Carbon Tax In Singapore – Understanding How It Works & Affects You

Carbon Tax In Singapore – Understanding How It Works & Affects You

As the world gears up to fight against climate change, Singapore is following suit with The Carbon Pricing Act (CPA) that came into effect on 1st Jan 2019 that introduces a carbon tax to help reduce greenhouse gas emissions.

This carbon tax not only affects industries and businesses in Singapore, but it also affects consumers who purchase electricity for their daily and household needs.

Whether you are a business owner or a resident, this guide will take you through what the carbon tax in Singapore is all about and how it affects you.

What Is A Carbon Tax & Why Does It Exist?

A carbon tax is a fee that is imposed by governments on the burning of carbon-based fossil fuels that include natural gas, coal and fuel oil.

This is done to reduce the use of fossil fuels whose combustion releases greenhouse gases such as carbon dioxide, which are responsible for climate change.

Because electricity generation in Singapore (and many other countries) is primarily done by burning fossil fuels such as natural gas, the carbon tax applies to the power generation industry. 

One of carbon tax’s objectives is to help spur the transition of energy generation from non-renewable sources to renewable alternatives such as wind and solar power – energy that is clean and generates close to zero carbon emissions.

carbon emission tax in singapore

The Role Of Carbon Tax In Fighting Climate Change 

According to the International Monetary Fund, a carbon tax is perhaps the most efficient and effective method of reducing air pollution, helping combat climate change and global warming.

More than 40 countries around the world have implemented a form of carbon pricing that either tax companies that produce more than a permitted amount of carbon emissions or direct taxation on fossil fuel producers.

Carbon tax helps to reduce emissions and fight climate change in three main ways:

  • By increasing the cost of using carbon-based fuels like fuel oil, companies will be motivated to move towards cleaner forms of energy such as solar energy.
  • A carbon tax will also naturally increase the price of electricity, spurring consumers (both residential and commercial) to conserve energy and be more efficient to save cost, further saving on fossil fuel use.
  • The revenue gained from the tax can be used on many government initiatives that could include research on better renewable technologies or funding clean-up and disaster relief efforts that result from climate change.

carbon tax bill to fight climate change

Carbon Tax Rate In Singapore & Our Climate Goal

As part of our commitment under the Paris Climate Agreement signed in 2016, the carbon tax bill in Singapore was passed in Parliament in 2018. Following that was the implementation of a carbon tax in Singapore in 2019 to help reduce greenhouse gas emitters.

This carbon tax scheme affects all industrial facilities in Singapore that emit 25,000 tonnes or more of greenhouse gases in a year. These emitters will have to pay, from 1st January 2019 onwards, $5 per tonne of greenhouse gas emissions, tonnes of carbon dioxide equivalent (tCO2e), from 2019 to 2023.

This carbon tax rate will be reviewed by 2023 with plans to increase it to between $10 and $15 per tonnes of greenhouse gas emissions by 2030.

How much greenhouse gases does Singapore emit?

As a major part of Singapore’s economy relies on the oil industry (storage, refining & petrochemical), we have industrial facilities that emit considerable volumes of greenhouse gases as part of their operations.

In 2017, 52.5 million tonnes of greenhouse gases were emitted in Singapore with industries accounting for about 60% of the amount.

On an emissions per capita basis (tonnes CO2/capita), in 2018, Singapore ranked 27th out of 142 countries – highlighting the significant amount of greenhouse gases generated and how as a nation, Singapore will have to play its part to fight against climate change.

By 2020, Singapore is slated to reach 77.2 million tonnes of greenhouse gas emissions.


[source: NCCS Singapore]

The Carbon Tax On Everyday Consumers – How Does It Affect Me?

As a consumer and resident of Singapore, you might be wondering how the carbon tax affects you, after all, isn’t just companies that are being taxed?

Your electricity consumption is subjected to a carbon tax. This is simply because the carbon tax affects the power generation industry. 

