Public Consultation Paper for Draft Carbon Pricing Bill

Ministry of the Environment and Water Resources

Consultation Period: 31 Oct 2017 - 08 Dec 2017

Status: Closed - Summary of Responses

Consultation Outcome

RESPONSE TO FEEDBACK ON DRAFT CARBON PRICING BILL

Issued by the Ministry of the Environment and Water Resources (MEWR) 

18 February 2018

The Ministry of the Environment and Water Resources (MEWR) conducted a public consultation on the draft Carbon Pricing Bill from 31 October to 8 December 2017. 

2.We received responses from members of the public, companies and non-governmental organisations. A summary of the key feedback and our responses can be found below. 

Objectives of the Carbon Tax

3.Most respondents understood the rationale and need for the carbon tax as one of our mitigation efforts to reduce greenhouse gas (GHG) emissions. They recognise the need to send an economy-wide signal for companies to move towards or transform to a low-carbon economy. Respondents were supportive of the Government’s efforts to meet Singapore’s commitments under the Paris Agreement. Nonetheless, a common concern raised was the cost pass-through of the tax. Some respondents said that the taxable facilities might pass on the cost, and suggested that the tax be set at a level that would balance the effectiveness of the price level in achieving our environmental objectives and the impact to the general public. 

4.There was a suggestion to increase the tax rate over time. Others asked that the carbon tax design be simple, to minimise compliance costs, and cost-efficient and effective, in terms of reducing our emissions. Exemptions, if any, should be fair to companies who have undertaken early action, and be made transparent. Incorporating these considerations and communicating the carbon tax design early will help companies make the proper projections for their financial commitments of new investments.

5.The Government is mindful of these issues and will consider them carefully in deciding the carbon tax rate. The impact of the carbon tax on households is expected to be small. 

6.We have introduced the Minimum Energy Performance Standards (MEPS) and the Mandatory Energy Labelling Scheme for key household appliances and will be expanding these to more appliances. We will study other measures to support households to become more energy-efficient and reduce their energy consumption. This is aligned with the objective of the carbon tax.

7.The design of the carbon tax and opportunities for green growth were also raised in an earlier consultation on Singapore’s Climate Change Strategy and Carbon Pricing by the National Climate Change Secretariat (NCCS) from March to April 2017. Interested parties may wish to refer to this link. 

International Competitiveness

8.Companies wanted price certainty and a level playing field to manage the impact of the carbon tax on their competitiveness. The Government will continue to work with companies to support them in enhancing their energy efficiency to reduce their energy costs and become more competitive. 

Use of Carbon Tax Revenues

9.There were several suggestions on the use of the carbon tax revenues. Suggestions included channelling them towards other measures to reduce GHG emissions, such as increasing the adoption of renewable energy and incentivising the use of electric vehicles. 

10.The carbon tax revenues raised will help support initiatives to address climate change. These could include climate change mitigation efforts such as incentives for industry to adopt energy efficiency improvements. The Government will look into how the funding could be better distributed across all sectors, focusing on measures which would bring about the most reduction in emissions. 

Carbon Tax Mechanism

11.Several respondents commented on the proposed fixed-price credits-based mechanism and asked about the opportunities for linking our carbon tax system to other international emissions trading systems (ETS). 

12.In the initial implementation of the carbon tax, companies will not be allowed to use international credits against their carbon tax liability. For a small domestic market like Singapore, a carbon tax could achieve the same objective as an ETS in a simpler way. It provides greater price certainty and stability. Notwithstanding this, Singapore remains open to linking our carbon tax framework to other carbon pricing jurisdictions with high environmental integrity, including those that have adopted ETS, and will carefully study the feasibility of doing so. Singapore also participates at the United Nations Framework Convention on Climate Change (UNFCCC) to discuss, amongst other issues, the development of international carbon market rules. We are monitoring global developments closely. 

13.Several respondents also asked if carbon credits from projects or initiatives overseas could be used in lieu of part of their carbon tax liabilities. 

14.We note also that several companies are already participating in existing mechanisms such as the Clean Development Mechanism (CDM) under the Kyoto Protocol. Companies will not be able to use international carbon credits to meet their carbon tax liability in the initial phase. However, we are studying this and will decide at a later stage, when the global rules on international carbon markets are more established, on whether to introduce international carbon credits into our tax system.

List of Excluded Emissions

15.We received several suggestions to expand the list of excluded emissions. Some companies also requested for a threshold approach  in deciding which emissions should be excluded as this would give them more flexibility. 

16.To reduce companies’ compliance burden, minor emission sources will currently not be covered for taxation and will also not be subjected to third-party verification. Such emissions sources are either not included under current international GHG reporting guidelines, or are typically small and not integral to the main production process of the facility, but have a disproportionately high monitoring cost. We have reviewed the suggestions carefully and will expand the list to include two emission sources: 

• Emissions of carbon dioxide (CO2) from the combustion of biogenic fuel sources (e.g. biomass, biofuels or biogas), to be aligned with international GHG reporting guidelines by the Intergovernmental Panel on Climate Change (IPCC);

• Emissions of hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) from refrigeration and air-conditioning (RAC) equipment used for non-manufacturing purposes. 

