Many climate activists, scientists, engineers and politicians are trying to reassure us the climate crisis can be solved rapidly without any changes to lifestyle, society or the economy.
To make the vast scale of change palatable, advocates suggest all we have to do is switch fossil fuels for renewable power, electric vehicles and energy efficiency technologies, add seaweed to livestock feed to cut methane and embrace green hydrogen for heavy industries such as steel-making.
There’s just one problem: time. We’re on a very tight timeline to halve emissions within eight years and hit net zero by 2050. While renewables are making major inroads, the world’s overall primary energy use keeps rising. That means renewables are chasing a retreating target.
My new research shows if the world’s energy consumption grows at the pre-COVID rate, technological change alone will not be enough to halve global CO₂ emissions by 2030. We will have to cut energy consumption 50-75% by 2050 while accelerating the renewable build. And that means lifestyle change driven by social policies.
How is that possible, you ask, given the soaring growth rate of renewable electricity over that time period? Because world energy consumption has been growing rapidly, apart from a temporary pause in 2020. So far, most of the growth has been supplied by fossil fuels, especially for transportation and non-electrical heating. The 135% growth in renewable electricity over that time frame seems huge, but it started from a small base. That’s why it couldn’t catch fossil fuelled electricity’s smaller percentage increase from a large base.
As a renewable energy researcher, I have no doubt technological change is at the point where we can now affordably deploy it to get to net zero. But the transition is not going to be fast enough on its own. If we don’t hit our climate goals, it’s likely our planet will cross a climate tipping point and begin an irreversible descent into more heatwaves, droughts, floods and sea-level rise.
Our to-do list for a liveable climate is simple: convert essentially all transportation and heating to electricity while switching all electricity production to renewables. But to complete this within three decades is not simple.
Even at much higher rates of renewable growth, we will not be able to replace all fossil fuels by 2050. This is not the fault of renewable energy. Other low-carbon energy sources like nuclear would take much longer to build, and leave us even further behind.
Do we have other tools we can use to buy time? CO₂ capture is getting a great deal of attention, but it seems unlikely to make a significant contribution. The scenarios I explored in my research assume removing CO₂ from the atmosphere by carbon capture and storage or direct air capture does not occur on a large scale, because these technologies are speculative, risky and very expensive.
The only scenarios in which we succeed in replacing fossil fuels in time require something quite different. We can keep global warming under 2℃ if we slash global energy consumption by 50% to 75% by 2050 as well as greatly accelerating the transition to 100% renewables.
Individual behaviour change is useful, but insufficient
Let’s be clear: individual behaviour change has some potential for mitigation, but it’s limited. The International Energy Agency recognises net zero by 2050 will require behavioural changes as well as technological changes. But the examples it gives are modest, such as washing clothes in cold water, drying them on clotheslines, and reducing speed limits on roads.
The 2022 Intergovernmental Panel on Climate Change report on climate mitigation has taken a step further, acknowledging the importance of collectively reducing energy consumption with a chapter on “Demand, services and social aspects of mitigation”. To do this effectively, government policies are needed.
Rich people and rich countries are responsible for far and away the most greenhouse gas emissions. It follows that we have to reduce consumption in high-income countries while improving human well-being.
We’ll need policies leading to large scale consumption changes
We all know the technologies in our climate change toolbox to tackle climate change: renewables, electrification, green hydrogen. But while these will help drive a rapid transition to clean energy, they are not designed to cut consumption.
These policies would actually cut consumption, while also smoothing the social transition:
a carbon tax and additional environmental taxes
wealth and inheritance taxes
a shorter working week to share the work around
a job guarantee at the basic wage for all adults who want to work and who can’t find a job in the formal economy
non-coercive policies to end population growth, especially in high income countries
boosting government spending on poverty reduction, green infrastructure and public services as part of a shift to Universal Basic Services.
You might look at this list and think it’s impossible. But just remember the federal government funded the economic response to the pandemic by creating money. We could fund these policies the same way. As long as spending is within the productive capacity of the nation, there is no risk of driving inflation.
Yes, these policies mean major change. But major disruptive change in the form of climate change is happening regardless. Let’s try to shape our civilisation to be resilient in the face of change.
Author: Mark Diesendorf Honorary Associate Professor, UNSW Sydney
SYDNEY (BLOOMBERG) – The sudden speed of the shift to clean power is forcing Australia, a global champion of coal and gas, to confront one of the energy industry’s biggest challenges – how to transition millions of fossil fuel workers to new roles in wind and solar.
Clean energy could create more than 38 million jobs worldwide by the end of the decade and meeting that demand without a labour shortage requires accelerating efforts to not only lure new entrants, but also to create a clearer plan to retrain the industry’s veteran workforce as traditional fuel sources decline.
That’s a task getting underway in Australia, where coal’s supremacy is finally under threat from cheap clean power, and with lawmakers who once defended fossil fuels now trading promises over green jobs in campaigning ahead of a May national election.
“The light is just going on across governments and industry” that more investment in training is needed, with a lack of skilled workers already emerging for some existing projects and challenging plans to add more clean energy to help nations meet climate commitments, said Dr Chris Briggs, research director at the University of Technology Sydney’s Institute for Sustainable Futures.
