Covid-19 may turn out to be a dress rehearsal for the tragedies that the climate emergency could bring, says Finance Minister Lawrence Wong, but the pandemic may also bring greater attention to reducing global emissions.
In his opening remarks at the Singapore Sustainable Investing & Financing Conference (SSIFC) on Sept 30, Wong stopped short of discussing Singapore’s pandemic response, instead focusing on Singapore’s carbon tax.
“The right carbon price is critical in ensuring that the cost of carbon properly internalises and helps bring about a reduction in emissions. So, MOF is presently reviewing the level and trajectory of our carbon tax and we will give an update on this important matter in next year's Budget,” Wong adds.
Wong follows President Halimah Yacob and Deputy Prime Minister Heng Swee Keat in delivering addresses at Temasek’s three-day Ecosperity Week 2021, which ends today. Organised by BlackRock, the International Finance Corporation (IFC) and Temasek, the inaugural edition of the SSIFC is held as part of Ecosperity Week 2021, a hybrid event at the Marina Bay Sands.
See: Nature 'not just a passive victim' of economic development, also a potential asset class: DPM Heng
See also: Impact of climate crisis could be more severe than Covid-19: President Halimah
Heng first spoke about the review of Singapore's carbon tax at the unveiling of Budget 2021 in February. “We will announce the outcome of the review at Budget 2022 to give time for businesses to adjust to any revision in the carbon tax trajectory,” he said.
First announced at Budget 2018, Singapore’s carbon tax rate is fixed at $5 per tonne of carbon dioxide equivalent until 2023.
See: How will carbon tax affect investors and companies?
In July, Monetary Authority of Singapore managing director Ravi Menon called Singapore’s rate an “outlier”. “Carbon taxes in Singapore will have to move to a steeper trajectory, to help us meet our climate commitments,” said Menon.
In comparison, Sweden's carbon tax, which was introduced in 1991, has gradually increased to SEK 1,200 ($185.56) in 2021.
See also: Singapore must find its own way out of Covid-19, avoid comparisons to other countries: Wong
In a subsequent discussion with Png Chin Yee, deputy chief financial officer at Temasek, Wong stressed the importance of setting the “right” carbon price.
“Getting the carbon price right is absolutely critical. [When] you internalise the cost of carbon, it will influence business and government decisions. Businesses can then decide whether or not, based on the carbon price, certain investments and projects are worth doing.”
Wong also urged viewers to “look beyond the headline price” when comparing Singapore to Sweden. “Headline prices are, of course, important. But it's also important to understand how comprehensive the coverage is. If you look at the data, it's not always the case that the highest headline prices have the widest coverage… In fact, Singapore has one of the widest, most comprehensive coverages of carbon tax frameworks around the world. We cover about 80% of our national emissions.”
“But there's a balance to be struck with cost competitiveness as well. We also need to realise that not all demand can adjust to this new price. So raising the price of carbon will simply end up with higher business costs for some businesses,” says Wong.
Here, Wong highlights two solutions. For one, governments need to phase out “inefficient ways of doing things”. “We are already talking about phasing out some appliances that are energy-inefficient [like] phasing out internal combustion engine vehicles, and moving to cleaner vehicles.”
Governments also have to think about carbon border adjustments, says Wong. “If one country is virtuous, but around you, other countries do not adopt similar moves, activities high in carbon emissions are just moving to another place; it doesn't help. So internationally, we will need to work through some of these mechanisms and conversations are already being undertaken in G20 and other platforms.”
Photo: Bloomberg
