By Melissa Low

At the United Nations Climate Change Conference (COP23) held in Bonn, Germany from 6-17 November 2017, Singapore’s Environment and Water Resources Minister Masagos Zulkifli announced that Singapore will designate 2018 as the Year of Climate Action. The announcement is timely, as it comes as the world commemorates the 20th anniversary of the 1997 Kyoto Protocol and the second anniversary of the adoption of the Paris Agreement on climate change.

2017 saw a number of climate-related policy changes in Singapore, beginning with the carbon tax announcement during Budget in February, followed by enhancements to the Energy Conservation Act passed in Parliament in April.

Carbon Tax to Target Large Emitters

During the 2017 Budget speech, the government announced that a carbon tax on the direct greenhouse gas emissions of large industrial facilities will be introduced in 2019. This policy announcement is expected to affect between 30 to 40 large emitters mainly from the petroleum refining, chemicals and semiconductor sectors.

The Carbon Pricing Bill, which was passed in Parliament on 20 March 2018, opened for public consultation from 31 October to 8 December 2017. The Bill indicates that the expected form of the carbon tax would be a fixed price credit based system, where covered entities would be required to purchase credits from the regulator and surrender an amount equal to their respective emissions during the compliance period. Facilities with an annual direct emissions volume of 25,000 tonnes of carbon dioxide-equivalent (tCO2e) or above are liable to pay the carbon tax.

At the 2018 Budget speech on 19 February 2018, Minister of Finance Heng Swee Keat announced that Singapore’s carbon tax rate will set at $5/tCO2e from 2019 – 2023 and will be applied uniformly to all sectors without exemption.

Emissions Reporting Enhancements

To minimise additional compliance burden on companies, the Carbon Pricing Bill was built on existing procedures and requirements under the Energy Conservation Act (ECA).

Under the Carbon Pricing Bill, taxable facilities will be required to submit a verifiable emissions report starting from 1 January 2019 until the day immediately before deregistration. The emissions report will have to be prepared and submitted based on their monitoring plan, of which guidelines were enhanced in April 2017 as part of amendments to the ECA.

Now, under the Carbon Pricing Bill, those who emit 2,000 tCO2e of GHG emissions or more in a preceding year, will have to register as a reportable facility, and will have to comply with emissions reporting requirements. The threshold in the ECA was 54 terrajoules of annual energy consumption, while the thresholds in the Carbon Pricing Bill are in terms of tCO2e.

The ECA enhancements in 2017 saw the tightening of energy monitoring and reporting requirements for large industrial users of energy, including now having to comply with minimum energy efficiency standards for energy-consuming systems and submitting an enhanced emissions report detailing energy consumption, energy production and GHG emissions.

In addition to the requirement of submitting an energy efficiency improvement plan, facilities also need to implement an energy management system and conduct energy efficiency opportunities assessments for new ventures and expansions of existing business.

For certain affected companies, they must also appoint a GHG manager to prepare an emissions report. This individual must be a Singapore Certified Energy Manager certified by the Institution of Engineers, Singapore and have at least 3 years’ experience in energy management and GHG emissions accounting and in the operational processes and activities of the reportable business.

Under the Carbon Pricing Bill, in order to ensure that companies are reporting accurately, all emissions reports will have to be verified by an independent third party and approved by the NEA which will serve as the regulatory authority. If the report is considered unsatisfactory, NEA may ask for the report to be revised, rectified, recomputed, re-verified by a third party and resubmitted.

Financing Energy Efficiency Improvements

Companies are able to tap on an array of programmes and incentive schemes to improve their energy efficiency, and to help offset compliance costs related to additional reporting requirements.

The Energy Efficiency Fund (E2F), launched on 3 April 2017, supports efforts by businesses to improve energy efficiency of industrial facilities. Through the E2F, NEA places greater emphasis on improving manufacturing Small and Medium-sized Enterprises’ (SMEs) energy efficiency efforts with the support of the Singapore Economic Development Board (EDB).

The grant application process has also been streamlined so that companies can apply for funding support with minimal paperwork. The NEA also pre-identified a list of energy efficiency retrofit projects in order to simplify the application and processing process.

Challenges Ahead

These government initiatives are not without challenges. First, improving the energy efficiency of the industrial sector – the largest consumer of energy that accounts for 60% of Singapore’s greenhouse gas emissions – is one of the key strategies to reduce emissions and fulfil Singapore’s pledge under the Paris Agreement. However, these new regulatory measures and a carbon tax will incur costs that affect industry competitiveness.

As a small island state that relies heavily on trade and foreign investment, the Singapore government must pay attention to this and continue to study the optimal mix of policies and technologies to achieve its 2030 commitment, while ensuring that the economy remains competitive. Second, companies may not regard energy efficiency improvements as a priority, and instead regard the new requirements as an additional step for them in maintaining product quality. In ensuring product specifications are met, depending on the feedstock and materials used, more energy could be used to complete the manufacturing process. This is potentially where there could be a misalignment of government policies with business sentiments.

With the new policy changes introduced, much of the responsibility in 2018 will be on local companies to step up and adhere to the enhanced regulations under the ECA and Carbon Pricing Bill. If done satisfactorily and in line with international standards, Singapore will be in a good position to participate in external carbon markets in future. This is important, given that international market mechanisms currently being developed under the Paris Agreement’s rulebook is expected to play a significant role in facilitating countries in meeting their climate goals.

Melissa Low is a Research Fellow at the Energy Studies Institute, National University of Singapore. This is   a revised and abridged excerpt from Melissa Low, “2018 as Singapore’s Year of Climate Action”, ESI Policy Brief 21, published on 29 January 2018.

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