Singapore introduced its carbon tax in 2019 as part of its commitment to the Paris Agreement. Its current nationally determined contributions are to reduce emissions to around 60 MtCO₂e in 2030 after peaking, and to between 45 and 50 MtCO₂e in 2035, on the way to net zero by 2050. The carbon tax regime has since been significantly strengthened, with rates legislated to rise steeply through 2027 and a stated aim of S$50 to S$80 per tonne by 2030. 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.
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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 register, 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
About 50 facilities in the manufacturing, power, waste and water sectors are covered by the carbon tax, accounting for about 70% of Singapore’s total greenhouse gas emissions. Together with fuel excise duties on transport fuels, about 80% of emissions are priced.
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: 2019 to 2030
Singapore has legislated a carbon tax escalation schedule to 2027, with a stated target range for 2030, to provide certainty for businesses planning investments:
| Year | Carbon Tax Rate (per tCO₂e) |
|---|---|
| 2019 to 2023 | S$5 |
| 2024 to 2025 | S$25 |
| 2026 to 2027 | S$45 |
| 2028 onwards | Not yet announced; the Government aims to reach S$50 to S$80 by 2030 |
For 2026, the carbon tax rate is S$45 per tCO₂e, a nine-fold increase from the original S$5 rate. This rate applies to emissions from 1 January 2026 onwards, with the tax payable in the calendar year following the emissions year (i.e., tax on 2026 emissions is due by 30 September 2027).
How Is the Carbon Tax Calculated?
The carbon tax liability is calculated as:
Carbon Tax Payable = Taxable Emissions (tCO₂e) × Carbon Tax Rate (S$/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
Taxable facilities must submit a verified annual emissions report to NEA by 30 June of the following year (i.e., 2026 emissions are reported by 30 June 2027), and pay the carbon tax by 30 September of that year. The report must be prepared in accordance with the NEA-approved monitoring plan and must be verified by an NEA-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 from eligible programmes and host countries. Unused quota from emissions year 2025 can be carried into 2026, adjusted by a conversion factor of 25/45 because the rate has risen.
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 11 implementation agreements and launched calls for credit-generating projects in countries including Bhutan, Ghana, Peru, Rwanda and Thailand. NEA has noted that the supply of eligible credits has been slower than expected, so facilities should not assume the full 5% can be sourced.
Transition Framework for Emissions-Intensive, Trade-Exposed Companies
From 2024, existing emissions-intensive, trade-exposed (EITE) companies may receive transitory allowances under a transition framework administered with EDB. The allowances cover only part of a company’s emissions, are based on efficiency benchmarks and decarbonisation plans, are reviewed regularly and do not apply to new investments. This is not applicable to most businesses.
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
Under the mandatory climate reporting requirements administered by the Accounting and Corporate Regulatory Authority (ACRA) and SGX RegCo, all SGX-listed companies must report Scope 1 and Scope 2 emissions from FY2025, with STI constituents reporting full ISSB-based climate disclosures. In August 2025, the timelines were extended: smaller listed companies (non-STI, market capitalisation below S$1 billion) report the other ISSB-based disclosures from FY2030, and large non-listed companies’ requirements were deferred to FY2030.
For covered facilities, the emissions on which carbon tax is paid will also form part of the company’s Scope 1 reporting, and the carbon tax passed through in electricity bills affects the cost of Scope 2 energy. Companies that have not yet begun measuring their Scope 1 and 2 emissions should start now 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. See our Enterprise Sustainability Programme guide.
- Resource Efficiency Grant for Emissions (REG(E)): Administered by the Economic Development Board (EDB), this grant co-funds projects at manufacturing and data centre facilities that abate at least 250 tCO₂e a year, capped at 50% of qualifying costs. See our REG(E) guide.
- EDGE for Sustainability: Since 30 September 2026, Enterprise Singapore’s EDGE grant (which replaced the Enterprise Development Grant) supports sustainability projects such as carbon management, sustainability strategy and resource optimisation, at up to 70% for SMEs on most sustainability activities.
- Energy Efficiency Grant (EEG): Co-funds energy-efficient equipment. See our EEG guide.
- EFS-Green: Enterprise Singapore’s green financing facility, with a 70% government risk-share on loans for green projects and assets, available until 31 March 2031.
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
Information checked against official sources on 6 November 2026.
The Editorial Team, Raffles Corporate Services
For a related funding option, see retrofit funding under the Green Mark Incentive Scheme for Existing Buildings (GMIS-EB 2.0).