In the southeastern city of Ballarat, a key 19th Century gold mining hub, companies including Vestas Wind Systems A/S – the world’s biggest turbine manufacturer – have funded the country’s first wind power training tower, where students and ex-coal workers can use a 23m-high platform to acquire the expertise needed for roles in renewables.
“At the moment, with these skills, you have to fly them in from outside, or send Australians overseas,” said Mr Duncan Bentley, a vice-chancellor at Federation University, which hosts the site.
The facility is the first local training institution that can provide a key safety qualification needed to work in the wind industry.
Renewables accounted for almost a third of the country’s electricity generation in 2021, double the share four years earlier, and utilities are bringing forward plans to retire coal-fired power stations years ahead of schedule.
About 10,000 coal jobs in Australian mines and power plants related to domestic electricity generation will be lost by 2036, according to Dr Briggs. More will surely also exit as coal exporters eventually shutter.
In the same period, around 20,000 to 25,000 new jobs will appear in the construction, maintenance and operation of renewable power, he said.
Legislators, too, are starting to adapt. Australia’s Prime Minister Scott Morrison won a 2019 election in part because his defence of fossil fuel jobs helped secure decisive support in coal communities.
Ahead of May’s election – with his government trailing the opposition Labor Party in opinion surveys – he’s still supporting coal, but also touting prospects for workers to win new roles in clean hydrogen.
There is a catch in the rush to new sectors. Most roles in solar and wind power promise only a fraction of the salaries in the minerals industry. Mining is in the blood in Australia, fostering almost every economic boom since the gold rushes of the 19th century.
“As a young fellow it made sense to go straight to the mines, trying to chase money,” said Mr Dan Carey, who spent 12 years working in the remote iron ore hub of Port Hedland as well as the oil and gas town of Karratha in Western Australia.
In January, in search of a better lifestyle, he became a service technician at a wind farm in Warradarge, a three-hour drive north of Perth. Now “it’s about enjoying the work”, Mr Carey said. “In the mining world, everyone does sort of live for the money.”
For example, the starting salary for an operator at AGL Energy’s Loy Yang A coal power station in Victoria is about A$164,500 (S$164,750) while a technician for wind turbine builder Suzlon would earn between A$100,000 and A$120,000, according to recent Fair Work Commission enterprise agreements.
In mining there are also a raft of perks, that could include 6 weeks paid leave, subsidised housing and utilities, free vacation air tickets and big bonuses.
“It’s definitely going to be hard to retain people that have come from that world,” Mr Carey said.
Also, while mining and coal power have provided work for generations of Australians, many new jobs in renewables are temporary.
“The challenge is that there are hundreds of jobs in construction and only a handful of jobs in operations and maintenance,” said Ms Anita Talberg, director of workplace development at the Clean Energy Council, an industry group. And some of the highest-skilled jobs in fossil fuels have no direct equivalent in renewables, she said.
Yet the sheer size of the energy transition will mean construction of large new solar and wind farms will continue for decades, steadily increasing the number of ongoing positions as the new plants come online.
Fossil fuel veterans are well positioned to prosper, according to the International Renewable Energy Agency. Staff on gas platforms typically have expertise suitable for offshore wind, while coal workers have been recruited into solar and oil reservoir engineers can use their knowhow for geothermal power.
Australia’s first offshore wind farm, the Star of the South, is scheduled to open in 2028 in the Bass Strait, off the country’s southern coast. At about the same time, Hong Kong-based CLP Holdings will close the ageing Yallourn coal-fired plant nearby after more than 100 years of operation.
The wind project is aiming to capitalise on the pool of potential workers, and has sought talks about retraining opportunities. “You’ve got the workers with the skill sets,” said Ms Erin Coldham, Star of the South’s chief development officer.
Most of us don’t think about how and where our electricity comes from when we flick a switch in our home. Behind the scenes, however, Singapore is making major moves to use greener power sources as it transforms the energy sector.
As you may have noticed from the hotter days and nights here, flash floods and extreme weather worldwide, climate change is real, and its effects on the weather are increasingly seen and felt. Slowing climate change is a global challenge, and everyone has a part to play in reducing the carbon emissions that contribute to it.
Singapore is greening its power sector because it makes up a significant portion – about 40 per cent – of the country’s overall emissions. It is crucial to act now because the journey towards a more sustainable power sector could take decades.
To decarbonise its power sector, Singapore is tapping on four “supply switches”. These are: natural gas, solar energy, regional power grids and low-carbon alternatives.
In time to come, when you turn on the lights, the electricity could be from a solar farm, or wind turbines somewhere in the region, or even a hydrogen power plant.
As Singapore greens its power sector, here are the answers to some burning questions you may have.
Question 1: In sunny Singapore, why can’t we just blanket the island with solar installations to meet all our clean energy needs?
Solar power is Singapore’s most promising renewable energy source. There is a limit, however, to how much solar energy we can harness, because of land constraints. Even if we maximise all available space in Singapore for solar deployment and use the latest technology, this would only meet about 10 per cent of the projected demand in 2050.
