14/02/24

SINGAPORE: Singapore's carbon tax hike will drive innovation

As published on: asia.nikkei.com, Wednesday 14 February, 2024. 

Last month's steep increase in Singapore's carbon tax illustrates the commitment the country has made to bringing about a carbon-neutral future.

Without government intervention and regulation, corporate action on reducing carbon emissions would likely be insufficient to shift the needle. In this context, the increase in the carbon tax from 5 Singapore dollars ($3.72) per metric ton equivalent of carbon dioxide to SG$25 marked a proactive, policy-driven step toward reducing the country's emissions.

Yet while significant, this move is more of a gradual nudge for companies to adopt innovative solutions than a drastic push. The real transformative impact on our carbon emissions will come when technological advancements and carbon tax rates intersect at a point where being green and being profitable align.

With the tax set to further rise to SG$50 per metric ton by 2030, businesses must begin to explore more sustainable practices and innovative solutions. Such strategies could include leveraging renewable energy, improving operational efficiencies and utilizing carbon capture, utilization and storage (CCUS) technologies.

Such technologies offer a way to capture carbon emissions from industrial processes and either reuse or store them to prevent atmospheric release. While various CCUS methods already exist or are under development, challenges remain in integrating them into today's industrial plants.

The end goal should be to make these technologies economically viable and practical, so they can serve as attractive alternatives as carbon taxes rise. But while Singapore is providing support for CCUS research and development, a critical hurdle remains in terms of a lack of space for carbon storage.

Carbon dioxide is typically stored either in gaseous form or a supercritical form midway between a gas and a liquid. Smaller quantities are typically kept in tanks, while larger volumes are often pumped into the aquifers of depleted oil and gas fields.

None of these options is easy to accommodate in land-starved Singapore. This limitation has created a need for innovative local solutions or international partnerships for offsite carbon sequestration.

Limited space also constrains Singapore's renewable energy options. While our proximity to the equator means that we receive a consistent supply of sunlight, finding suitable spots for large-scale installations of solar panels is difficult.

Thus, Singapore has committed to increasing its renewable energy capacity through regional investments and a plan to import up to 4 gigawatts of renewable power from neighboring nations with more abundant renewable resources.

This should allow the country to meet its energy needs sustainably, with imports likely coming from a variety of sources including solar, wind and possibly hydroelectric.

The energy will probably be transferred through subsea cables designed to efficiently carry electricity over long distances. However, the installation and maintenance of the cables will involve a considerable technical and financial undertaking, requiring robust engineering solutions.

Another challenge with renewable energy is ensuring the reliability and consistency of the power supplied. Renewable sources such as solar and wind power are intermittent by nature, with output fluctuating depending on weather conditions and time of day.

One potential workaround involves diverse sourcing, with energy imported from multiple locations to mitigate the risk of supply interruption. Another option involves integrating storage solutions to buffer and balance supply.

Singapore's path to a carbon-neutral future might be further complicated by ambiguities in international policies related to carbon trading and storage. International agreements like the International Carbon Credits Framework and the Paris Agreement have created platforms for collective climate action, but they are mired in complexities and uncertainties.

Cross-border carbon trading requires international consensus regarding carbon credit generation, verification and the mechanics of trading. Without standardized systems and agreements, a global transition to greener practices will remain challenging.

Within ASEAN, Singapore has been at the forefront of supporting development in this area. Surbana Jurong Group has been actively involved in designing comprehensive decarbonization road maps for Malaysian states, including Sarawak and Johor, that encompass renewable energy, CCUS solutions and behavioral changes.

These regional collaborations are facilitating knowledge exchanges and enriching our own understanding of green technologies. As countries grow more interdependent to meet their energy needs, fostering a collaborative environment conducive to addressing climate change and economic development is becoming vital to ensuring a stable supply of green energy for Singapore and a supportive environment for our transition efforts.

Land reclamation on Singapore's Jurong Island in 2019: Marine clay, generated during reclamation, can be converted into low-carbon concrete. © Reuters
Another alternative approach being explored is a "circular economy" framework in which waste is transformed into valuable resources. For instance, with advanced cryogenic utilization, waste cold energy from liquefied natural gas regasification can be deployed for cooling uses.

In the same way, marine clay, which is generated in large quantities during land reclamation, can be converted into low-carbon concrete. Incineration bottom ash is another "waste" product that might be put to productive use, potentially as an absorbent material for carbon capture processes.

These initiatives demonstrate the way a circular-economy approach can utilize waste material to bring us closer to a carbon-neutral future. However, they are not without technical challenges. For instance, with marine clay, it will be essential to ensure that the treated material meets the same strength and durability requirements as conventional concrete.

Singapore's decarbonization journey is testament to its commitment to creating a sustainable future. While we are still at an early stage, the path to a carbon-neutral future may still seem fraught with challenges, but it is one filled with opportunities for innovation and cooperation.

Through a combination of innovative technologies, investment in research, strategic international partnerships and robust policy frameworks, Singapore is poised not only to meet its sustainability targets but also to serve as a regional driver and a beacon as other nations embark on their own decarbonization journeys.

A wider shift toward carbon pricing and sustainability measures is inevitable. Early adopters of decarbonization and forward-looking countries and corporations will likely emerge stronger and more resilient in the long run.

With the right mix of pragmatism and ambition, significant progress in energy decarbonization is not only possible, but within reach.

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Singapore Carbon Tax