In September 2016, Singapore ratified the Paris Agreement, an international treaty to reduce greenhouse gas emissions. Under the Agreement, Singapore pledged to reduce its emissions intensity by 36% from 2005 levels by 2030 and stabilise emissions with an aim of peaking around 2030.
To fulfil the country’s climate change obligations under the Paris Agreement, Singapore announced the imposition of a S$5 carbon tax for every tonne of greenhouse emissions on direct emitters (which include power generating companies) from 1 Jan 2019 onwards till 20231. The aim of the carbon tax is to encourage direct emitters and downstream consumers to be more energy efficient and reduce carbon dioxide emissions.
The power sector has contributed significantly to Singapore’s climate goals by achieving carbon emission reductions of 15% between 2010 and 20152. This is achieved through substantial investments in more efficient power plant units over the years. Consequently, the nation’s electricity (> 95%) is currently being produced by natural gas-fired3 combined cycle gas turbines and co-generation plants. The remaining 5% is produced by solar and waste co-generation facilities. There is very limited scope for power generators to reduce carbon emission levels or switch to other fuels to avoid/reduce carbon tax based on current stock of power plants in the Singapore power system.
Singapore’s land scarcity and the unsuitability of numerous renewable energy technologies (such as wind and tidal) also means power generators have limited scope to invest in zero-emission renewable energy. Therefore, end-consumers will also have to play their part. The carbon tax will act as an incentive for end-consumers to improve energy efficiency and reduce overall energy consumption.
To cushion the carbon tax impact on end-consumers, the Singapore government announced financial assistance schemes such as the Energy Efficiency Fund (E2F) and the Resource Efficiency Grant for Energy (REG(E)) for companies and U-Save rebates for households. Taking all the above into consideration, a carbon tax will be applicable to all end-consumers from 1 Jan 2019 onwards. This would mean a carbon tax charge will apply for every unit of electricity (kWh/MWh) that electricity retailers sell to consumers from 1 Jan 2019 onwards.
Since 2002, the energy efficiency of the power industry has improved substantially by moving away from emission-heavy fuel oil-fired steam plants and making substantial investments in cleaner and more efficient gas-fired power generation assets. This move has led to an almost 67%4 increase in efficiency, reducing the amount of CO2 emitted per unit of electricity produced (or Grid Emission Factor5) by an estimated 20%6 from 2005 to 2016.
The power industry will continue to optimise the performance of its existing power plants and make investments in more efficient power plant technologies. For a start, it is expected to tap into available energy efficiency funds offered by the Government to improve the efficiency of power plants in future years.
At the same time, end-consumers can play their part by adopting energy conservation measures (e.g. reducing their electricity consumption) to lower their carbon tax charges. Power generating companies will also work with the government to educate consumers on energy conservation initiatives.
The carbon tax charge, which takes effect for every unit of electricity (in kWh) consumed from 1 Jan 2019, is calculated using the reference formula:
Carbon Tax Charge
= Electricity consumed* (in kWh) x GEF-OM^ x Carbon Tax Rate**
*based on metered consumption.
**S$5/tCO2e carbon tax rate as announced by the Singapore government which is valid till 2023. tCO2e = tonnes of carbon dioxide equivalent.
^GEF-OM is the Grid Emission Factor-Average Operating Margin published by the Energy Market Authority (EMA). It represents the power system-wide CO2 emissions per unit of net electricity generated into the grid. This is the generation-weighted average CO2 emission per unit net electricity generation of all generating power plants serving the electricity grid/pool and which is sold to (i.e. consumed by) end-consumers.
Net electricity refers to the units of electricity sold to the grid/pool (i.e. units of electricity generated by power generators less off losses at the power generator and the power grid).
The carbon tax charge will appear as a separate line item in customer bills by default. This is to allow customers to be more cognisant of the carbon tax they incur each month. It also allows customers with existing or future carbon accounting and/or carbon reporting requirements in their organisations to have easy access to the data.
For customers who prefer the convenience of having an all-in rate, the carbon tax charge may also take the form of a bundled rate (i.e. carbon tax charge is incorporated into the electricity price). Regardless of the form the carbon tax charge will be represented in customer bills (i.e. single line item or all-in rate), it will be computed based on the formula above.