Nevertheless, we have deployed solar panels in innovative ways – not just on rooftops, but on reservoirs, temporary vacant land and sheltered walkways, making Singapore one of the most solar dense cities in the world. We are on track to meet our target of deploying at least 2 gigawatt peak (GWp) of solar by 2030, which is enough to power about 350,000 households.
Sunshine over Singapore may be plentiful, but solar power fluctuates due to cloud cover and high humidity. This intermittency could affect the stability of our power system and the reliability of our power supply.
The Energy Market Authority (EMA) has partnered firms, researchers and other government agencies to co-create solutions such as energy storage systems to support more solar energy use. The cost of solar energy is now generally lower than the retail electricity price.
Question 2: Why are we importing electricity? Wouldn’t that make Singapore’s energy supply more vulnerable to developments overseas?
Today, about 95 per cent of Singapore’s electricity is generated using natural gas which is imported from around the world. Importing electricity is the same idea. While Singapore lacks natural renewable energy sources, other countries in the region have more renewable energy options. This means that we can access cleaner energy sources beyond our borders.
Importing electricity has other benefits. By diversifying our energy sources, we will be able to strengthen the security of our energy supply, because we will not be dependent on just a few resources or providers.
Creating a regional power grid will also speed up the development of renewable energy projects in the region and increase economic growth and access to clean power in the source countries.
The EMA aims to import up to 4 gigawatts of low-carbon electricity by 2035, which would make up about 30 per cent of Singapore’s electricity supply. While the costs of electricity imports may vary widely depending on their source location and technology used, cost competitiveness will be a key factor in assessing electricity import proposals.
To prepare for large scale electricity imports in the future, Singapore is working on pilots to import 100 MW of electricity from a solar farm in Indonesia, and 100 MW of power from Laos via Thailand and Malaysia.
Question 3: What else are we doing to green our power supply?
We are also investing in longer-term solutions. By supporting promising low-carbon technologies, we can expand our options to reduce the energy sector’s carbon footprint in the long run.
For example, hydrogen does not emit carbon dioxide when used as fuel and can be used to store and transport energy. However, global supply chains and infrastructure will need to be in place for this low-carbon technology to be used widely. The Government is supporting research and development to improve its technical and economic viability through the $55 million Low-Carbon Energy Research Funding Initiative.
EMA is also collaborating with Nanyang Technological University, and various ministries and government agencies, to study the potential of geothermal energy in Singapore.
These and other initiatives will ensure that we are ready to seize opportunities in these areas when they become viable.
Question 4: If we are moving towards adopting more renewable energy sources, why do we still need natural gas?
Efforts to green the energy sector will take time to yield results. We will therefore require natural gas, which is a stable fuel source and the cleanest of all fossil fuels, to maintain a stable and reliable energy supply as we scale up our efforts on the other three “supply switches”.
Even as we continue to rely on natural gas, we are making improvements to our existing infrastructure. The EMA, for instance, supports our generation companies to improve the energy efficiency of their existing power plants through the Genco Energy Efficiency Grant Call. Existing legislation has also been amended to empower EMA to implement standards and requirements to reduce greenhouse gas emissions in the power sector. EMA will work with the industry to develop reasonable standards to shape a more energy and carbon efficient power sector.
Question 5: What does a more sustainable energy future mean for Singapore and Singaporeans?
Businesses will have many opportunities in emerging and fast growing fields. For example, they can offer services in deploying and maintaining solar panel installations, developing hydrogen systems and trading carbon credits. This, in turn, will create more jobs for Singaporeans.
To help Singaporeans tap the opportunities in these newly emerging areas of growth, EMA has worked with other government agencies and training providers to build up relevant capabilities. Schemes such as the Career Conversion Programme for Clean and Renewable Energy Professionals by Workforce Singapore and the Energy-Industry Scholarship by EMA are available to nurture talent for the energy sector.
As Singapore aims to move to the forefront of green energy technologies, it will also create and scale up innovative technologies and solutions, and eventually export them to the rest of the world – unlocking more economic growth.
With limited land and alternative energy options, decarbonising the power sector is especially challenging for Singapore. As we decarbonise the power sector, we need to do so without compromising energy security and reliability. Besides transforming the way we produce and consume energy, managing our energy demand is also key to achieving a more sustainable future. Households and businesses will need to reimagine the way we live, work and play, as well as adopt energy conservation as a way of life.
In his Budget speech, Finance Minister Lawrence Wong said that the increase in carbon tax will help Singapore to “move decisively” in achieving its new ambition of achieving net zero emissions by around the mid-century. Image: TODAY/Ili Nadhirah Mansor
Singapore will raise its carbon tax five-fold in 2024, and more in subsequent years
The rise brings Singapore to a “respectable” level on carbon tax globally, say experts
While the carbon tax is effective, it must be implemented alongside other policies that support a transition to a green economy, they say
They warn that companies may pass on higher operating costs to consumers if carbon tax is raised without any alternatives for renewable technology
Environmentalists suggest requiring companies to have a certain percentage of renewable energy in their operations or scale up solar energy deployment as some other ways to spur sustainability
SINGAPORE: Back in 2019, when Singaore became the first Southeast Asian country to implement a carbon tax — touted as a cost-effective way to combat global warming — many viewed the rate of S$5 per tonne of carbon emissions as too low.
