Environmental Governance of Carbon Pricing: A Case Study on Singapore's Carbon Tax Implementation

Abstract

Carbon pricing has emerged as a crucial strategy for abating greenhouse gas (GHG) emissions and climate change. Numerous jurisdictions across the globe have embraced carbon pricing mechanisms to incentivize emission reductions. Singapore introduced its Carbon Pricing Act in 2018, the first in Southeast Asia.

Under this Act, facilities directly emitting 25,000 tons of greenhouse gases or more were required to pay a carbon tax rate set at S$5 per ton of CO2 equivalent (tCO2e) from 2019 to 2023. This initial rate allowed companies emitting GHGs to adjust gradually. Subsequently, the tax rate increased to S$25/tCO2e for 2024-2025 and further to S$45/tCO2e by 2026 to 2027. There is an indication that the tax rate could reach between S$50 and S$80 per tCO2e by 2030. Implementing a carbon policy presented several critical challenges. These included determining the optimal carbon price level to effectively incentivize emission reductions, ensuring equitable distribution of the burden and benefits, and establishing mechanisms to protect vulnerable groups disproportionately affected by the policy. Simultaneously, the policy aimed to foster the growth and competitiveness of the local economy.

This case study on the Environmental Governance of Carbon Pricing: Carbon Tax Implementation in Singapore, examined Singapore’s carbon pricing journey using Bennett and Satterfield’s environment governance criteria. The results revealed that environmental governance has been effective, equitable, responsive, and robust. However, there is room for improvement regarding fairness, justice, and stakeholder participation. Recommendations include enhancing participation levels, increasing transparency, and ensuring a fair distribution of benefits. Further studies are recommended to assess the overall impact of an improved ecosystem resulting from effective environmental governance.