Green setback: People sit next to a pond with a view of the city skyline in Singapore. The main challenges the country faces in its decarbonisation journey are limited space for renewable energy infrastructure, high costs and investment required, and limited avenues to offset carbon emissions. — AFP
SINGAPORE: Close to 40% of companies in Singapore experienced “minimal impact” from the hike in carbon tax, according to a survey conducted by the Sustainable Energy Association of Singapore (Seas).
A smaller proportion (24.5%) of companies said the increase in carbon tax, which was implemented in January 2024, had led them to reconsider their long-term sustainability strategies, with close to 20% indicating that they have stepped up efforts to reduce emissions and invest in energy-efficient technologies.
However, the survey, which polled 250 industry professionals, mostly in South-East Asia’s energy sector, also found that only a very small percentage (3.8%) bought carbon credits, suggesting that the tax hike alone may not be enough to drive demand for companies to purchase carbon credits.
Singapore’s carbon tax rate increased from S$5 per tonne of carbon dioxide equivalent to S$25 per tonne from Jan 1, 2024. It will be raised to S$45 per tonne in 2026 and 2027, with plans for the rate to hit between S$50 and S$80 by 2030.
Former managing director of the Monetary Authority of Singapore Ravi Menon had previously said that the carbon tax needs to go even higher to accelerate climate action to address global warming.
Overall, only 24.5% of respondents felt that the carbon tax regime in Singapore was effective, though a significant proportion (41.9%) found it to be moderately effective.
A very small percentage (6%) viewed the carbon tax to be very effective.
This suggested that while the mechanism is working, there is a need for further refinement and impact assessment to enhance its effectiveness, said Seas.
In addition to the carbon tax, respondents were also surveyed on the pace of energy transition in Singapore and the wider Asean region.
While quite a large proportion (45.9%) of respondents felt that Singapore’s progress was satisfactory, about 32.5% said that more improvements are needed.
Only 17% said that Singapore made “very satisfactory” progress, which indicates that while progress is recognised, there is still substantial room for improvement to meet Singapore’s net-zero-by-2050 target.
Respondents believed that the key drivers for decarbonisation were government policies and economic incentives.
Over half also thought that corporate sustainability initiatives are important.
However, they are seen as secondary in terms of the influence and outcomes that government-led initiatives could yield.
The survey is also seeing growing demand for clean energy from large tech corporations, possibly due to the increased focus on artificial intelligence and data centre investments.
Dependence on natural gas, barriers in cross-border interconnection agreements, as well as regulatory uncertainties in tightened energy markets were cited as the biggest regulatory hurdles for Singapore.
This highlighted the challenge of coordination in balancing energy security with decarbonisation goals.
The main challenges Singapore faces in its decarbonisation journey, the survey results indicated, are limited space for renewable energy infrastructure, high costs and investment required, and limited avenues to offset carbon emissions.
A majority (67.9%) believed that a carbon trading system would be effective in speeding up the pace of decarbonisation.
About 32% were sceptical, indicating that there are also concerns or doubts that need to be addressed to ensure widespread acceptance and success of a carbon trading system.
The carbon trading industry has been hit by scandals over the integrity of credits in the last two years, which sent prices and trading volumes declining.
Establishing comprehensive and reliable carbon accounting systems and transparent regulatory frameworks, as well as having a competitive and attractive carbon pricing mechanism are seen as critical for Singapore to be a key carbon trading hub.
Having a robust infrastructure for carbon trading transactions, and enhancing market liquidity and accessibility in the carbon markets would increase participation. — Singapore Straits Timess/ANN
