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Section Three · Case Study

Singapore's Carbon Tax — A Deep Dive

How a small island nation became Southeast Asia's climate policy pioneer.

~60 Mt
Target peak emissions by 2030
SGD 45
Carbon tax per tCO₂e (2026-27, in effect)
28
Article 6.2 bilateral agreements
On This Page
→ Policy Overview
→ International Carbon Credits
→ Net-Zero Initiatives
1

Policy Overview

Singapore's Carbon Pricing Act, which came into effect in 2019, makes the city-state the first in Southeast Asia to implement a carbon tax. This landmark policy reflects Singapore's commitment to the Paris Agreement and its commitment to peak emissions at ~60 MtCO₂e by 2030 before declining to net-zero by 2050.

The tax applies to approximately 80% of Singapore's emissions across 50 facilities, covering power generation, petrochemical production, refining, and chemical manufacturing. Direct emitters (Scope 1) face mandatory reporting and taxation, while Scope 2 (indirect) emissions are monitored but not yet taxed.

The tax is designed to incentivize emissions reduction while maintaining economic competitiveness. Companies can offset up to 5% of liabilities using International Carbon Credits (ICCs) approved under Article 6 of the Paris Agreement, providing flexibility and linkages to global carbon markets.
NDC Commitments

Peak emissions: ~60 MtCO₂e by 2030. Achieve net-zero by 2050. Interim targets under Paris Agreement Article 6 cooperation frameworks.

Carbon Tax Pricing Trajectory (2019–2030)

Pricing Schedule

Period SGD/tCO₂e USD/tCO₂e Notes
2019–2023 SGD 5 USD 3.70 Launch phase, low rate
2024–2025 SGD 25 USD 18.50 5x increase, still transitional
2026–2027 SGD 45 USD 33.30 Current rate (2026), aligns with EU baseline
2028–2030 SGD 65+ USD 48+ Phased increase to meet NDC targets
2

International Carbon Credits

Singapore's carbon tax framework includes provisions for offsetting liabilities through International Carbon Credits (ICCs) under Article 6.2 of the Paris Agreement. This mechanism allows companies to meet obligations by purchasing high-quality credits from Article 6.2 bilateral agreements with other countries, provided they meet strict eligibility criteria.

Up to 5% of carbon tax liabilities can be offset using approved ICCs. This flexibility encourages global emissions reduction while maintaining fiscal certainty for regulated entities. Singapore has established bilateral agreements with over 28 countries under Article 6.2, creating a diversified portfolio of offsetting options.

ICC Eligibility Requirements

+ Timeframe & Vintage
Credits must have been issued within 5 years of the offset claim. Older vintages (pre-2021) are not eligible unless they meet specific additionality tests. This ensures only recent, verifiable reductions are counted toward Singapore's climate targets.
+ Double Counting Prevention
Singapore implements robust tracking systems to prevent double-counting of credits. Each credit unit is registered in the Article 6.2 Corresponding Adjustments Registry, ensuring that both host and buyer countries cannot claim the same emission reduction.
+ Additionality Assessment
Projects must demonstrate that emissions reductions would not have occurred without the carbon revenue. Singapore requires ex-post verification by third-party validators accredited under ISO 14065 standards.
+ Real, Verified & Permanent
All ICCs must represent genuine, measurable, and permanent emission reductions. Singapore accepts credits from renewable energy, methane reduction, forestry, and energy efficiency projects that meet ISO 14064-2 methodology standards.

Approved standards: ISO 14064-2 (GHG quantification), VCS (Verified Carbon Standard), Gold Standard, CDM methodologies under UN FCCC framework.

Article 6.2 Bilateral Agreements Status

Country Status Notes
Papua New Guinea Implementation Agreement Forestry & REDD+ projects
Ghana Implementation Agreement Renewable energy, energy efficiency
Bhutan Implementation Agreement Hydropower & forestry
Chile Implementation Agreement Solar & wind energy
Peru Implementation Agreement Amazon protection, sustainable agriculture
Rwanda Implementation Agreement Clean cookstove, renewable energy
Paraguay Implementation Agreement Hydropower development
Thailand Implementation Agreement Energy efficiency, biomass
Vietnam Implementation Agreement Renewable energy, methane reduction
Mongolia Implementation Agreement Renewable energy, land use
Malaysia Memorandum of Understanding Framework under negotiation
Cambodia Memorandum of Understanding REDD+, sustainable forestry
Colombia Memorandum of Understanding Amazon forest preservation
Kenya Memorandum of Understanding Renewable energy, environmental monitoring
Morocco Memorandum of Understanding Solar energy development
Dominican Republic Memorandum of Understanding Renewable energy, waste management
Sri Lanka Memorandum of Understanding Renewable energy, forestry
Costa Rica Memorandum of Understanding Geothermal energy, conservation
Zambia Memorandum of Understanding Hydropower, land use projects
Philippines Memorandum of Understanding Renewable energy, mangrove protection
Malawi Memorandum of Understanding Clean cooking, forestry
Ethiopia Memorandum of Understanding Renewable energy, afforestation
Brazil Memorandum of Understanding Atlantic Forest protection, biofuels

Projected ICC Demand & Market Pricing

Singapore's regulated emitters are projected to demand approximately 3 million tonnes of ICCs annually under the current 5% offset allowance. As carbon prices increase and compliance costs rise, demand is expected to reach 21 million tonnes by 2030, driving up prices for premium project categories.

Price premiums vary by project type, with nature-based solutions (forestry, wetlands) commanding 15–25% premiums over energy-based credits. Clean cookstove projects in East Africa are among the most sought-after, with prices expected to reach USD 37.80/tonne by 2030.
ITMO Market Pricing Forecast

Premium cookstove credits (Rwanda, Malawi, Ethiopia) are expected to cost SGD 45–55 (USD 33–40) by 2027. By 2030, as demand peaks, premium projects may reach SGD 63 (USD 37.80), reflecting scarcity and higher co-benefits such as health and livelihood improvements.

3

Net-Zero Initiatives & Market Infrastructure

Climate Solutions in Action

SolarNova Initiative

2.8 GW solar capacity target by 2030. Incentivizes rooftop solar installations across industrial and commercial sectors.
Green Transport

EV adoption incentives. 600,000 battery electric vehicles by 2040, phase-out of petrol cars by 2045.
Green Building

90% of buildings to be Green Mark certified by 2030. Energy efficient retrofits across the built environment.
Green Innovation

R&D funding for carbon capture, hydrogen, and advanced materials. Support for sustainable startup ecosystems.

Carbon Credit Trading Platforms

Climate Impact Exchange (CIX)

Singapore's primary voluntary carbon credit exchange. Lists premium verified credits from global projects. Transparent pricing, real-time settlement, and standardized contracts.

Launched 2024. ~50M credits listed annually.
Article 6 Credit eXchange (ACX)

Bilateral ITMO trading platform for Article 6.2 corresponding adjustments. Direct government-to-government settlement, audited by independent verifiers.

Operational since 2022. Facilitates 80% of Singapore's Article 6 transfers.
Revenue Recycling & Climate Finance

All carbon tax revenues are ringfenced for climate initiatives. Approximately 50% supports green R&D, 30% funds public-sector emissions reductions (buildings, transport, waste), and 20% is allocated to supporting vulnerable communities and ensuring just transition. This ensures climate action does not disproportionately impact lower-income households.

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