Carbon Tax - NEA

The carbon tax is applied to all industrial facilities with an annual direct GHG emissions of at least 25,000 tonne of carbon dioxide equivalent (tCO2e).The initial carbon tax rate was set at $5 per tonne for 2019 to 2023, to provide a transition period for businesses to adjust. The carbon tax rates will be raised to: -

• $25 per tonne in 2024 and 2025
• $45 per tonne in 2026 and 2027
• with a view of reaching $50 to $80 per tonne by 2030

The carbon tax revenue collected are used to support decarbonisation efforts, the transition to a green economy, and to cushion the impact on businesses and households. International Carbon Credits (ICC) Framework

From 1 Jan 2024, taxable facilities are allowed to use high quality ICC to offset up to 5% of their taxable emissions. Details on the ICC eligibility can be found at Singapore’s Carbon Market Cooperation Website.

Taxable facilities can refer to the Guidance Document (download) on the administrative processes under the ICC Framework. It covers the Eligibility Criteria of ICC, steps on sourcing and procuring eligible ICC, and steps on surrendering the ICC to NEA for the payment of carbon tax under the Carbon Pricing Act 2018 (CPA).

Roll over of Unutilised ICC Offset Limit for Emissions Year 2024

Singapore has signed Implementation Agreements (IAs) with Bhutan, Chile, Ghana, Papua New Guinea and Peru on Article 6 carbon credits cooperation. We are actively working with our counterparts to operationalise these partnerships.

In the meantime, there may be a constrained supply of ICCs for emissions year 2024. In light of this, taxable facilities will be allowed to roll over their unutilised ICC offset limit, of up to 5% of taxable emissions in 2024, to emissions year 2025.1

Singapore has also signed MOUs with more than 15 countries to collaborate on Article 6, with a view to signing IAs eventually. The availability of ICCs will require active participation from the private sector, and the Singapore Government will continue supporting these efforts as more IAs are signed.

1 For any registered person who surrenders a number of eligible ICCs equal to the prescribed limit under section 33B(1) of the CPA in payment of the carbon tax charged on the taxable emissions for emissions year 2025 of a taxable facility of the registered person, to surrender a further number of eligible ICCs in payment of the carbon tax for emissions year 2025, calculated as follows:

A – B,

where —

A is the prescribed limit under section 33B(1) of the CPA for the number of eligible ICCs that may be surrendered by the registered person in payment of the carbon tax charged on the taxable emissions in emissions year 2024 of the taxable facility; and

B is the number of eligible ICCs that the registered person surrenders in payment of the carbon tax in A.

For illustration:

1. Taxable facility emits 100 kilotonnes (kt) of CO2e annually. It is allowed to use up to 5 kt (5% of 100 kt) of ICCs to offset their carbon tax liability each year.
2. If the taxable facility only uses 1 kt of ICCs to offset their tax liability for emissions year 2024, it will pay the carbon tax for the remaining 99 kt.
3. The unutilised 4 kt of ICC offset limit from emissions year 2024 can be rolled over to emissions year 2025, to be used together with their ICC offset limit for 2025 emissions.

Table 1: Illustration of Roll over of Unutilised ICC Offset Limit for Emissions Year 2024

Allowance Framework

From 2024, a transition framework will also be introduced by EDB to give existing emissions-intensive trade-exposed (EITE) companies more time to adjust to a low-carbon economy and to avoid carbon leakage. The allowances will be determined based on efficiency standards and decarbonisation targets.