Singapore’s Pioneering Carbon Tax and its Business Implications

As the world continues to grapple with the impacts of climate change, such as hotter temperatures, more severe storms, rising ocean levels, and loss of species, governments and international organisations have been constantly looking for solutions that can effectively reduce the emission of greenhouse gases (GHGs), which pollute the earth. One of the solutions that many authorities have been eyeing is the imposition of carbon taxes.

For most of their proponents, carbon taxes are the most effective and efficient way to minimise carbon emissions and help avoid the worst effects of climate change. Currently, there are 27 countries in the world that have implemented a carbon tax, one of which is Singapore. In 2019, the Singapore government laid the groundwork and became the first-ever Southeast Asian country to introduce a carbon tax that covers around 80% of domestic carbon emissions. To learn more about this important issue, read on as this article looks into Singapore’s carbon emissions tax and its implications for business.

What is a Carbon Tax?

A carbon tax is basically a form of carbon pricing that is levied on the carbon content of fossil fuels. It is generally seen as an efficient and cost-effective way to minimise GHG emissions, specifically carbon dioxide (CO2). The main purpose of a carbon emissions tax is to put a price on these emissions in order to increase the cost of emissions-intensive products and services in comparison to other goods and services. This essentially disincentivises the emission of GHGs, thereby reducing their amount in the atmosphere and mitigating the negative impacts of climate change.

The Applicability of a Carbon Tax in Singapore

The carbon tax in Singapore underpins the country’s climate mitigation efforts and net zero targets by providing an excellent economic signal that will steer consumers and producers away from carbon-intensive products and services, thereby holding businesses accountable for their GHG emissions and enhancing the business case for developing low-carbon solutions. Now, this carbon tax is applied across all industries without any change in rate. This means that a uniform carbon price is levied on all big emitters in the country, across all sectors.

However, it is important to take note that the carbon tax in Singapore is only applicable to carbon emissions within its national boundaries. Therefore, in shipping, carbon tax for international emissions shall be imposed in accordance with the International Maritime Organisation (IMO). The same thing is true for the aviation sector, wherein carbon tax concerns are to be addressed by the International Civil Aviation Organisation (ICAO). 

The Impact of Singapore’s Carbon Tax on Domestic Companies

As mentioned earlier, Singapore is the first country in Southeast Asia to introduce a CO2 emission tax, covering 80% of domestic carbon emissions. Now, as an increasing number of countries around the globe implement carbon pricing policies, a revised price trajectory for its carbon tax has been announced by the Singapore Government. While this revised tax rate will not begin until 2024, it is necessary for private companies to start preparing for the changes in order to stay ahead of the curve.

Starting in 2024, large emitters of GHGs in Singapore will need to pay S$25 for every tonne of carbon dioxide equivalent (tCO2e) that they release. This price will increase to S$45 in 2026 or 2027 and will eventually reach around S$50 to S$80 by 2030. This is a huge step since, in the initial plan of the Singapore Government in 2018, their objective was to raise C02 emission tax rates to only between S$10 and S$15 for each tCO2e by 2030.

The most recent and more demanding carbon tax rates will most likely send domestic businesses with an unmistakable message – as Singapore improves its decarbonisation efforts and makes the shift to a low-carbon green economy, private enterprises now need to minimise their emissions in line with national objectives. According to Yu Liuqing, an analyst at the Economist Intelligence Unit, the new carbon emission tax in Singapore will undoubtedly be an additional burden for a lot of businesses, including those in the petrochemical and utility service industries.

The substantial rise in carbon tax will most likely add cost pressure to many of these businesses. That said, it is still possible for some businesses to embrace the change quickly without much impact, such as what happened to Hitachi, a Japanese electronics conglomerate that maintains its regional headquarters in Singapore. Furthermore, to help businesses transition more easily, the Singapore Government explained that enterprises can turn in carbon credits to offset a maximum of 5% of their taxable emissions from 2024, the time when the first carbon tax rate increase kicks in.

According to Wiliam Pazos, managing director and co-founder of the carbon trading platform AirCarbon, allowing businesses to have their carbon credits offset their carbon liabilities creates demand, which, by extension, will most likely have a desirable effect on carbon prices. For Pazos, the carbon tax essentially acts as a ‘floor on carbon,’ which creates a trusted price signal that consequently promotes capital deployment into carbon-reducing projects. Ultimately, the most important thing that businesses must do now is to understand their possible direct or indirect liability and come up with plans to decarbonise over time.


The imposition of carbon taxes is a great way to reduce the emissions of harmful GHGs into the earth, which places the burden mostly upon businesses, especially those that are large carbon emitters. In Southeast Asia, Singapore is at the forefront of adopting the carbon tax solution in order to accelerate its decarbonisation efforts and expedite its transition to a low-carbon economy. With the most recent changes in its carbon emissions taxes, Singapore is expected to cement its place as having the highest carbon levy in Asia, thereby leading the efforts to achieve net zero emissions by 2050.

About Maritime Fairtrade

Maritime Fairtrade is an impartial and reputable digital news platform that aims to provide the public with the latest news and updates on the Asian maritime trade. Our dedication lies in delivering honest and complete coverage of regulatory changes as well as insightful analyses of rising trends within the shipping industry. Be sure to explore our maritime guide in Singapore to keep up-to-date about the most recent happenings in the maritime industry. Our website also offers a multitude of information on the different aspects of the shipping sector, including pieces of advice when it comes to shipping courses in Singapore.


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