‘No evidence’ carbon tax drives companies away
Major oil and gas players support Singapore’s plans to tax greenhouse gas emissions
By Siau Ming En
Despite concerns repeatedly voiced that a carbon tax could dent competitiveness, there is no evidence it has led any company to move out of a country, said a panellist at a Singapore International Energy Week discussion.
Forty-seven countries and states today have some form of carbon pricing, such as a carbon tax or an emissions trading scheme. Prices range from US$1 to US$140 per tonne of emissions, noted World Bank senior carbon finance specialist Wang Xueman.
Asked at a panel discussion on carbon tax if Singapore’s decision to impose a carbon tax from 2019 – announced earlier this year – could hurt its competitiveness, Ms Wang said: “Currently, if you look at all the evidence, the industry does not move away because there is carbon pricing. They move away because of many other… considerations.”
Singapore is looking to charge large emitters such as power stations between S$10 (US$7.35) and S$20 (US$14.69) per tonne of greenhouse gases emitted. In the wake of the announcement in February, Tuas Power had said companies would not be able to absorb the tax. If passed on to households, electricity prices could increase by 0.43 (US$0.43) to 0.86 (US$0.63) cents per kilowatt hour, a fraction of current tariff rates — although observers cautioned there should not be a disproportionate impact on the poor.
Major oil and gas players Shell and ExxonMobil said they supported the move.
Panellists at Wednesday’s session, attended by head honchos of some energy firms, said a carbon tax should be high enough to spur a change in behaviour and should factor in the cost of existing assets. This is because a change of assets in the energy business entail a “huge investment”, said Mr Philippe Joubert, executive chairman the Global Electricity Initiative, which consists of utilities companies from around the world.
Taxing the high emitters is also a “matter of fairness”, he said. “The fact that carbon has no price doesn’t mean that it has no cost. The only difference is we are sending the bill to the next generation.”
Industry players and investors should be given time to understand and adjust to policy changes and minimise the costs passed on to consumers, said another panellist, Frontier Economics managing director Danny Price.
Australia introduced a carbon tax in 2011 but scrapped it after three years and Mr Price said investors were unable to respond to the rapid policy changes.
But a switch to clean energy such as solar also exacts an environmental cost, noted Associate Professor Loh Wai Lam of the National University of Singapore’s mechanical engineering department, who specialises in offshore oil and gas technology. Energy storage is a key ingredient for solar energy adoption and rare metals such a lithium are needed in the production of batteries – an area in which technology is still developing, he said.