The Carbon Tax Impact On Business Electricity Customers

The Carbon Tax Impact On Business Electricity Customers

What Is Carbon Tax & How Does It Affect Consumers?

A carbon tax is a fee that is imposed on the burning of carbon-based fuels such as natural gas and fuel oil. This is done to reduce the use of fossil fuels whose combustion is causing climate change through its emission of greenhouse gases. This carbon tax will affect the power generation industry as the majority of electricity generated entails the burning of fossil fuels.

Singapore’s Carbon Tax & Climate Goals

As part of Singapore’s commitments under the Paris Climate Agreement, the Singapore Government will be imposing a carbon tax to reduce greenhouse gas emissions. This will be an imposition of a S$5 carbon tax for every tonne of greenhouse emissions on emitters that include power generators from 1st Jan 2019 all the way till 2023. Power generators will be passing on the cost of the carbon tax to consumers.

Due to Singapore being land scarce, power generators here will have limited opportunities to diversify into green energy options that have zero-emissions and hence will continue to burn fossil fuels to satisfy the nation’s energy needs.

To help lessen the impact of the carbon tax on consumers, the Singapore Government has announced assistance schemes such as the U-Save rebates for households and Energy Efficiency Fund (E2F) for corporations and businesses. Households are also adviced to take note of their energy usage and reduce energy wastage to lower their overall electrical bills.

While this tax is unavoidable, generation companies in Singapore have been consistently improving their energy efficiency by moving away from fuel oil steam plants to the gas-fired power plants. This has led to a substantial increase in efficiency, helping to lower the amount of carbon dioxide emitted per unit of electricity generated.

Why Consumers Will Have To Pay For The Carbon Tax Charges

As a retailer of electricity, we buy electricity with the carbon tax charge from the energy grid to retail to our consumers. This means we have to pass on the carbon tax charges to our consumer because it originated from the source (the power generation companies).

The Carbon Tax Charge Calculation

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

The 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.

For example: A household that consumes 1000 kWh of electricity a month from the 1st of January 2019 onwards, the carbon tax for the month is calculated as such:

Carbon Tax Charge
= Electricity Consumed* x GEF-OM** x Carbon Tax Rate
= 1000 kWh x 0.4192 tCO2e/MWh x S$5/tCO2e
= 1 kWh x 0.4192 tCO2e/MWh x S$5/tCO2e

That means in addition to the electricity rate you are paying (whether it be fixed price or discount off tariff), the carbon tax charge if you consume 1000 kWh will be S$2.096.

Is The Carbon Tax Applicable To My Own Renewable Energy Consumption?

If your household or business consumes renewable energy from sources such as solar PV or wind energy, there is no need to pay any carbon tax. This tax is applicable to the energy consumed from non-renewable energy sources such as the electricity from power generators.

At iSwitch, We Strive To Be Transparent & Helpful

If you have any other questions regarding the carbon tax for your household or business, our friendly energy consultants will be more than happy to guide you. Just drop us a call at 1800 505 9900 or email us at

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Reference Links

1. Mainsteam Media Link:

2. Carbon Pricing Bill Link:

3. Confirmation of effective date of Carbon Tax by Perm Sec:

4. Carbon Tax Grid factor published by EMA:

5. Energy Efficient Fund Business Grant

6. U-Save Household Rebates

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