In Singapore, the majority of our electricity is generated through the burning of fossil fuels (natural gas). Hence, power generators are imposed the carbon tax as they emit more than 25,000 tonnes of greenhouse gases when generating electricity.

Power generators are passing on the cost of this carbon tax onto the consumers. Licensed electricity retailers in Singapore buy electricity with the carbon tax charge from the energy grid and as such, pass on the charge to the consumers.

Is this carbon tax on consumers here to stay?

In all likelihood, yes. 

This is because Singapore is land-scarce and there will be limited opportunities for power generators here to diversify and shift to green energy options that have near-zero-emissions.

For the part of power generators, they will have to improve their electricity generation efficiency by adopting and investing in cleaner and more effective gas-fired power plants.

As consumers, we will have to play our part by understanding how much electricity our household uses and reducing our consumption in our daily lives.

This will not only help reduce the carbon tax we have to pay, but also reduce the demand for electricity, allowing for less fossil fuels to be burned at the source.

carbon tax in singapore on electricity

How The Carbon Tax Act Affects Businesses

If you own a business in Singapore that emits more than 2,000 tonnes of greenhouse gases but less than 25,000 tonnes, you will have to submit an emissions report.

If your business facilities (factories, manufacturing plants, warehouses, etc.) emit more than 25,000 tonnes of greenhouse gases, they are considered ‘taxable facilities’ and will have to pay the charge of $5 per tonne.

Their emission reports will have to be independently verified. ‘Taxable facilities’ will also have to develop a monitoring plan that informs regulators on the assurance of their data quality used in the calculations of their emissions in the report.

How To Calculate Carbon Emission Tax In Singapore

As the carbon tax gets progressively higher, it is important to understand how it is calculated.

The carbon tax charge takes effect for every unit of electricity (in kWh) consumed from the 1st of January 2019 onwards.

Carbon Tax Charge = Electricity Consumed* x GEF-OM** x Carbon Tax Rate

*Electricity consumed is based on the metered consumption

**GEF-OM is the Grid Emission Factor-Average Operating Margin published by the Energy Market Authority (EMA). It is the power system-wide CO2 emissions per unit of net electricity generated into the power grid.

How much will the carbon tax cost an average household in Singapore? 
electricity consumption

[Source: Energy Market Authority Singapore]

For example: For a household that consumes 454 kWh of electricity a month (around the 2017 average monthly household electricity consumption of a 5-room HDB flat) the carbon tax for the month is calculated as such:

Carbon Tax Charge

= Electricity Consumed* x GEF-OM** x Carbon Tax Rate

= 454 kWh x 0.4192 tCO2e/MWh x S$5/tCO2e

= 0.454 MWh x 0.4192 tCO2e/MWh x S$5/tCO2e

= S$0.95

That means in addition to the electricity rate you are paying (whether your electricity plan is a fixed-price or discount off tariff plan), the carbon tax charge if you consume 454 kWh will be S$0.95 before GST. The same calculation holds true for companies that consume electricity from non-renewable sources.

If your corporation consumes 100,000 kWh of electricity in a given month, the carbon tax charge for that month will be:

Carbon Tax Charge

= Electricity Consumed* x GEF-OM** x Carbon Tax Rate

= 100,000 kWh x 0.4192 tCO2e/MWh x S$5/tCO2e

= 100 MWh x 0.4192 tCO2e/MWh x S$5/tCO2e

= S$209.60

That means in addition to the electricity rate your business is paying (whether your electricity plan is a fixed price or discount off tariff plan), the carbon tax charge your business is liable for on your 100,000 kWh consumption will be S$209.60 before GST.

Carbon Tax FAQ (5 Important Questions Answered!)

While the above calculation should serve as a guide to understand how much you will be paying for the carbon tax charge, here are some answers to commonly asked questions that you might still have.

1. Is it compulsory for me as a residential consumer to pay the carbon tax on my household electricity use? 

If your electricity supply is from SP Services, you will be charged the carbon tax based on your electricity consumption.

