Singapore introduced its carbon tax in 2019 as part of its commitment to the Paris Agreement and its nationally determined contribution to reduce greenhouse gas emissions intensity by 45% from 2005 levels by 2030. The carbon tax regime has since been significantly strengthened, with rates rising steeply through to 2030 under a legislated schedule. For businesses operating in Singapore, particularly those in energy-intensive sectors, understanding the carbon tax framework is increasingly important for financial planning, regulatory compliance, and sustainability reporting.
This guide explains how Singapore’s carbon tax works, who it applies to, what rates apply in 2026, and what compliance obligations businesses face.
What Is Singapore’s Carbon Tax?
Singapore’s carbon tax is levied under the Carbon Pricing Act 2018 (CPA), administered by the National Environment Agency (NEA). It is a facility-level tax — meaning it applies to individual facilities (factories, industrial plants, power stations) rather than to companies as a whole.
The tax is applied on the total greenhouse gas (GHG) emissions of covered facilities, measured in tonnes of carbon dioxide equivalent (tCO₂e). Covered gases include carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF₆), and nitrogen trifluoride (NF₃).
Who Must Pay Carbon Tax in Singapore?
Carbon tax applies to facilities that emit 25,000 tCO₂e or more per year. Facilities emitting between 2,000 and 25,000 tCO₂e per year are reportable facilities — they must monitor and report emissions but do not pay the carbon tax.
Covered facilities currently include large industrial emitters in sectors such as:
- Petroleum refining and petrochemicals
- Semiconductor manufacturing
- Steel and metals
- Power generation
- Chemicals manufacturing
Approximately 50 facilities in Singapore are covered by the carbon tax, accounting for around 80% of Singapore’s total greenhouse gas emissions.
Most SMEs are not directly covered by the carbon tax. However, as the tax is passed through energy costs by utilities and fuel suppliers, all businesses feel its effects indirectly through higher electricity and gas bills.
Carbon Tax Rates: 2024 to 2030
Singapore has legislated a carbon tax escalation schedule to provide certainty for businesses planning investments:
| Year | Carbon Tax Rate (per tCO₂e) |
|---|---|
| 2019–2023 | S$5 |
| 2024–2025 | S$25 |
| 2026–2027 | S$45 |
| 2028–2030 | S$50–S$80 (to be confirmed) |
For 2026, the carbon tax rate is S$45 per tCO₂e — a nine-fold increase from the original S$5 rate. This rate applies to emissions from 1 January 2026 onwards, with the tax payable in the calendar year following the emissions year (i.e., 2026 emissions are payable in 2027).
How Is the Carbon Tax Calculated?
The carbon tax liability is calculated as:
Carbon Tax Payable = Taxable Emissions (tCO₂e) × Carbon Tax Rate (S$/tCO₂e)
For example, a facility emitting 100,000 tCO₂e in 2026 would face a carbon tax liability of:
100,000 × S$45 = S$4,500,000
Facilities must monitor their emissions using approved methodologies set out by NEA, typically through direct measurement or fuel/process data with established emission factors.
Compliance Obligations for Covered Facilities
Annual Emissions Reporting
Covered facilities must submit an annual emissions report to NEA by 31 March of the following year (i.e., 2026 emissions are reported by 31 March 2027). The report must be prepared in accordance with the NEA-approved monitoring plan and must be verified by an accredited third-party verifier.
Carbon Credits: Using International Credits to Offset Liability
From 2024, covered facilities can use eligible international carbon credits (ICCs) to offset up to 5% of their taxable emissions. This allows companies with strong sustainability credentials to reduce their cash tax exposure by purchasing and surrendering qualifying carbon credits — such as credits from Gold Standard or Verra-verified projects in eligible host countries.
Singapore has been proactively signing bilateral agreements with countries to enable carbon credit transfers under Article 6 of the Paris Agreement. By 2026, Singapore had signed implementation agreements with several countries including Ghana, Papua New Guinea, and Bhutan, with more in the pipeline.
