Carbon Pricing Bill – Speech by Leon Perera

(Delivered in Parliament on 20 March 2018)

Mr Speaker sir, excessive carbon emissions and the climate change they threaten to cause pose a grave danger to humanity. Those most endangered are young Singaporeans and future generations of Singaporeans yet unborn.

The Paris accords, which Singapore supports, represent what is best in the international community, namely a determination to halt this dangerous slide towards anthropogenic climate change. Hence as a nation we need to set a good example in the world community.

As a civilised country Singapore should reject the unfortunate notion, fashionable in some quarters now, that carbon emissions do not cause climate change. The evidence that carbon emissions are causally related to climate change is overwhelming and represents far and away the consensus among scientists.

Not only is the evidence of carbon emissions accelerating climate change overwhelming. History has shown that the nations of the world can find the resolve to act in concert so as to reverse the negative effects of human activity.

The best example of this was the damage to the ozone layer caused by CFCs, which was effectively halted by the global agreement on CFCs. The Montreal protocol in 1987, which took effect in 1989, banned CFCs, halons and other ozone-depleting chemicals. Ozone levels began to stabilize in the mid-1990s and recover in the 2000s.

Nations can find the political will to act in unison against a threat to the shared future of humanity. It is vital to keep in mind the prospect of success when facing important global challenges like climate change and not to give in to the kind of pessimism that guarantees defeat.

Anthropogenic climate change could bring about great harm to many millions of human beings through practical consequences like rising sea levels swamping coastal inhabited areas, the increasing frequency of freakish weather events and the spread of infectious diseases. Singapore, being a low-lying island nation, would be particularly vulnerable.

Singapore’s first Intended Nationally Determined Contribution (INDC) under the Paris Agreement states that we intend to reduce our Emissions Intensity by 36% from 2005 levels by 2030, and to stabilise our emissions with the aim of peaking around 2030.

In starting the journey towards imposing a cost to carbon emissions in line with this commitment and in line with the long-term externality carbon creates, this Bill is a step in the right direction.

In the rest of my speech, I will make a few suggestions in relation to this Bill.

Looking at climate change holistically

Firstly, would the government consider creating a balanced score card for measuring the extent to which we are moving towards a society that mitigates the sources as well as the effects of climate change?

Measuring our resilience to climate change recognises the possibility that the world may indeed get climate change wrong, and Singapore needs to plan for that eventuality by ensuring resilience. Indeed, the world was reminded of this possibility when President Trump pulled the US out of the Paris Agreement on carbon emissions, though one hopes that the US will eventually re-enter the Agreement.

Such a score card for broader climate change contributions and resilience could be populated with data and published at regular intervals for public debate. This is worthwhile to do given the importance of this issue to Singapore and the world, particularly to future generations of Singaporeans who will be the ones who really pay the price if the world gets climate change wrong.

Emissions intensity is one relevant and important indicator.

Other indicators of climate change contribution and resilience may include:-

  • Our drainage capacity and technologies to withstand possible higher levels of rainfall in future, to avoid flooding and minimize ponding.
  • Urban planning measures to reduce the impact of the Urban Heat Island effect so as to maintain liveability in Singapore’s highly urbanised environment. The Urban Heat Island effect refers to how certain types of building materials, technologies and urban plans can inadvertently lead to significantly higher temperatures in particular areas of a city.
  • The extent to which we maintain our terrestrial, freshwater, and marine biodiversity so that our nature reserves and marine parks can become sites for sustainable ecotourism and research.
  • The extent to which we improve and strengthen our local farming sector to better guard against the threat of unpredictable overseas weather patterns afecting our imported food supply.
  • The extent to which we adopt or even use R&D to develop solutions in the fight against vector-borne diseases like dengue that may be worsened by climate change.

Setting goals, Changing long-term behaviour

Next, the carbon price for taxable emitters is now specified at $5 per tonne of greenhouse gas emissions, which the government has said will last from 2019 to 2023. The government stated that it will review the carbon tax rate by 2023, with plans to increase it to between $10 and $15 per tonne of emissions by 2030.