The rate, which currently covers facilities producing about 80 per cent of Singapore’s total carbon emissions, puts the island at the bottom of the carbon tax ladder, far below other countries such as Sweden (S$186) and Switzerland (S$137.55). The low rate is meant to give businesses time to adjust to a carbon tax, the Singapore authorities had said.
Still, the rate is “alarmingly insufficient and meagre” when compared with global recommendations of S$100 by 2030 for advanced economies, said Mr Shawn Ang, a 23-year-old undergraduate and spokesperson for Students for a Fossil Free Future (S4F), a coalition championing the elimination of fossil fuels.
“Such a low rate indicates policy inertia and has been extremely inconsistent with Singapore’s ambitions to reach net zero, which was previously targeted for ‘as soon as viable’,” added the third-year environmental science and political science undergraduate from Nanyang Technological University (NTU).
However, the impending hike in carbon tax, which will be raised to a more “respectable level” of S$25 per tonne in 2024 and even higher in subsequent years, will give Singapore a seat alongside serious carbon tax users, said Dr Vinod Thomas, a visiting professor at National University of Singapore’s (NUS) Lee Kuan Yew School of Public Policy.
Dr Thomas is also an economist and former World Bank vice-president, who oversaw the organisation’s flagship reports on climate and the environment.
The tax will be further increased progressively to S$45 per tonne in 2026, with a view to reach S$50 to S$80 per tonne by 2030.
The higher rates — which were announced during the Budget statement in Parliament on Feb 18 — were welcomed by S4F and other environmentalists, such as SG Climate Rally, a youth-led movement for climate justice.
However, they noted that even with the progressive hikes, the carbon tax rate will still remain below the global benchmark recommended for advanced economies.
“This announcement has given us renewed hope and faith that collectively, Singapore is prepared to do what it takes, and what is right to mitigate climate change even if it comes at short-term costs,” said Mr Ang.
In his Budget speech, Finance Minister Lawrence Wong said that the increase will help Singapore to “move decisively” in achieving its new ambition of achieving net zero emissions by around the mid-century.
Previously, Singapore had aimed to halve its emissions by 2050, before reducing to net zero in the second half of the century.
Ms Melissa Low, a research fellow at NUS’ Energy Studies Institute, pointed to public sentiment as one possible reason why the Government raised the carbon tax beyond its initial indication of between S$10 and S$15 per tonne by 2030.
“I think the Government is hearing a lot from stakeholders, including young people and Members of Parliament (MP), on increasing the tax … Maybe the many engagements on the Singapore Green Plan indicated to the Government that we need higher carbon tax, if not things won’t move,” she said.
The Green Plan is a “whole-of-nation movement” charting Singapore’s green targets until 2030.
Ms Grace Fu, the Minister for Sustainability and the Environment, said that the hike is meant to send a signal to companies that carbon emissions have an explicit cost on the environment.
They will now find it worthwhile to adopt sustainable measures to reduce their carbon tax, she said during a forum at the Singapore University of Social Sciences (SUSS) on Feb 19.
While many view the impending hike in carbon tax as unavoidable, given the intensified concerns over climate change in recent years, some observers pointed out that consumers and businesses may feel the pinch in the form of higher prices and costs.
With carbon tax here to stay and rise further, we look at how effective it is, who bears the brunt of the tax, and what else needs to be done to move the needle on carbon emissions.
How carbon tax became a global movement
About three decades after Finland became the first country to introduce the carbon tax in 1990, about 30 other countries had implemented a carbon tax system nationwide as of last year, according to data from the World Bank.
The taxes levied by the different countries, in total, covered 2.93 gigatonnes of carbon dioxide equivalent and represented 5.4 per cent of global greenhouse gas emissions for last year.
The carbon tax is one of two popular carbon pricing mechanisms adopted globally.
The other is the cap-and-trade system which places a limit on the total level of greenhouse gas emissions that emitters can release. Those with lower emissions can sell their extra allowances, or carbon credits, to bigger emitters.
According to the World Bank’s online carbon pricing dashboard, 45 national jurisdictions and 34 subnational jurisdictions are using carbon pricing mechanisms, covering about 20 per cent of global greenhouse gas emissions for last year.
Internationally, there has been a greater push for countries to adopt carbon pricing mechanisms as a proxy to reduce carbon emissions, given that they are the most direct way to incentivise emitters to reduce their emissions.
Last July, the Group of 20 (G20) countries recognised carbon pricing, which includes carbon taxes, as a potential tool to address climate change for the first time, including its mention in an official communique following a meeting by G20 finance ministers in Italy.
The International Monetary Fund (IMF) also proposed last year that countries implement a tiered system of carbon pricing based on their income levels by 2030.
Advanced economies should charge US$75 (S$100) per tonne of emissions, high-income emerging-market economies should charge US$50 per tonne of emissions, while lower-income emerging markets should charge US$25 by the coming decade.
