Carbon Pricing Act 2018 imposing carbon tax in force from 1 January 2019
30 January 2019
The Carbon Pricing Act 2018 (“Act”) came into operation on 1 January 2019. The Act makes consequential and related amendments to the Energy Conservation Act (“ECA”) and imposes a carbon tax on certain greenhouse gas emissions (“GHG emissions”) of business facilities, measured from 2019 onwards. The Act also imposes obligations concerning the reporting of GHG emissions of business facilities, in place of the obligations currently in the ECA.
To manage compliance costs for companies, the Act builds on the existing requirements in the ECA. Similar to the ECA, the Carbon Pricing Act is administered by the National Environment Agency (“NEA”).
The key features of the Act are set out briefly here.
Carbon tax rate
The details of the carbon tax can be found in Part 5 of the Act which sets out details of the carbon tax, the rate of which will start at S$5 per tonne of GHG emissions. This tax rate will be raised to between S$10 to S$15 by 2030. In terms of application, the carbon tax is deployed via a fixed-price credits-based mechanism. This means registered persons pay the carbon tax by surrendering carbon credits equivalent to their carbon tax liability. These carbon credits can only be bought from NEA at a fixed price.
The carbon tax is levied on the direct emissions of six types of greenhouse gases - namely carbon dioxide, methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride. These are the six gases that Singapore is required to report under the United Nations Framework Convention on Climate Change.
Facilities affected
The Act identifies the persons and business facilities that must be registered - such facilities include those from the manufacturing, power generation, water supply and waste management sectors. A “business facility” refers to a single site where a business activity that involves the emission of greenhouse gases and forms a single undertaking or enterprise is carried out. “Persons” as referred to under the Act - be it either a company or other legal person - would have operational control over the facility and must therefore be registered under the Act and be responsible for fulfilling stipulated obligations.
The Act imposes obligations on two types of facilities - taxable facilities and reportable facilities. These facilities are differentiated by emission levels.
Measurement, reporting and verification
A robust measurement, reporting and verification (“MRV”) regime forms the foundation of an effective carbon pricing scheme. For reportable facilities, the measurement and reporting requirements are similar to their ECA reporting practices, whereas taxable facilities adhere to a more stringent set of MRV requirements. The Act provides for the submission of emissions reports on an annual basis. The Act also sets out practices which must be adhered to in order to ensure that GHG emissions data is measured and reported accurately and robustly. The report must also be verified by an NEA accredited independent third party.
Reference materials
The Carbon Pricing Act is available on the Singapore Statutes Online www.sso.agc.gov.sg.