The Workers’ Party (WP) Member of Parliament (MP) for Sengkang GRC Jamus Lim believes that there is room to increase Singapore’s carbon taxes in a way that minimises income losses by those most affected, which is via the “raise-and-rebate” system.
In his Parliamentary speech on the Climate Change motion on Monday (1 Feb), Assoc Prof Lim highlighted that Singapore’s carbon tax is far below the rates recommended by “just about every credible source”.
Hence, he proposed a higher but broader-based carbon tax, offset by a rebate elsewhere in the economy, adding that there are also “attractive alternatives” to the carbon tax in the form of a “cap-and-trade system”.
Assoc Prof Lim further explained his points in a Facebook post on Tuesday (2 Feb), voicing his support for the increase of carbon taxes in Singapore via the “raise-and-rebate” system.
“One reason for this is that we are engaged in a large number of midstream oil-and-gas activities (such as petrochemical refining and chemical engineering).
“So despite our absence of natural resources, our economy looks like those that do. To rebalance our economy, we need a tool that provides incentives for a shift,” he wrote.
Emissions taxes would be the “simplest” tool to do so, but Assoc Prof Lim noted that taxes may “hurt” certain segments of society and may even be “regressive”.
“By rebating the taxes to those who are least able to cope with the increase, we offset the pain from higher prices that result from the tax,” he added.
At the same time, households would be encouraged to buy products that are greener, and businesses would be provided with incentives to shift to greener practices to avoid the tax.
While at the economy-wide level, Singapore is “pushing out brown industries in favour of green ones”, said Assoc Prof Lim.
He believes that such a system can be “revenue neutral” even as it achieves “important societal objectives”, which is why it would be the “best way” to roll out higher taxes.
“It is useful to recall that the Government has executed such policy manoeuvres before: When we introduced the GST, we also cut income taxes. What can we use rebates for?
“We can make households in income quintiles most affected by higher prices better off (a “Green Dividend”). Or we can offer them as subsidies to firms, to invest in green technologies (a “Green Fund”),” said the MP.
Assoc Prof Lim proposed Singapore’s carbon tax between S$58 – “the midpoint for industrial economies” – and S$133 – “the average cost of carbon capture and sequestration technologies”.
“Ideally, an independent panel comprising policymakers, businesses, academics, and civil society will recommend,” he added.