Shell, ExxonMobil welcome Singapore carbon tax with reservations

20 February 2018 06:00 Source:ICIS News

(recasts to clarify that the currency throughout the story is Singapore dollar)

SINGAPORE (ICIS)--Global energy giants Shell and ExxonMobil welcome the Singapore government’s decision to impose a carbon tax to combat climate change, but with some reservations.

Singapore will introduce a carbon tax of Singapore dollar (S$) 5 per tonne ($3.8/tonne) on all facilities emitting 25,000 tonnes or more of greenhouse gas per year from 2019, with the first payment due in 2020.

The carbon tax will be levied on major emitters, which account for about 80% of Singapore’s emissions. Nearly S$1bn in government’s revenue is expected to be generated on its first five years of implementation.

Heng Swee Keat delivering budget speech in Singapore parliament

The southeast Asian country is home to the biggest integrated refinery and petrochemical operations of both Shell and ExxonMobil in the world.

The two energy giants declined to comment on the financial impact of the carbon tax on their operations.

“Shell welcomes the Singapore government’s initiative to put a tax on carbon emissions from its large industrial and power plants. This would be an important step towards meeting its carbon objectives set after the Paris agreement,” Shell chief economist Steven Fries told ICIS in an e-mailed statement.

The Paris Agreement, which entered into force in 2016, sets out a world-wide action plan to limit global temperature rise to well below 2 degrees Celsius, and to strive for 1.5 degrees Celsius.

‘Singapore produces less carbon emissions per dollar of GDP than most countries. We intend to further reduce our emissions intensity, to make a bigger effort to combat climate change,” the country’s finance minister Heng Swee Keat had said during his budget speech before the parliament on 19 February.

Singapore has intentions to review the carbon tax rate of S$5/tonne in 2023, with a view to raise it to between S$10 and S$15 per tonne by 2030, according to the Ministry of Finance.

“However, it is important to design this tax so that it will be an effective incentive to cut emissions and also support industry competitiveness, both of which are government goals,” Fries said.

“International experience has shown a good way to deliver on both objectives is for Governments to set an appropriate carbon “price” on emissions which exceed an acceptable industry performance,” the Shell chief economist said.

“This allows the government to set a carbon price high enough to incentivise companies to be more efficient, while safeguarding competitiveness by keeping the average carbon tax low,” he added.

Based on Singapore’s plans, the carbon tax “will apply uniformly to all sectors, without exemption”, noting that “this is the economically efficient way – to maintain a transparent, fair and consistent carbon price across the economy to incentivise emissions reduction”, according to Singapore finance minister Heng.

“This means our initial carbon tax rate of [S]$5 cannot be directly compared with that in other countries. Jurisdictions with higher headline carbon prices often also have significant exemptions for particular sectors, which lowers their effective carbon prices,” he added.

In a separate statement e-mailed to ICIS, an ExxonMobil spokesperson said: “We remain committed to working constructively with the government to reduce the risks of climate change in the most efficient way for society, while recognizing the importance of affordable energy in supporting economic growth and ensuring Singapore’s competitiveness.”

The company invests “in technologies and produce a range of products that allow our customers and consumers to become more efficient, helping them to reducing their emissions and carbon footprint”.

ExxonMobil’s energy efficiency investments in Singapore include three cogeneration facilities at its integrated manufacturing site which supports most of "our" energy and steam needs, the spokesperson added.

“We continue to make significant investments to improve efficiency and reduce emissions in Singapore,” the ExxonMobil spokesperson said.

($1 = S$1.32)

Focus article by Pearl Bantillo

By Pearl Bantillo