17.We have decided not to adopt the proposed threshold approach since this may not necessarily reduce the compliance cost for companies as third-party verification of these emissions would be required to ensure that they fall below the threshold. With an excluded list approach, companies do not need to undertake third-party verification for the list of emissions. This will reduce their compliance burden. 

Penalties

18.Companies sought clarifications on how the penalties were determined. We have taken reference from the penalties in existing domestic tax legislation (such as the Income Tax Act, and Goods and Services Tax Act), particularly with regard to cases of fraud and tax evasion, to ensure parity. For other non-tax-related offences, we had referred to the Energy Conservation Act (ECA). 

Other Feedback

19.We also received feedback on the role of the independent third-party verifier and the standards and requirements for the verification processes. A few companies suggested relying on international standards such as the ISO14064-3. We have designed our carbon tax framework, including the measurement, reporting and verification (MRV) components based on international standards such as ISO standards, the GHG Reporting Guidelines by the IPCC, and the GHG Protocol. 

20.Companies also raised concerns regarding the confidentiality of data submitted under the Bill as it could contain commercially-sensitive information. We are cognisant of the sensitivity of the data that will be collected, and will put in place the necessary safeguards in the Bill to ensure the appropriate safeguarding of this information. 

Conclusion

21.MEWR would like to thank all respondents for their views and feedback on the draft Carbon Pricing Bill. We are studying the suggestions received and will incorporate them into the revised Carbon Pricing Bill, where relevant.

Detailed Description

Public Consultation Paper for Draft Carbon Pricing Bill

A. Aim

The Ministry of the Environment and Water Resources (MEWR) is carrying out a public consultation on the draft Carbon Pricing Bill. This is a follow-up from the earlier consultation conducted by the National Climate Change Secretariat (NCCS), Strategy Group in March 2017, on the Government’s plan to introduce a carbon tax in Singapore (link to  REACH website) and is part of the ongoing efforts by Government agencies in consulting stakeholders on the carbon tax. The consultation period for the draft Carbon Pricing Bill will last for 6 weeks, from 31 October to 8 December 2017. 

B. Background

2.At Budget 2017, the Government announced plans to implement a carbon tax of between S$10 and S$20 per tonne of greenhouse gas (GHG) emissions from 2019. The carbon tax is part of a suite of measures that will help us meet our commitments under the Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCCC) where Singapore has pledged to reduce our emissions intensity¹ by 36% from 2005 levels by 2030, and to stabilise our emissions with the aim of peaking around 2030. The Paris Agreement entered into force in November 2016. 

3.As announced earlier in the year, the carbon tax will be applied upstream on large emitters, such as power stations and other large industrial facilities that directly emit GHGs. Putting a price on carbon has been recognised by policymakers, academia and businesses as an economically efficient way to reduce GHG emissions. A carbon tax will put in place a price signal to incentivise emitters to reduce their emissions, while giving them the flexibility to take action where it makes the most economic sense. It will also complement existing measures in Singapore to reduce emissions such as regulations and standards.  In implementing and deciding on the final carbon tax, the Government will take into consideration the prevailing economic conditions in Singapore and the need to maintain international competitiveness, and will provide appropriate measures to ease the transition.

C. Objectives of Bill

4.The Carbon Pricing Bill will give effect to the carbon tax. It sets out the overall carbon tax framework and obligations for large GHG emitters, including the measurement, reporting and verification (MRV) requirements. The Bill will also give the National Environment Agency (NEA) the powers to make and amend related regulations for matters such as the MRV requirements for affected facilities. 

5.In designing the proposed carbon tax framework, we have taken into account international standards. Where relevant, we have built on existing procedures and requirements under the Energy Conservation Act (ECA) in developing the Carbon Pricing Bill so as to minimise additional compliance burden on companies². The Bill also consolidates the previous GHG emissions reporting requirements for industrial facilities that were formerly under the ECA into the Carbon Pricing Bill. Similarly, the enhanced measurement and reporting requirements that are part of the Energy Conservation (Amendment) Act will now be part of the new Carbon Pricing Act. 

D. Key Features of the Bill

Qualification and Deregistration Criteria and MRV Requirements

6.The Carbon Pricing Bill adopts a similar definition of facility as that found in the ECA; i.e. the corporation must have operational control over the GHG-emitting business activity or activities at a single site. The Bill also sets out the qualification and deregistration criteria, as well as the MRV requirements for two categories of facilities – reportable facilities and taxable facilities. The detailed requirements are as follows:  

Reportable Facilities

7.imilar to the GHG emissions reporting requirements under the ECA, reportable facilities will have to comply with standard MRV requirements that are aligned with international best practices and protocols, and have to report their annual emissions to NEA. These facilities are not liable for carbon tax. 

8.In the Bill, reportable facilities are defined as those that have emitted equal to or more than 2,000 tonnes of carbon dioxide-equivalent (tCO₂e) of GHG emissions in the preceding calendar year and will be required to:

(a) Register as a reportable facility by 30 June; 

(b) Monitor their GHG emissions; and 

(c) Submit an emissions report on their total GHG emissions for the preceding year by 30 June every year. 