However, if you choose to buy electricity from a licensed retailer, the carbon tax charge will depend on the terms and conditions of your contract/agreement with the retailer.

Certain retailers are bearing or absorbing the charge while others are passing on the charge to you. It is recommended that you ask any retailer about how the carbon tax charge affects you before signing an electricity supply agreement.

2. I am a business with industrial facilities that emit greenhouse gases above 25,000 tonnes annually. Do I still have to pay carbon tax on my electricity use on top of the carbon tax on my emissions? 

In short, yes. The two carbon tax charges are independent of each other.

The carbon tax on your electricity use is separate from the carbon tax that is imposed on your business emitting greenhouse gases. Depending on your electricity supply agreement with your retailer, you will have to pay the carbon tax on your electricity consumption unless it is absorbed.

For your emissions, you will be charged $5 per tonne of greenhouse gas emissions, tonnes of carbon dioxide equivalent (tCO2e), from 2019 to 2023.

3. Is the carbon tax charge liable for GST? 

Yes, GST will be applied on the carbon tax charge.

The carbon tax is a component of the final electricity price that is payable on your end. Hence, it is subjected to GST.

4. I utilise energy generated from renewable sources. Do I still need to pay carbon tax for my electricity consumption from them? 

If you consume energy from renewable sources such as from solar pv panels, you will not have to pay any carbon tax on them as they generate no carbon emissions.

However, any other types of energy consumed from non-renewable sources, such as electricity bought from the Singapore power grid, is subjected to the carbon tax.

5. Can I buy my own carbon credits to offset the carbon emissions I am responsible for from my electricity consumption? 

As a residential consumer, it is not possible at this current point to do so in Singapore.

You will have to pay the carbon tax charge (unless their electricity retailer absorbs the charge).

Only taxable facilities of businesses can buy carbon credits from the National Environmental Agency (NEA) and use it to pay the tax on their total greenhouse emissions for the year.

Singapore city
How Businesses & Residential Consumers Can Reduce Their Carbon Taxes

While the carbon tax will be here to stay, there are many strategies that both commercial and residential consumers can take to lower their electricity consumption and by effect, reduce the carbon taxes.

Switch to LED bulbs, smart plugs & lightings

Whether in your business or at home, your lightings will contribute substantially to your electricity consumption.

One great way to save on your daily electricity consumption (and bill) is to ensure all your lightings are LED. After all, an LED bulb consumes 75% less energy and lasts up to 25 times longer than traditional incandescent lighting.

In addition, consider installing smart plugs and lightings around your facilities and home premises. This will allow you to shut off your lights and electricity supply either through a timed schedule or over a mobile app – making it even more convenient in reducing your electricity use.

Utilise energy-efficient appliances and machinery

From your aircon usage to refrigerators, many household appliances and machinery could be working inefficiently, causing you to consume more electricity and as a result incur more carbon taxes.

Purchasing energy-efficient alternatives is a great way to help you save on your electricity use over time.

Conduct energy audits to identify and eliminate energy wastage

Understanding your electricity consumption habits is a great start to identify where waste might occur.

For businesses, consider auditing every part of your business to identify areas where electricity is being wasted. This will allow for accurate directives and initiatives to be launched where every employee can get involved.

For the home, compare your electricity consumption with the national average of a similar dwelling to see if your household is going overboard with electricity use.

The next step would be to sit down with the family members to discuss cutbacks or to ensure good energy habits such as turning off the aircon before you sleep or using the fan instead.

Choosing the right electricity plan that maximises your savings

While paying carbon taxes will be unavoidable, another way to reduce the impact is to maximise your savings from your overall electricity use.If you are still buying electricity from SP Services, you will be pleased to know that since the launch of the Open Electricity Market, both commercial and residential consumers can now switch to an electricity retailer.

By choosing a plan suitable for your business or household, fixed price or discount off tariff, you will be able to enjoy significant savings of 20-30% or more off your overall electricity bill.


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