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Singapore: Carbon Pricing (Amendment) Act 2022 comes into force on 7 March 2023

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In brief

The Carbon Pricing (Amendment) Act 2022 (“Act“), which came into force on 7 March 2023 and amends the Carbon Pricing Act 2018, seeks to advance Singapore’s transition towards net-zero.

The Act aims to encourage emitters of greenhouse gases (“GHG“) to proactively reduce emissions by:

(a)  progressively increasing carbon tax rates;

(b) introducing an industry transition framework to provide transitory allowances to companies in Emissions-Intensive Trade-Exposed (“EITE“) sectors;

(c)  setting up an International Carbon Credits (“ICC“) framework; and

(d)  revising the list of greenhouse gases and their Global Warming Potential Values.

In depth

We discuss the key provisions of the Act below.

Key Amendment 1: Progressive Increase In Carbon Tax Rates

As part of Singapore’s plan to reach a carbon tax level of SGD 50/tCO2e to SGD 80/tCO2e by 2030, the Act prescribes a progressive increase in the carbon tax rates from SGD 5 per tonne of GHG emissions (“/tCO2e“) as follows:

  • for GHG emissions in 2024 or 2025 – SGD 25/tCO2e; and
  • for GHG emissions in 2026 onwards – SGD 45/tCO2e.

Key Amendment 2: Industry Transition Framework For Companies In EITE Sectors

In recognition of challenges faced by companies in EITE sectors (e.g., chemicals, electronics and biomedical manufacturing sectors) in transitioning to low carbon operations, and to mitigate the risk of carbon leakage, the Act provides eligible EITE companies with transitory allowances to offset a portion of their carbon tax obligations for existing investments.  

Companies in non-EITE sectors (e.g., power generation and waste management sectors) will continue to receive support from existing schemes such as the Economic Development Board’s Resource Efficiency Grant for Emissions and the National Environment Agency’s Energy Efficient Fund.

Key Amendment 3: Use Of ICC To Pay Carbon Tax

Prior to the Act’s creation of the ICC framework, surrendering fixed-price carbon credits was the only mode of carbon tax payment. The ICC framework provides an alternative option for carbon-tax liable companies to fulfil part of their carbon tax liabilities by surrendering eligible ICCs. Notably, the ICC framework does not apply to the voluntary carbon market.

Key Amendment 4: Revised List Of Greenhouse Gases And Global Warming Potential Values

For alignment with the latest standards enunciated by the Intergovernmental Panel on Climate Change, the Act updated the list of greenhouse gases and their Global Warming Potential values. In particular, the addition of various hydrofluorocarbons (“HFCs“) and perfluorocarbons (“PFCs“) to this list is noteworthy for companies in the EITE sectors as these fluorocarbons are often used as refrigerants in the biomedical manufacturing sector for example. As such, companies producing these gases will now have to include the respective HFCs and PFCs in calculating their GHG emissions.

Relatedly, the electronics and semiconductor sector will likely be affected by the removal of nitrogen trifluoride (“NF3“) from the list of reckonable GHG emissions, bringing NF3 emissions within the coverage of the carbon tax.

Commentary

With the progressive increase in carbon tax rates, it is imperative for companies to consider steps to focus on investments in technologies that will reduce emissions and to find ways to optimise their energy mix. Companies should also undertake a review of their emissions against the revised list of greenhouse gases.

We would be happy to provide you with advice tailored to your specific needs on how to fulfil your obligations under this Act. Please get in touch with your usual Baker McKenzie contact in this regard.

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Andy Leck is the head of the Intellectual Property and Technology (IPTech) Practice Group and a member of the Dispute Resolution Practice Group in Singapore. He is a core member of Baker McKenzie's regional IP practice and also leads the Myanmar IP Practice Group. Andy is recognised by reputable global industry and legal publications as a leader in his field. He was named on "The A-List: Singapore's Top 100 lawyers" by Asia Business Law Journal 2018. In addition, Chambers Asia Pacific notes that Andy is "a well-known IP practitioner who is highlighted for his record of handling major trade mark litigation, as well as commercial exploitation of IP rights in the media and technology sectors. He's been in the industry for a long time and has always been held in high regard. He is known to be very fair and is someone you would like to be in the trenches with you during negotiations." Furthermore, Asian Legal Business acknowledges Andy as a leading practitioner in his field and notes that he “always gives good, quick advice, [is] client-focused and has strong technical knowledge for his areas of practice.” Andy was appointed by the Intellectual Property Office of Singapore (IPOS) as an IP Adjudicator to hear disputes at IPOS for a two-year term from April 2021. He has been an appointed member of the Singapore Copyright Tribunal since May 2010 and a mediator with the WIPO Arbitration and Mediation Center. He is also appointed as a Notary Public & Commissioner for Oaths in Singapore. He previously served on the International Trademark Association’s Board of Directors and was a member of the executive committee.

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Ren Jun Lim is a principal with Baker McKenzie Wong & Leow. He represents local and international clients in both contentious and non-contentious intellectual property matters. He also advises on a full range of healthcare, as well as consumer goods-related legal and regulatory issues. Ren Jun co-leads Baker McKenzie Wong & Leow's Healthcare as well as Consumer Goods & Retail industry groups. He sits on the Law Society of Singapore IP Committee and on the Executive Committee of the Association of Information Security Professionals. He is also a member of the Vaccines Working Group, Singapore Association of Pharmaceutical Industries, a member of the International Trademark Association, as well as a member of the Regulatory Affairs Professionals Association. Ren Jun is ranked in the Silver tier for Individuals: Enforcement and Litigation and Individuals: Prosecution and Strategy, and a recommended lawyer for Individuals: Transactions by WTR 1000, 2020. He is also listed in Asia IP's Best 50 IP Expert, 2020, recognised as a Rising Star by Managing IP: IP Stars, 2019 and one of Singapore's 70 most influential lawyers aged 40 and under by Singapore Business Review, 2016. Ren Jun was acknowledged by WTR 1000 as a "trademark connoisseur who boasts supplementary knowledge of regulatory issues in the consumer products industry." He was also commended by clients for being "very responsive to enquiries and with a keen eye for detail, he is extremely hands-on. His meticulous and in-depth approach to strategising is key to the excellent outcomes we enjoy."

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Ken Chia is a member of the Firm’s IP Tech, International Commercial & Trade and Competition Practice Groups. He is regularly ranked as a leading TMT and competition lawyer by top legal directories, including Chambers Asia Pacific and Legal 500 Asia Pacific. Ken is an IAPP Certified International Privacy Professional (FIP, CIPP(A), CIPT, CIPM) and a fellow of the Chartered Institute of Arbitrators and the Singapore Institute of Arbitrators.

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