Singapore was the first country in Southeast Asia to introduce a carbon tax, and in 2026 the rate steps up sharply. For companies that operate large industrial facilities, the carbon tax is no longer a rounding error. It is a material cost that needs to be measured, reported, verified and paid, with real penalties for getting it wrong.
This guide explains how Singapore’s carbon tax works under the Carbon Pricing Act 2018, which facilities are caught, the 2026 rate and the trajectory to 2030, the reporting and verification obligations, and the options companies have to manage the cost, including international carbon credits.
What the carbon tax is
The carbon tax is a price on greenhouse gas emissions, introduced to encourage companies to reduce their carbon footprint and to support Singapore’s net-zero commitment. It is imposed under the Carbon Pricing Act 2018 and administered by the National Environment Agency (NEA).
Unlike corporate income tax, the carbon tax is not charged on profits. It is charged on measured emissions from a facility, regardless of whether the business is profitable. That makes it a genuine operating cost for heavy emitters, and one that rises over time.
Which facilities are caught
The carbon tax framework applies at the level of the facility, not the company as a whole. There are two key thresholds.
Reportable facilities
A facility that emits 2,000 tonnes or more of carbon dioxide equivalent (tCO2e) in a year is a reportable facility. It must register and submit an emissions report, even though it does not necessarily pay the tax.
Taxable facilities
A facility that emits 25,000 tCO2e or more in a year is a taxable facility. It must register, monitor and report its emissions, have them verified, and pay the carbon tax on its reckonable emissions. Most facilities below this threshold do not pay the tax, which is why the regime bites hardest on large manufacturing, power and industrial operations.
The 2026 rate and the trajectory to 2030
The carbon tax rate has risen in deliberate steps to give companies time to adjust.
| Period | Rate per tCO2e |
|---|---|
| 2019 to 2023 | $5 |
| 2024 to 2025 | $25 |
| 2026 to 2027 | $45 |
| By 2030 (indicative) | $50 to $80 |
The jump to $45 per tCO2e in 2026 roughly doubles the 2025 cost for an unchanged emissions profile. A facility emitting 100,000 tCO2e faces a carbon tax of about $4.5 million at the 2026 rate before any offsets, illustrating why decarbonisation planning has moved up the boardroom agenda.
Reporting, verification and payment
Compliance under the Carbon Pricing Act is quantitative and evidence-based. Taxable facilities must submit a Monitoring Plan setting out how emissions are measured, and an annual Emissions Report. The Emissions Report for a taxable facility must be verified by an accredited external verifier before submission, and the tax is then paid based on the verified reckonable emissions. The measurement is plant-level and technical, so companies typically rely on specialist advisers and verifiers to get it right.
Because the obligations run on an annual cycle with firm deadlines, heavy emitters should fold carbon tax milestones into their compliance planning in the same way they track corporate filings. Our Singapore company compliance calendar is a useful companion for mapping the year.
Managing the cost: international carbon credits and transition support
Companies have two main levers to manage the carbon tax cost, beyond reducing emissions themselves.
The first is the use of eligible international carbon credits. Taxable facilities may surrender high-quality international carbon credits to offset a portion of their taxable emissions, up to a defined percentage. This gives companies flexibility while credible domestic abatement options are developed.
The second is transitional support for specific sectors. The Government has put in place transition frameworks and allowances for emissions-intensive, trade-exposed sectors, to manage competitiveness concerns while the price rises. Eligibility and the level of support are assessed against defined criteria and decarbonisation commitments. Full details of the schemes are published by the National Environment Agency and the Ministry of Sustainability and the Environment.
How the carbon tax fits the wider picture
The carbon tax does not sit in isolation. Larger companies increasingly face parallel obligations to disclose climate risk and emissions, as covered in our guide to Singapore sustainability reporting. The carbon tax is a cost driver; the reporting rules are a disclosure driver; and both point companies towards measuring and reducing emissions. The carbon tax itself is a deductible business expense for income tax purposes where it is incurred wholly and exclusively in producing income, which interacts with the ordinary corporate tax computation.
Frequently asked questions
Does every company pay the carbon tax?
No. The tax applies to facilities emitting 25,000 tCO2e or more per year. Facilities emitting 2,000 tCO2e or more must register and report, but only those at or above 25,000 tCO2e pay the tax. Most SMEs are not directly liable.
What is the carbon tax rate in 2026?
The rate is $45 per tCO2e for 2026 and 2027, up from $25 in 2024 and 2025, with an indicative trajectory of $50 to $80 by 2030.
Can companies offset their carbon tax?
Taxable facilities may surrender eligible international carbon credits to offset a portion of their taxable emissions, subject to the limits and quality criteria set by the authorities.
Do emissions reports need to be verified?
Yes. A taxable facility’s Emissions Report must be verified by an accredited external verifier before it is submitted and the tax is assessed on the verified emissions.
– The Editorial Team, Raffles Corporate Services