9.For existing facilities that meet this threshold and are already registered under the ECA, NEA will contact these facilities directly to facilitate a one-time seamless registration under the new Carbon Pricing Act. 

Taxable facilities 

10.In the Bill, taxable facilities are defined as those that have emitted equal to or more than 25,000 tCO₂e of GHG emissions in the preceding calendar year. Taxable facilities will be required to:

(a) Register as a taxable facility by 30 June;

(b) Submit a monitoring plan (for the monitoring and reporting of greenhouse gas emissions) that has been prepared in accordance with guidelines for NEA’s approval by 31 December; 

(c) Monitor their GHG emissions based on the approved monitoring plan;

(d) Submit a verifiable emissions report for the preceding year that is prepared in accordance with the approved monitoring plan and that has been independently verified by a qualified third-party verifier, by 30 June every year; and

(e) Pay the carbon tax for the preceding year’s emissions by 30 September every year.

11.The key registration and reporting deadlines for reportable and taxable facilities are provided in Annexes A and B. Annex A provides a timeline applicable for all new corporations, while Annex B provides the timelines for corporations currently registered under the ECA. 

Re-classification and Deregistration 

12.A taxable facility can apply to be deregistered as a taxable facility if its GHG emissions fall below 25,000 tCO₂e for three consecutive calendar years. The facility will then be re-classified as only a reportable facility and will then only have to comply with the requirements for reportable facilities described above. 

13.Under the Bill, reportable facilities can apply to deregister if their GHG emissions fall below 2,000 tCO₂e for three consecutive calendar years. 

14.Notwithstanding the above, if a facility can demonstrate and prove that there are significant and substantial changes to its processes that lower its emissions considerably below the respective thresholds, the facility can apply for a re-classification or deregistration in the following year. This application will be subject to NEA’s approval strictly on a case-by-case basis.

Coverage

15.Facilities will have to report and pay taxes (where they meet the threshold) on their total emissions of the following six GHGs: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF₆).³

16.GHG emissions from several small emissions sources that do not form part of the main production activity for industrial facilities will be exempted from the carbon tax. However, no different from current ECA requirements, facilities will still be required to report the GHG emissions from these small emission sources for data completeness. The proposed list of excluded emissions sources is listed in Annex C.

Carbon Tax Mechanism

17.The carbon tax will take the form of a fixed-price credits-based (FPCB) mechanism. Taxable facilities will pay the tax by purchasing and surrendering the number of carbon credits corresponding to their GHG emissions. These carbon credits will be issued by NEA at a fixed price. The price level would be determined closer to the implementation date. 

18.The number of carbon credits that each taxable facility has to surrender will be determined by NEA based on the verifiable emissions report that the facility will submit for that year. The carbon tax will be levied on the facility’s total emissions of the six GHGs. For example, if a taxable facility emits 50,000 tCO₂e for the year, the tax will be applied on the total emissions of 50,000 tCO₂e. Companies must surrender these credits to NEA by 30 September of each year, for their preceding year’s emissions that are subject to the carbon tax.

Penalty Framework 

19.There will be associated penalties for non-compliance with specific requirements in the Carbon Pricing Bill. The Government has taken reference from existing domestic legislation, such as the Income Tax Act and Goods and Services Tax Act, as well as those of overseas jurisdictions. In particular, non-compliance by taxable facilities on the reporting requirements or the carbon tax obligations, such as fraudulent reporting in the verifiable emissions report, late payment of tax or tax evasion, will result in penalties depending on the severity of the non-compliance. 

20.Facilities will be allowed to appeal to the Minister on decisions taken by NEA regarding the registration and monitoring plan requirements, and the tax assessment. If the Minister determines that the nature of the appeal requires specific technical expertise, the Minister may decide to delegate the decision to an Appeal Panel. 

E. Procedures and Timeframe for Submitting Comments

21.Interested parties are invited to provide feedback on the draft Bill. Please note that this is a working draft which we are continuing to engage the Attorney-General’s Chambers on. Some provisions will be further scoped and refined based on feedback received during this consultation. 

22.All feedback is to be submitted in softcopy (in Microsoft Word or PDF format) to MEWR_CPBill@mewr.gov.sg, with the subject “Public Consultation for Carbon Pricing Bill”. All submissions should reach MEWR by 8 December 2017. 

23.We regret that we will not be able to separately address or acknowledge every single comment we receive. However, we will consolidate and publish a summary of key comments received through REACH, together with our responses after the consultation exercise closes. The summary will maintain confidentiality of the feedback received. The identity of respondents will not be disclosed in the summary.

¹Emissions Intensity refers to GHG emissions per dollar of GDP.

²For example, key concepts that we had adopted from the Energy Conservation Act include the principles behind the definition of a liable facility as well as the GHG emissions reporting timelines.

³Singapore’s reports the emissions of these six gases in our national emissions inventory to the United Nations Framework Convention on Climate Change.

Draft Bill [PDF, 451 KB]

Annexes A, B and C [PDF, 131 KB]