Example: For a company that consumes 50,000kWh of electricity in the month of Jan 2019, the carbon tax charge for 50,000 kWh of electricity consumed in the month of Jan 2019 works out to:
Carbon Tax Charge
= Electricity consumed (in kWh) x GEF-OM x Carbon Tax Rate
= 50,000 kWh x 0.4192 tCO2e/MWh7 x S$5/tCO2e
= 50 MWh8 x 0.4192 tCO2e/MWh x S$5/tCO2e
= S$104.8 (works out to S$2.1/MWh or S$0.0021/kWh)
The Singapore government announced the imposition of the carbon tax which will come into effect for carbon dioxide emissions from 1 Jan 2019 to encourage both emitters and end-consumers to improve energy efficiency so that overall carbon emissions may be reduced. To help cushion the impact of carbon tax, the government also announced financial assistance schemes such as the Energy Efficiency Fund (E2F) and the Resource Efficiency Grant for Energy (REG(E)) for companies and U-Save rebates for households.
All our electricity contracts/agreements with consumers provide that new or additional third party charges and/or costs associated with the supply of electricity shall be borne by consumers. Carbon tax falls into the scope of such new or additional charges/costs.
Direct emitters will have to pay carbon tax for the energy they purchase from Geneco. There is no double counting as direct emitters pay carbon tax for carbon dioxide emissions arising from their facility’s activities, which is independent from the carbon tax due to energy they purchase from Geneco.
The amount of carbon dioxide emitted by the generation company is based on the amount of energy produced by the generation company’s power plants.
The amount of carbon tax paid by the consumer is based on the amount of metered energy sold to the consumer. For electricity, the losses at the power generator and the power grid account for the difference between the amount of energy generated and the amount of metered energy sold to the consumer.
The carbon tax charge is based on the reference formula below.
Carbon Tax Charge
= Electricity consumed (in kWh) x GEF-OM x Carbon Tax Rate
Electricity consumed is based on metered consumption.
GEF-OM is a published figure by the EMA (Energy Market Authority).
Carbon Tax Rate is S$5 tCO2e/MWh as announced by the Singapore government.
For further details, please refer to guidance item C on ‘Carbon Tax Charge’.
Further to FAQ4 above, the carbon tax charge depends on i) the energy consumed, ii) the GEF-OM (which changes on a yearly basis) and iii) the carbon tax rate which is valid till 2023.
All our electricity contracts/agreements with consumers provide that new or additional third party charges and/or costs associated with the supply of electricity shall be borne by consumers. Carbon tax falls into the scope of such new or additional charges/costs. We have set out the computation of the carbon tax charge above.
Consumers do not need to pay carbon tax for the energy they consume from renewable energy sources (e.g. solar PV). However, consumers will need to pay for energy they consume from non-renewable energy sources (e.g. electricity from power generators).
The carbon tax framework in Singapore currently does not allow the use of carbon credits (from renewable energy projects) to offset a company’s carbon tax liabilities.
However, there may be possible future plans for the Singapore government to offset carbon tax with carbon credits.
Carbon Tax and Goods and Services Tax ("GST") serve different purposes.
The GST is a tax levied on the consumption of goods and services. It is calculated based on the final price of goods or services, inclusive of any other taxes and duties. Carbon tax is part of the final price of electricity that the GST is levied on. This is similar to the water conservation tax, which is part of the final price of water that the GST is levied on.
1 Singapore Budget Speech 2018
2 The amount of CO2 emitted per unit of electricity produced reduced by 15% between 2010 and 2015, Pg 27 of Singapore Climate Action Plan 2017
3 Natural gas is the least carbon-intensive fossil fuel on Earth
4 Switch from fuel oil-fired steam plants (~30% efficiency) to higher efficiency gas-fired plants (~50% efficiency)
5 refers to Grid Emission Factor-Average Operating Margin. Further explanation on item C above on 'Carbon Tax Charge' of this document
6 Source : Information on Grid Emission Factors (Operating Margin), NEA
7 Singapore Energy Statistics 2018
8 1000 kWh = 1 MWh