These rates will bring emissions in line with keeping global warming below 2 degrees Celsius as targeted by the 2015 Paris Agreement on climate change, said the IMF.
The case for carbon tax
As nations scramble to fight climate change, carbon tax is expected to incentivise companies to reduce their use of fossil fuels — which release large amounts of carbon dioxide when burned — to avoid paying taxes and turn to renewable energy, said experts.
It is the “most direct and efficient way to price air”, said Dr Thomas. It also provides a substantial source of revenue to be invested in renewable energy, he added.
Nevertheless, the effectiveness of carbon tax is contingent on its rate, which must be high enough to incentivise companies; the time period given for industries to adapt to the tax; and the availability of green technology for industries to tap, said experts.
Dr Thomas said that the experience of other countries has shown that a strong reduction in emissions typically kicks in when the rate goes beyond S$25.
He suggested that Singapore bring forward the revised rates to the mid-2020s rather than 2030, given the “very immediate” cost of climate change such as sea level rise and weather changes.
Professor Euston Quah, who specialises in environmental economics at NTU, however, argued for adjustments to the carbon tax to be spread out over a longer time period, beyond 2030.
He pointed to the constraints facing Singapore in switching to renewable energy. The use of solar energy, for instance, is hampered by limited space, while tapping energy sources through an international grid or pipeline would present energy security issues.
A longer runway with fewer drastic increases in carbon tax prices would give companies time to adjust to the changes, said Prof Quah, who is the Albert Winsemius Chair Professor of Economics.
What companies are doing
Big emitters which are subject to the carbon tax said that they have already implemented various decarbonisation measures to reduce their emissions over the last decade.
Ms Geraldine Chin, the chairman and managing director of petroleum company ExxonMobil Asia Pacific, said that the firm has introduced a series of initiatives since 2002, which have led to energy efficiency gains of more than 25 per cent and reduced the carbon emissions of its Singapore facility.
These initiatives include the operation of three cogeneration facilities that produce both electricity and steam concurrently. Cogeneration recovers heat energy after electricity is generated to produce steam.
The steam is then used for ExxonMobil’s plant operations in Singapore. This process requires less fuel and emits less carbon than if the steam and electricity were produced separately.
Ms Chin said that its Singapore team is also working to develop a detailed emissions-reduction road map to bring the company’s ambition to achieve net-zero greenhouse gas emissions from its operated assets by 2050 to fruition.
She added that ExxonMobil has long supported an explicit price on carbon and added that a stronger carbon price signal from the Government encourages investments in greenhouse gas reduction.
However, given Singapore’s open economy, it is also important that the carbon tax framework safeguards the competitiveness of trade-exposed industries. They are competing with other industrial facilities globally that have either no, or a lower price on carbon domestically or on their exports, said Ms Chin.
German chemical company Evonik, whose headquarters for its Southeast Asia, Australia and New Zealand operations is in Singapore, said that it also takes climate and environmental protection “extremely seriously”.
Among its efforts to reduce its emissions is a made-to-order power supply solution on its methionine plant on Jurong Island, which gives its complex control over energy management and maximises power efficiency to reduce carbon emissions.
Evonik said that it is not worried about the potential impact of carbon tax on its operations as it continuously looks for ways to make its processes more sustainable.
Small and medium-sized (SME) companies which are not subject to carbon tax have also taken pains to reduce their energy use, partly spurred by rising business costs, and in the process do their part to reduce their carbon footprint.
Precision engineering company Certact Engineering has been looking for ways to reduce its energy consumption and lower its operational costs ever since its sales took a hit during heightened trade tensions between the United States and China four years ago.
The company’s finance manager, Mr Daryl Chia, said that the company has installed industrial fans in its production site at Kian Teck Drive in Jurong, so that it can switch off air-conditioners during cooler periods of the day and reduce electricity consumption.
The company has also installed 258 solar panels on the rooftop of its production facility. The energy generated from the panels provides about 20 per cent of its monthly electricity usage of 85,480kWH per month, said Mr Chia.
Based on the current rate of 18 cents per kWH, Mr Chia said that the solar panels help the company save S$3,077 monthly.
The company does not track its carbon emissions as it does not know how to do so. Nevertheless, it is “constantly on the lookout” for hardware or methods to save electricity and energy, he said.
Another SME, Kawarin, was also partly spurred by a desire to cut costs when adopting sustainable efforts in its operations.
Among other things, the steel servicing company reuses the wooden timbre pallets that come with its steel imports to package its own products. A team of workers will remove the nails from the pallets and customise them to suit the different sizes of Kawarin’s own products. It also uses the wrapping paper from its imports for its own products.
Kawarin’s managing director Ken Lin said the company started such cost-saving efforts about a decade ago when energy costs began to rise.
“The (steel servicing) market opened up and became more competitive 10 years ago. So we needed to think about how to cut costs from various angles and also, in a way, save energy.”
Eng Hup Shipping, which provides vessel chartering and shipyard services for business across Asia, said that it started its decarbonisation journey three years ago after it observed an increasing demand for low-emission vessels by its clients.