Other than the price, our carbon pricing plan would seem to have a number of parallels with the Australian carbon pricing plan that was in force from 2011 to 2014. Some key similarities are using the device of paying for “carbon units” issued by the government (called “carbon credits” in our legislation) rather than direct taxation on fuel sources; imposing this only on firms and exempting households; and only taxing facilities with 25,000 tonnes of CO2 equivalent emissions.

However, Australia had set its carbon price at A$23 at their plan’s inception. Currently, many countries which practice carbon pricing set the price at around the US$20 mark, though many countries running pilot schemes also price it much lower than that.

It is, of course, necessary to balance the goal of disincentivising carbon emissions with the goal of ensuring that the economy has time and resources to adapt to the tax while remaining competitive. Therefore, it is prudent to set the price at a low level initially.

Having said that, it is not clear if setting the carbon price at such a low level, and the pass-through change in terms of end-user prices that brings about, will nudge end-users to substantially change their behaviour with regards to energy conservation or the deployment of carbon-light, energy-efficient technologies.

I do not argue that we should we should set the carbon price higher at this stage, to balance the effect on the economy and people.

However so as to nudge the economic eco-system towards a smaller carbon footprint in the longer-term, which is the goal of any carbon pricing regime, I have the following suggestions.

Would the government – and this is my second broad point – consider setting a goal for the share of renewables’ contribution to total energy production in the longer-term? I have called for this in the House previously.

Such a goal, even if expressed as a range, has the effect of focusing minds both in government and the private sector, and nudge decisions to trial, test and ultimately adopt cleaner technologies, knowing that tougher measures are inevitable.

Note that this is not the same as arguing for subsidising renewable technologies using devices like feed-in tariffs.

It is useful to announce a long-term renewables target because that sends a signal that the regime for incentivising renewables and disincentivising carbon-intensive technologies will gradually and over time become more rigorous, even if the time frame is fairly long.

This may embolden companies thinking of invest in new and innovative renewables projects, would-be entrepreneurs thinking of setting up start-ups in the field and workers considering developing their skills and career in this field.

Funding Greentech

Thirdly, the Finance Minister said that he is willing to invest even more than the revenue generated by the carbon tax in low-carbon technologies. Presumably the goal here is to nudge the economy into lower, world-class levels of carbon use per unit of GDP.

Would the government consider setting aside part of the funds from the carbon tax into a vehicle like a fund or even a Green infrastructure bank offering low-interest loans that has a mission to fund the development, testing and deployment of Green technologies in Singapore?

This could, in the longer-term, bring about new, Greener possibilities for the economy and help nudge economic actors towards adopting them.

One criterion for funding projects could be that they test-bed new technologies in Singapore, so that the know-how from deploying and maintaining such technologies resides in Singapore and diffuses to our workers and companies, creating knowledge that will enhance our economic competitiveness. The economic benefits so derived, such as new investment and jobs, may even increase tax revenues and turn out to be revenue positive in the longer-term.

Such broad economic measures could be coupled with administrative measures to nudge economic actors towards new technology adoption. For example developers could be required to install a certain minimum capacity for solar panels on roofs, with exceptions given on a case by cases basis for those buildings with minimal rooftop sunlight or which have a case for setting aside some rooftop space for other uses, like rooftop gardens.

Making public data on the trends among large emitters

Lastly, will the Government consider making data on individual large emitters’ emissions publicly available? The benefits of this are twofold.

Firstly, this may nudge large emitters to do better in their efforts to reduce emissions. Secondly, it would give researchers in environmental policy and science the opportunity to access data to track Singapore’s progress towards meeting our committments under the Paris Agreement, and to scrutinise the effectiveness of the carbon tax and other Green measures, amongst other possibilities.

The notion of publishing carbon emissions data is not novel. Many large global companies publish emissions data and this is a trend that is likely to grow.

Publishing the data from large emitters may be in line with where global trends are heading any way. In fact it is possible that some of the global companies registering emissions data under the carbon pricing bill would be publishing global emissions data in any case.

If there are concerns about commercial sensitivity if individual company data is released, would the government consider releasing emissions data for clusters of firms in specific sectors, such as oil refining and the manufacturing of specific categories of chemicals, for example. This goes beyond the data sets released by the NCCS for broad sectors like transport, industry, power generation and buildings. Such data would help the public to benchmark the carbon-intensity of our economic activities against global norms.

Thank you.