Nominated Member of Parliament (NMP) Anthea Ong in Parliament on Thursday (26 March) called for the government to align the tax incentives with a carbon-neutral economy in order to attract and grow more of champions to pioneer the green economic activities.
During her debate on Economic Expansion Incentives Act (EEIA) Amendment Bill, Ms Ong said that the tax incentives to reduce carbon emissions will help Singapore to “get a foothold into a host of emerging industries that support a climate-friendly future”.
“These industries include carbon capture and storage, renewable energy, circular manufacturing, bio-plastics, energy storage, electric vehicles, alternative meat, climate-resilient agriculture, and green building technology,” she added.
Speaking on EEIA’s current list of activities which is eligible for investment allowances, Ms Ong noted that it is “unfortunate” to exclude the capital expenditure investments such as renewable energy, active mobility, and waste reduction, which contribute to Singapore’s long-term sustainability.
“While there are grants available for some of these activities, such as the 3R fund for waste recycling and reduction, this should not preclude the option to use investment allowances as an additional incentive,” she remarked.
Hence, she suggested to the Ministry of Trade and Industry (MTI) to include a category for capital expenditure that will reduce greenhouse gas emissions, either directly or indirectly, in the list of activities eligible for investment allowances.
While EEIA provide tax relief for a wide range of investments and innovation, Ms Ong raised concerns on the tax relief potentially ending up as a subsidy to the fossil fuel industry, given that EEIA might extend its incentives to high-carbon activities.
Therefore, she questioned the ministry about the qualifying criteria of tax relief under the EEIA and urged it to consider including activities that would leave a positive long-term impact on Singapore, so as to reduce greenhouse gas emissions, rather than the ones that would contribute to an increase in carbon emissions.
In addition, Ms Ong noted that investment in fossil fuel assets would be affected as the climate action ramped up around the world, including Singapore which is expected to reduce the demand for diesel and petrol while the country is moving towards full electrification of the land transport system.
She said the underestimation of the downside risk of disruptions from low-carbon technology, energy efficiency, and climate policy from this investment could result in “stranded assets”.
As such, she asked MTI to consider including the downside risk from future disruptions, such as decarbonisation, in the economic benefits under the assessment criteria for EEIA tax relief.