The company participated in the LowCarbonSG Programme offered by Global Compact Network Singapore (GCNS) last year, which provides tools for companies to monitor and reduce their emissions where possible.
GCNS is the Singapore chapter of a United Nations initiative which encourages businesses worldwide to adopt sustainable practices.
The shipping company’s head of corporate services, Ms Lyn Phun Yi Ying, said that it has consolidated multiple individual trips into an optimised route to lower its fuel usage and carbon emissions.
It also moderates the speed of its vessels to reduce energy usage.
“Different engine models have their respective performance curves. Hence, in order to maximise the efficiency of the engines to reduce fuel consumption, we ensure that the captain of our vessel, as much as possible, operates their assigned vessel closest to its most efficient speed,” said Ms Phun.
These efforts have allowed it to cut its carbon footprint by up to 10 per cent.
She added that while the company is not affected by the carbon tax, it serves larger corporations which may have to pay the tax.
Thus, Eng Hup Shipping is trying to reduce its emissions so that it can help decrease the supply chain carbon footprint of its clients. This will be beneficial to the latter if indirect emissions, which occur in a company’s value chain, are subject to carbon tax in future, said Ms Phun.
Will consumers bear the cost?
But even as smaller companies are going green to reduce their operational expenses, the carbon tax is expected to raise such costs for big emitters.
If big emitters generate their own energy with fossil fuels, higher operational costs can come in the form of higher tax if they do not switch to alternative sources of energy which are untaxed.
Carbon intensive sectors, such as power generation companies (gencos), will also feel the squeeze from a higher carbon tax. More than 95 per cent of Singapore’s electricity is now generated by natural gas, a form of fossil fuel.
Facilities in other sectors will indirectly face a carbon price on the electricity they consume as well, as gencos are expected to pass on some degree of their own tax burden through increased electricity tariffs.
Finance Minister Wong had said that the S$25 carbon tax per tonne of emissions will lead to an increase of about S$4 per month in utility bills for an average household living in a four-room Housing and Development Board flat, though additional rebates in the form of GST Vouchers will be provided to cushion the impact.
Prof Quah said that if companies are unable to adapt quickly to the carbon tax by adopting decarbonisation technology, the tax hikes may end up driving inflation.
For example, gencos facing higher production costs may pass them on to retailers, who may eventually pass them on to households. Other expenses such as retail, food and transport may also go up due to higher electricity bills.
The extent of cost increases will depend on the tax incidence, or how the tax is shared among different parties such as the gencos, retailers and consumers, said Prof Quah.
“If the gencos have to pay a higher carbon tax, it means they will have a higher cost of production and operation,” he added. “The question is whether the gencos can pass this (higher cost) to the (electricity) retailer who buys from (them). That, in turn, depends on how much these (electricity) retailers can pass on to the retail firms in the market to the households.”
Prof Quah said that household electricity bills, for example, will go up if residents do not cut back on their utility usage. While households are largely dependent on electricity and will have to pay the increase in prices, the estimated increase of S$4 a month is “very low”, he added.
Prof Quah felt that consumers will be able to adjust their behaviour and cut back on expenditure for other goods and services such as recreation and food.
This means that households will be able to cope with the higher carbon tax “quite comfortably” as they adapt and reduce their energy use and consumption. However, businesses which are unable to pass the cost on to customers will be hurt, said Prof Quah.
Nevertheless, Ms Low from the NUS Energy Studies Institute expressed concern whether households will be able to cope with the trickle-down effect of the carbon tax, alongside other cost increases such as the higher Goods and Services Tax that will kick in next year.
She said it is yet unclear if consumers will be able to adjust their behaviour and reduce their energy usage. She noted that household appliances which consume the most energy, such as washing machines or refrigerators, are only replaced with more efficient models when existing ones are worn out.
To reduce their energy use, consumers may simply transfer their consumption of electricity outside of the household. For example, to reduce their utility bill, they may choose to charge their mobile phones at their offices instead of homes, defeating the underlying intent of the carbon tax which is to encourage a reduction in energy use.
Consumers we spoke to said that they do not intend to reduce their electricity usage, as the expected increase for utilities was not significant.
“The additional S$4 to the overall cost of the bill is not much and it doesn’t really bother me. I may use less electricity but I won’t go out of my way to reduce my consumption,” said Mr Sivakumar Balamurugan, a 33-year-old marketing manager.
In response to queries, genco Senoko Energy said that with the impending increase in carbon tax, it will continue to explore efficiency upgrades and improve the efficiency of its existing power plants that can further reduce carbon emissions.
Senoko Energy chief executive officer Graeme York said that for his company, “replacing power generation fleet even with the most modern gas turbines would only reduce emissions by 10 per cent”.
Deep emissions reductions can only come from tapping other energy supplies such as solar, regional power grids and low-carbon alternatives, he said.
On the potential impact on energy costs, he added that Senoko Energy is committed to offering competitive prices and to meet the energy needs of businesses and consumers through sustainable and innovative solutions.
Utilities company SP Group, in response to queries, said that it does not generate electricity nor have a retail licence to offer different price plans to customers.
