SINGAPORE – Allowances given to defray some large companies’ carbon tax are not a free pass for them to continue emitting greenhouse gases, said the National Climate Change Secretariat (NCCS).

Such allowances cover only a proportion of their emissions, and eligible facilities must have credible net-zero decarbonisation plans, NCCS said in a statement late on Sept 9.

The secretariat was responding to queries from The Straits Times after

environment groups released an open letter to the Government earlier on Sept 9,

calling for more transparency on tax “discounts” given to some large emitters here.

They also pressed for more clarity on how much the carbon tax will be raised from 2028.

Singapore’s carbon tax was first raised

from $5 per tonne of carbon dioxide (CO2) emissions to $25 per tonne in 2024 and 2025.

Alongside the tax increase, eligible companies here that face strong competition globally have been granted carbon tax “discounts” in the form of allowances. Such companies may come from the chemicals, electronics and biomedical manufacturing sectors.

There are about 50 carbon tax-paying facilities in Singapore, mainly from the manufacturing, power, waste and water sectors. These emitters are responsible for about 70 per cent of the total national emissions.

It is not clear how many firms have received the carbon tax discounts or what is the quantum of the allowances. The open letter questioned the tax policy’s effectiveness, fairness and transparency.

In response, NCCS said the allowances were meant to support trade-exposed companies in their green transition and prevent them from moving to other countries without carbon taxes.

Such relocation will affect jobs and the economy here, while allowing the firms to continue emitting carbon overseas – a phenomenon known as carbon leakage.

NCCS added that this risk is “particularly relevant amid current political and economic headwinds confronting climate action”.

“(These companies) compete globally with counterparts in jurisdictions that today have lower or no carbon price, or are offered extremely generous allowances that cover as much as 100 per cent of the emissions,” said NCCS.

NCCS also fleshed out more details on how the allowances are decided for firms.

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The amount given to each sector is pegged to the industry’s global best practices in emitting the minimum possible amount of CO2. Emissions beyond these allowances are taxed at $25 per tonne.

This encourages facilities to continuously improve and be amongst the most carbon-efficient globally, said the secretariat.

Allowances also do not cover the firms’ indirect emissions resulting from the electricity they buy, and they continue to pay carbon tax through their energy bill, added NCCS.

The open letter to the Government was penned by youth-led initiative Energy CoLab, as well as environment groups LepakInSG, SG Climate Rally and Singapore Youth for Climate Action.

The letter said there is no publicly available evidence that companies are actually developing or submitting robust emission cutting strategies, and no reporting requirements or independent verification have been disclosed. 

They also called for more transparency on each tax-paying facility’s allowances, citing other countries that disclose these details for each company.

The Singapore Government has said it will “release aggregated information on carbon tax allowances in due course”, but the environment groups said this was not enough to ensure accountability.

NCCS explained that “companies have raised valid concerns about how information on allowances could be used to compromise their strategies and operations”.

“The publication of allowances information should be balanced against the need to protect the legitimate commercial sensitivities of our companies,” it maintained.

In 2024, Reuters reported that refiners and petrochemical companies in Singapore were offered rebates of up to 76 per cent on the carbon tax for 2024 and 2025.

In June , ST reported that the expected revenue from the carbon tax for 2024 – the year the rate increased fivefold to $25 – was lower than expected. 

The revenue was projected to be about $642 million, even though calculations showed that the total tax revenue should be about $1 billion, assuming Singapore’s emissions are similar to previous years.

Experts said this discrepancy was likely due to the allowances.

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Singapore’s carbon tax will increase further to $45 per tonne in 2026 and 2027. By 2030, the tax rate could be $50 to $80 per tonne, the Government has announced.

In response to calls in the letter for comprehensive public consultation ahead of the post-2027 tax hike, NCCS said the Government will share more details in due course.

The environment groups also urged the authorities to protect low-income households from higher electricity bills amid the carbon tax hikes.

NCCS said they are mindful of the potential impact on households’ utilities expenses.

The secretariat cited existing measures that help cushion the impact of higher utility bills, such as the additional $20 in U-Save rebates per quarter for two years for eligible HDB households.

It also cited the $400 Climate Vouchers that all Singaporean households can use to buy energy-saving appliances to reduce their electricity bills.

NCCS said: “Public engagement remains an integral part of the government’s policymaking process. We have consistently engaged both the private and people sectors in our climate policies, including our carbon tax policies, and will continue to do so.”