Performance Incentive Scheme (for Electricity-Generating Units)
Electricity-generating units that use cleaner fuels and achieve lower emission intensities may be eligible for free allowances under a transitional performance incentive scheme. This is not applicable to most industrial facilities.
Impact on Business Costs
Direct Impact: Covered Facilities
For large industrial facilities, the 2026 carbon tax rate of S$45/tCO₂e represents a material operating cost. A facility emitting 50,000 tCO₂e per year faces an annual carbon tax bill of S$2.25 million. Boards and management teams of covered facilities should be incorporating carbon tax into their business planning, investment appraisal, and sustainability reporting.
Indirect Impact: Electricity Costs
Even non-covered businesses are affected through electricity tariffs. Singapore’s electricity market passes carbon costs through to consumers via the electricity price. As the carbon tax rate rises, electricity bills for businesses of all sizes will increase proportionally. This makes energy efficiency investments — such as LED lighting retrofits, efficient air-conditioning, and solar panel installation — increasingly economically attractive.
Carbon Tax and Sustainability Reporting
From 2025 onwards, listed companies on the Singapore Exchange (SGX) and large non-listed companies in specified sectors are required to make climate-related disclosures under the ISSB-aligned mandatory climate reporting requirements administered by the Accounting and Corporate Regulatory Authority (ACRA) and SGX RegCo.
For most large companies, the carbon tax represents a line item that will be disclosed in Scope 1 and Scope 2 GHG emissions reporting under these frameworks. Companies that have not yet begun measuring their Scope 1 and 2 emissions should do so immediately to prepare for these obligations.
Government Support for Decarbonisation
Singapore offers several government schemes to help businesses reduce their carbon footprint and manage the transition cost:
- Enterprise Sustainability Programme (ESP): Enterprise Singapore supports SMEs in developing sustainability capabilities and adopting green practices.
- Resource Efficiency Grant for Energy (REG(E)): Administered by NEA, this grant co-funds energy efficiency projects at industrial facilities.
- Green Lane for Enterprise Development Grant (EDG): Supports companies undertaking sustainability-related capability development.
- Singapore Green Finance Centre: Provides access to green financing solutions for companies investing in decarbonisation.
Practical Steps for Singapore Businesses in 2026
Even if your business is not a covered facility, here are practical steps to take in response to Singapore’s evolving carbon pricing environment:
- Measure your carbon footprint: Understand your Scope 1 (direct emissions), Scope 2 (purchased energy), and Scope 3 (supply chain) emissions. This is foundational for any sustainability strategy.
- Invest in energy efficiency: Higher electricity costs driven by the carbon tax make efficiency investments more financially attractive. Conduct an energy audit to identify savings opportunities.
- Review supplier contracts: As more suppliers face higher carbon costs, expect these to be passed through to your business. Factor this into procurement negotiations.
- Consider green certifications: Certifications like ISO 14001 (Environmental Management) and BCA Green Mark support sustainability credentials relevant to corporate clients and procurement requirements.
- Plan for climate disclosure: Even if not yet mandatory for your company, begin preparing GHG emissions data and climate risk assessments. The regulatory trend is clear — disclosure will become broader over time.
Key Resources
- NEA: Carbon Tax in Singapore
- Carbon Pricing Act 2018 — Singapore Statutes Online
- ACRA: Climate Reporting Requirements
How Raffles Corporate Services Can Help
While carbon tax compliance for covered facilities requires specialist environmental consultants, Raffles Corporate Services assists businesses with the corporate governance, accounting, and regulatory compliance frameworks that underpin good sustainability practice — including compliance management, corporate secretarial services, and coordinating with specialist advisers.
📧 Email: [email protected]
📱 Call, SMS or WhatsApp: +65 8501 7133
— The Editorial Team, Raffles Corporate Services