Its spokesperson said that the company offers customers the regulated tariff rate by the Energy Market Authority (EMA) to reflect the actual cost of electricity. A large percentage of the cost of tariff is fuel cost, which is paid to the gencos and reflects the cost of fuel and power generation.
Nevertheless, SP Group said it offers a range of sustainable energy solutions to its customers to lower their energy consumption and carbon emissions.
For example, it offers a carbon footprint calculator on its SP Utilities App to allow customers to track carbon emissions from daily activities.
It is also planning to retrofit several buildings in Tampines central with a distributed district cooling system, which will generate and distribute chilled water to these buildings, to reduce electricity consumption.
In a webpage on frequently asked questions about the carbon tax posted since 2019, NCCS addressed the concern of how the Government would ensure that consumers are not over-charged by electricity retailers passing on more than 100 per cent of the carbon tax to them.
NCCS said that the competitive electricity retail market discourages retailers from raising their electricity rates excessively.
Nevertheless, the EMA will continue to ensure fair and efficient conduct of market players, said NCCS.
In its response to questions on additional safeguards in place to protect consumers, NCCS said that the carbon tax revenue will be used by the Government to cushion the impact of the increase in utility costs for households, such as through additional U-Save rebates for lower and middle-income households.
Government’s efforts aside, experts and environmentalists interviewed had other suggestions on how to mitigate the impact of businesses passing down the cost of carbon tax to consumers.
SG Climate Rally said that price controls could be imposed on essential items such as household goods, medication and utilities, while Dr Thomas suggested that the Government invest heavily in renewables so that companies can switch to non-taxable forms of energy.
Going beyond carbon tax
Although carbon tax is viewed as key to fighting climate change, it can only be effective if accompanied by other policies that support decarbonisation efforts, experts said. Other stakeholders, such as businesses and individuals, also need to take action to be greener.
Beyond carbon tax, Dr Thomas said that installing more charging points will help increase the adoption of Electric Vehicles, regarded as transportation’s answer to reducing climate change emissions; while the plan for Singapore to quadruple its solar deployment to at least 2 gigawatt-peak (GWp) by 2030 can be scaled up.
SG Climate Rally suggested that large emitters be required to produce a certain percentage of renewable energy in their operations.
Ms Woo Qiyun, 25, who runs the Instagram account The Weird and Wild to educate readers on environmental policy, suggested more robust sustainability reporting so that the environmental impact of corporations will be more visible.
“Public accountability can be one lever to push for emissions reductions. Transparency, traceability and clarity of their disclosed emissions, carbon tax liabilities and the use of offsets would be key markers for observers to assess corporations’ progress in emissions reduction,” she said.
Mr Ang of S4F said that while the latest announcements on the carbon tax gives the student coalition “renewed hope” that Singapore is “prepared to do what it takes” for climate change, Singapore can push further.
Said Mr Ang: “We believe that Singapore, being well-resourced…and being a leader in many industries, technologies and intergovernmental spaces, can and must do more than it currently is, to do our fair share for the world and for our collective futures.”
Market demand will increase after policy specifies eligible offsets
Risk management and hedging to boost futures development
Singapore’s plan to raise carbon taxes is expected to stimulate demand growth in the voluntary carbon credit market and facilitate price discovery, which will in turn pave the way for the financialization of carbon as well as promote cross-border carbon trading, industry experts said.
The Singapore government recently announced plans to raise its carbon tax to S$25/mtCO2e (approx. $18.60/mtCO2e) in 2024 and 2025, from the current level of S$5/mtCO2e ($3.7/mtCO2e). Subsequently, the carbon tax will increase to S$45/mtCO2e in 2026 and 2027, and S$50 to S$80/mtCO2e by 2030.
“The newly proposed carbon tax scheme is well-calibrated and visionary,” said Mikkel Larsen, CEO with Singapore-based carbon exchange Climate Impact X.
“In our view, global carbon prices, through taxes or carbon credits, are set to increase substantially over the next five to 10 years. With this as a context, Singapore’s carbon tax prices are quite appropriate,” Bo Bai, chairman of Singapore-based digital exchange Metaverse Green Exchange, said.
“Overall, this is a very positive development and shows strengthened commitment from the Singapore government for the Green Plan and decarbonization,” Marc Allen, technical director with Engeco, a Singapore-based climate and energy consultancy, said.
“Singapore, as a low-lying island state, has a lot of downside risk potential from climate change and it’s refreshing to see a government willing to take a leadership position,” Allen added.
“Singapore’s stated goal of becoming a vibrant global carbon hub takes [it] a step closer to fruition with the carbon tax. It creates native demand for carbon and a clear minimum price signal,” William Pazos, cofounder and managing director of carbon trading platform AirCarbon, said.
Rising demand for carbon
“Allowing corporates to offset carbon liabilities with carbon credits creates demand and by extension will have a positive impact on carbon prices,” Pazos said.
Companies will be allowed to surrender high quality international carbon credits to offset up to 5% of their taxable emissions under the newly-proposed tax scheme starting from 2024.
The carbon tax acts as “a floor on carbon”, Pazos said. He said this creates a reliable price signal which, in turn, promotes capital deployment into carbon mitigating projects.
