURES
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• Double water
supply without
using more energy
• Increase overall
recycling rate
from 61% to 70%
by 2030
• Mandatory Energy Labelling
Scheme
• Minimum Energy Performance
Standards
• Increase public transport share from 67% to 75% by 2030
• Doubling of rail network to 360 km by 2030
• Increase cycling path from 240 km to 700 km by 2030
• Quadrupled sheltered walkway network to 200km
• Improve energy efficiency from
~0.8% p.a. today to 1-2% p.a.
• Increase solar deployment
• 162 MWp to 1,000 MWp beyond 2020
• 80% Green buildings by 2030

7. SINGAPORE’S CARBON TAX
Carbon tax supports and enhances our suite of
mitigation efforts by putting in place an
economy-wide carbon price signal
Who it applies to: direct emitters at or above 25ktCO2e
annual emissions threshold
◦ Approx. 40 companies. Covers about 80% of total emissions
◦ Balance between maximising coverage and directly affecting
only the largest emitters
◦ Applies uniformly to all sectors, without exemption, to provide
transparent, fair, and consistent price signal
◦ Existing excise duties for transport fuels equivalent to implicit
tax of S$37-281/tCO2e, effective coverage ~95%
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8. SINGAPORE’S CARBON TAX
What is the tax rate: S$5/tCO2e (~US$4/tCO2e) in the first instance (2019-2023), as a transition period for
companies to adopt energy efficiency projects
◦ Tax rate to be reviewed by 2023, with the intention to increase it to between S$10-15/tCO2e (~US$7.5-11/tCO2e) by
2030
◦ Review will take into account international climate change developments, progress of our emissions mitigation efforts,
and our economic competitiveness
How is the tax collected: Fixed-Price Credit-Based (FPCB) tax mechanism
◦ Essentially a carbon tax – start with a mechanism that is simple to implement and will minimise burden on companies
◦ Covered facilities to purchase fixed-price credits from government equivalent to their carbon tax liability (1 credit = 1
tCO2e)
◦ FPCB mechanism puts in place flexibility to facilitate linking by putting in place infrastructure (e.g. credit registry),
capabilities and processes
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9. SINGAPORE’S CARBON TAX
What will the carbon tax revenue be used for: Supporting energy efficiency initiatives for a low-carbon
economy
◦ Funds set aside to enhance support for energy efficiency through existing grant
◦ To give companies a strong push for energy efficiency, the Government is prepared to spend more
than the carbon tax revenue collected in the first five years to support worthwhile projects
What is the likely impact: Impact on manufacturing sector is expected to be modest for most sectors; carbon-
intensive sub-sectors will face a higher impact
◦ For households and most sub-sectors, including SMEs, impact is likely to be through increases in electricity
prices
◦ ~0.21 cents/kWh (~1%) increase from current tariff of 23.65 cents/kWh for 3Q 2018; small compared to
historical quarterly electricity tariffs which have fluctuated by up to 10% between 1Q 2010 and 3Q 2018
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10. CARBON PRICING ACT (CPA)
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Passed in March 2018, to come into force on 1 January 2019
• Establishes a carbon pricing framework to be applied across affected industry sectors
• Builds on existing procedures and requirements, such as those under the Energy
Conservation Act, to minimise companies’ compliance burden
• Aligned to:
• International standards and practices where relevant, to maintain Singapore’s competitiveness
• Relevant local tax legislation (e.g. Income Tax Act) where possible, to ensure parity in treatment

11. LONG PREPARATION
Conversations on pricing carbon
started early
• Started considering carbon pricing
options in 2007 in preparation for
our 2020 targets
• Yearly conversations with large
emitters since 2010
• Regular consultation with broader
public as we updated our climate
strategy
• Build on momentum and established
relationships to have genuine
exchanges
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12. Intensified consultations and engagements after announcement of intent to price
carbon
• Public consultation document on Singapore’s carbon strategy and role of carbon pricing
• In-depth consultations with industry stakeholders
• 1-on-1 consultations, sector group sessions, engagements with industry associations
• Multiple engagements covering all key issues e.g. mechanism design, Measurement, Reporting and
Verification (MRV), carbon leakage and competitiveness concerns
• Consultation on draft carbon pricing legislation
• Working closely with covered facilities on MRV requirements
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COLLABORATIVE APPROACH

13. CARBON TAX: KEY CONSIDERATIONS
• 1 Price – Low or High?
• Start Low – but ratchet over time
• Signalling effect – here to stay, will increase in future
• Factor in other cost of living increases, water conservation tax, GST, etc..
• 2 Maintain Competitiveness
• Consult and work with industry
• Plough back revenues to help industry improve EE
• 3 Exemptions?
• No Exemptions – clean, efficient tax system but targeted at large emitters.
• 3 Carbon tax or ETS?
• Carbon Tax but with flexibility to move to ETS via FPCB tax mechanism
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14. CARBON TAX - KEY TAKEAWAYS
1. Start the conversations early. Communicate plans.
• No surprises; give companies time to formulate their thoughts on carbon pricing for meaningful
exchanges with the government, and to prepare their long term plans
2. Collaborative approach establishes goodwill and working relationships
• Forthcoming exchanges to socialise the issue of carbon pricing in a constructive manner
• Helping companies improve energy efficiency to improve competitiveness
• Building capabilities in companies instil confidence for meeting requirements
3. Give companies time to adjust
• Start at a low rate and gradually increase over time
4. Principled approach to pricing other scarce resources helps to explain policy intent for a carbon tax
• Liberalised electricity market with no subsidies
• Water conservation taxes
• Keep implementation mechanism simple
• Demonstrate use of carbon tax revenue to reduce emissions
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15. CARBON TAX: ACHIEVING OUR NDC
• Our carbon tax has enabled us to submit an ambitious 2030 pledge
given our national circumstances
• Businesses will be motivated to invest to improve energy efficiency
• Consumers will be encouraged to use less electricity and save energy
• Carbon tax revenue will help fund measures by industry to reduce emissions
• Encourage the development and deployment of low carbon technology
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16. CARBON TAX: Driving Regional Action?
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• Demonstrative Effect
• 1st SEA country to introduce a carbon tax
• Sharing our experience
• Held 1-on-1 briefing session with other ASEAN Countries.
• Convening Special Ministerial Meeting on Climate Action to galvanise regional
climate action
• Working with UNFCCC to build regional capacity
• Developed a concept plan under Collaborative Instruments for Ambitious Climate
Action (CIACA) initiative
• Co-organised with UNFCCC a capacity building workshop entitled “Understanding
carbon pricing” in Oct 17
• As Chair of AWGCC, secured endorsement of the ASEAN-CIACA collaboration,
including funded study on enhanced MRV system for regional carbon market.

17. CARBON TAX: Develop Robust Multilateral rules
• Participate actively to shape Article 6 discussions on markets
• Open to explore linking our carbon tax framework to external carbon
markets when the rules and framework are established
• Starting with a fixed-priced credit-based system that could be linked easily to other
carbon markets
• Participate actively in international carbon market platforms
• Asia Pacific Carbon Market Roundtable (APCMR)
• World Bank’s Partnership for Market Readiness (PMR)
• Carbon Pricing Leadership Coalition (CPLC)
• Ministerial Declaration on Carbon Markets.
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18. “Our vision for Singapore
is a climate resilient
global city that is well
positioned for green
growth... Together, we can
ensure that Singapore
remains a vibrant and
liveable nation for our
future generations.”
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— Deputy Prime Minister Teo Chee Hean
THANK YOU