Singapore to offer carbon tax cuts of up to 76% to refiners, petrochemical companies, sources say

Under Singapore’s new tax rate on carbon emissions, which took effect on January 1, companies that emit more than 25,000 tonnes of carbon a year pay $25 per tonne until 2025, up from $5 per tonne in 2019-2023.

The rate will then increase to 45 US dollars per tonne in 2026-2027 and to 50-80 US dollars per tonne by 2030, the government announced in 2022.

Large companies in the refining and downstream sectors have benefited from transitional reductions to ease the additional tax burden, bringing the final cost to between $6 and $10 per tonne of emissions, three of the sources said.

These refineries and downstream companies will still have to pay a carbon emissions tax of $25 per tonne and then apply for reductions, under terms and conditions set by the government, a fifth source said.

Singapore has three refineries with a combined capacity of 1.119 million barrels per day, currently operated by Shell, ExxonMobil Corp and Singapore Refinery Co (SRC), a joint venture between Chevron and Singapore Petroleum Co, wholly owned by PetroChina.

While disruption to Russian oil trade after the Ukraine war and post-Covid demand boosted refining margins between 2020 and 2022, those profits halved from peaks reached in February.

Shell declined to comment, while an ExxonMobil spokesperson said: “In practice, we do not discuss confidential matters. »

“The Singapore Refining Company remains committed to supporting the policies of the Singapore Government through close partnership and ongoing dialogue,” said an SRC spokesperson.

These concessions are expected to be in effect at least for 2024 and 2025, one of the sources said, adding that the “reduced” rate would be back on the table for discussion in 2026 or later.

Singapore introduced a transition framework last year to support companies in emissions-intensive and trade-exposed (EITE) sectors, such as chemical, electronics and biomedical manufacturing, in their energy transition.

“Allocations will only be granted for a portion of companies’ emissions and are based on internationally recognized efficiency benchmarks where available, or on the ambition and robustness of companies’ decarbonization plans,” he said. Reuters a spokesperson for the Ministry of Trade and Industry. an email.

“Their remaining emissions will continue to be subject to current carbon tax rates. »

The duration of this transition framework will depend on developments in international carbon prices and progress in decarbonization technologies, he said, adding that companies will be sufficiently informed before the changes to facilitate business planning. .

In general, the carbon tax should be paid in the year following the reporting year “due to the time required to compile emissions data and independently verify total emissions for the reporting year,” said a spokesperson for the city-state’s National Environmental Agency. (NEA) said earlier.

Companies currently have the option to offset up to 5 percent of their taxable emissions using international carbon credits – either purchased or accumulated elsewhere in the world, according to the NEA.

The sharp increase in carbon taxes has been a hot topic in Singapore’s refining sector, following the sale of Shell’s flagship Bukom and Jurong Island refinery and petrochemical facilities amid fierce competition.