SINGAPORE: Highly insufficient - that’s what Singapore’s climate report card says of its targets and actions, measured against the Paris Agreement's aim of "pursuing efforts to limit warming to 1.5 degrees Celsius."
In fact, it represents a stepwise improvement from Singapore’s rating of “critically insufficient” before the latest update on Aug 28. But is this nevertheless too harsh for a country that contributes only 0.1 per cent of global emissions?
The Climate Action Tracker is an independent scientific project that tracks government climate action. Of about 40 countries currently rated on its website, none has policies that are in line with the Paris Agreement temperature limit.
Other East and Southeast Asian countries like China, Indonesia and Thailand have fared the same or worse in the ratings than Singapore. Only Japan and the Philippines fared better, with an “insufficient” rating.
It’s little comfort for the planet, but should a little red dot like Singapore take the heat?
One might argue that Singapore could fare better if it had some of the luxuries its neighbours enjoy, like sufficient land for large solar installations or better wind conditions, hydroelectric, or geothermal power generation. Furthermore, the fossil fuel industry has a significant presence in the city-state, making beneficial contributions to our economy but at the expense of adding to greenhouse gas emissions.
CLIMATE AMBASSADOR FOR THE REGIONSingapore has always taken pride in leading by example. Singapore was the first ASEAN country to adopt a carbon tax in 2019, starting to raise it from this year, and the first in Asia to publish a whole-of-government environmental sustainability report, the GreenGov.SG report.
Carbon taxes penalise firms based on the amount of greenhouse gases they emit. They're crucial for incentivising businesses to adopt cleaner practices and are increasingly relevant for global trade.
It’s still too early to tell what long-term effect this will have on Singapore's competitiveness. Research by leading institutions like the OECD suggests that globally, the net impact of carbon taxes on country-level competitiveness has been negligible thus far due to low tax levels and government subsidies to soften the blow. This is true even for countries like Sweden where the price of carbon emissions has more than tripled from US$41 when first introduced to US$127 today.
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Commentary: Sustainability reporting is only meaningful if companies are serious about making changes These same conditions certainly apply to Singapore. Before 2024, the carbon tax was a meagre S$5 (US$3.87); only this year did it jump to S$25 per metric tonne of carbon emissions. While this higher tax rate sounds like tough medicine for the small number of firms with significant emissions, rebates and other transition measures the government is providing or plans to offer should cover much of the increase here, potentially diluting the impact of the carbon tax.
Another area where Singapore has played a leadership role in the region is in the building sector. Singapore is home to big players in this economically viable but emissions-intensive industry responsible for at least 30 per cent of global emissions. We have already set ambitious targets for this sector - 80 per cent of buildings by gross floor area (GFA) to be green by 2030 and 80 per cent of new developments (by GFA) to be certified Super Low Energy from 2030 onwards.
ROOM TO DO MOREThere’s still room for Singapore to continue its leadership role.
Carbon taxes should be higher and applied more broadly than today. How much higher? According to the World Bank in April 2024, a carbon price of between US$226 and US$385 per tonne would be required to be consistent with the 1.5 degrees Celsius target in the Paris Agreement.
Singapore's carbon tax is scheduled to increase again in 2026 to S$45 per tonne, with the government indicating an intention to reach S$50 to S$80 per tonne by 2030.
This may seem like a worrisome figure that would lead to intolerably higher prices. In the short term, companies may pass along price increases to consumers, but in the long term, the point of a carbon tax is to discourage the use of fossil fuels, either by changing consumption patterns or by accelerating the transition to renewable energy. In the meantime, Singapore can afford to cushion the impact for many households, such as through the U-Save rebates.
In terms of the building sector, with government support and collective action from our industry-leading developers, Singapore could lead the effort to scale up the production of lower-emission materials like cement and steel in the region. This kind of investment will be crucial if green building standards are further tightened to require more significant usage of eco-friendly construction materials.
Since most of the production of these important inputs occurs in other countries, it is easy to forget how critical cement and steel are to Singapore's future physical development. But if collaborative investments in green building materials are made here in the region, it can meaningfully reduce carbon footprints across multiple regional supply chains and significantly boost Asia’s gross domestic product.
CLIMATE WINS ARE ECONOMIC WINSThe stakes are very high. Insurance company Swiss Re estimates that ASEAN GDP could decrease by as much as 30 per cent by 2050 if we don't take collective action – more than any other region in the world.
This underlines the importance of shared responsibility in our fight against climate change. It's not just Singapore's problem; it's a collective challenge of making hard choices together.
It will always be a tricky balance: If Singapore cuts emissions too drastically or quickly, it risks harming the economy and potentially driving businesses away. On the other hand, if other countries drag their feet, that leaves Singapore vulnerable to climate change's physical and economic impacts.
But being at the leading edge means it can set the direction and shape industry standards for others to follow. There is potential to create more jobs, encourage innovation in clean technologies, and strengthen Singapore's global competitiveness and climate reputation.
Today, Singapore's climate targets and policies only merit a “highly insufficient” rating. Will our go-getting spirit show up on the next report card?
Matthew Dearth is an Associate Professor of Finance (Practice) at Nanyang Technological Universityw500, Nanyang Business School and Co-Director of the Centre for Sustainable Finance Innovation.