At this point it is not possible to determine whether the qualifying “high-quality carbon credit” prices would exceed S$25/mtCO2e, but with increasing voluntary carbon market prices it could, Larsen said.
“The premise is to set the quality bar high, requiring carbon credits certified by the well-recognized international registries to be used,” Larsen said.
Larsen also pointed out that under the newly-proposed carbon tax scheme, Singapore will allow the use of international carbon credits, while existing schemes such as those in China, Australia and other places allow only domestic carbon credits.
After the government specifies what types of carbon credits can be used by the domestic corporates to offset their emissions, the market demand will go up, Larsen said.
“We believe that the impact to the offset market will be low because Singapore’s domestic carbon emission is relatively limited. However, it is important for Singapore is to become the global center for cross-border carbon trading,” Bai said.
S&P Global Platts assessed nature-based carbon credit prices at $13.30/mtCO2e Feb. 25, nearly triple the price level in last June, when Platts initiated this assessment.
Impact on domestic companies
Larsen said the increased carbon tax results in a stronger sentiment among Singaporean companies. He noted that companies that export commodities to the EU market will also have to deal with the new EU’s carbon border adjustment mechanism.
Singapore’s energy sector – power, oil, gas, and coal, will be most heavily impacted by the new tax scheme, Bai said.
“Ultimately, all companies will see a bottom-line impact, not just those that have a direct liability, but we will see carbon costs passed on to end-users of electricity,” Allen said.
“Clearly, the sectors covered by the tax will feel the pinch. However, the tax will incentivize companies to identify carbon savings within their operations, allowing them to mitigate some of the costs,” Pazos said.
As the price increases up to the 2030 target level of S$50-80/mtCO2e, it will be cheaper to actually implement an emissions reduction project than to pay the cost of emissions, Allen said.
“The key thing for companies now is to understand their potential direct or indirect liability and formulate plans to decarbonize over time. This starts with a baseline of emissions and hopefully culminates in a strong decarbonization plan and climate change strategy,” Allen added.
Larsen pointed out that the carbon tax scheme provides “a price signal over time,” and the companies will need to hedge given the upward trend of carbon costs. These factors can absolutely facilitate the development of financial instruments like carbon futures, he said.
Screenshot – Minister of Energy and Mineral Resources Arifin Tasrif delivering his remarks at the launch of the G20 Energy Transition forum monitored in Jakarta, Thursday (February 10, 2022). Source: ANTARA/HO-Ministry of Energy and Mineral Resources
Jakarta (ANTARA) – Minister of Energy and Mineral Resources Arifin Tasrif presented a roadmap for Indonesia’s energy transition to the World Bank leaders present at the G20 Indonesia Presidency.
Tasrif met with Managing Director for Operations Axel van Trotsenburg and Vice President for East Asia and the Pacific Manuela Ferro.
“The Indonesian government has committed to achieving a 23-percent share of new and renewable energy in its energy mix by 2025. By the end of 2021, the energy mix of new and renewable energy had reached around 11.7 percent,” Tasrif noted in a statement in Jakarta, Wednesday.
In the roadmap, additional power generation after 2030 will only be from new and renewable energy power plants. Starting from 2035, power will be generated mainly by variable renewable energy sources, such as solar power followed by wind power and ocean power in the subsequent year.
Hydrogen will also be used gradually starting in 2031 and massively in 2051. Moreover, nuclear power will be included in the generation system starting in 2049.
In an effort to achieve the target of new and renewable energy to reach 23 percent of the total energy mix by 2023, the Ministry of Energy and Mineral Resources has passed regulations related to rooftop solar power plants. The government targets an additional 3.6 gigawatts of rooftop solar panels to be installed by 2025.
The minister noted that Indonesia receives maximum solar radiation, as it is a tropical country, thereby making it suitable for installing rooftop solar power plants. Moreover, Indonesia has the potential for producing wind energy, hydropower, and ocean power.
In his presentation, Tasrif also highlighted other efforts to achieve this energy mix, specifically through the construction of 10.6-gigawatt new and renewable energy power plants, including replacing diesel power plants with clean power plants and using biofuels of up to 11.6 million kiloliters.
“In the electricity supply plan, we have ocean currents, solar, water, geothermal, and so on. However, currently, the biggest energy source is solar energy. In addition, we have not taken into account the use of nuclear power (in the near future) but started in 2049,” Tasrif stated.
Indonesia will also build a super grid to boost electricity connectivity. New transmissions between systems and islands are deemed necessary to share renewable energy sources owned by a region.
Tasrif further affirmed that the Indonesian government should build infrastructure to connect the main islands with transmission from new renewable energy power plants.
“For instance, North Kalimantan will be connected to Sumatra and Sulawesi. In addition, electricity supply from Nusa Tenggara, where there are many sources of solar energy, can be connected to Sulawesi and Kalimantan,” he added.
At the conclusion of the meeting, Arifin vouched to maintain sound relations with the World Bank to achieve the planned energy transition targets.
“We will continue to work closely with the World Bank and hope we can arrange for other programs to be executed,” he remarked.