Various countries around the world have implemented some form of carbon pricing as they seek to reduce emissions in a cost-effective manner. Singapore, too, has been studying this policy option and monitoring such international developments for some time, said NCCS.
Now that there will be a carbon-pricing, the first question is whether it would be in the form of a carbon tax or a cap and trade system?
Carbon tax allows price certainty but uncertainty in emissions reduction. Easier to implement and price certainty is good for businesses. But usually tax increase is not favoured politically.
Cap and trade allows more certainty in emissions reduction but price can become volatile. Not easy to implement, need an agency to set up an emissions trading system.
Regardless of the type of carbon pricing – either carbon tax or cap and trade, what matters is that it is a well-designed system that can ensure the necessary emissions reduction is achieved while providing certainty to businesses.
Furthermore, the second concern is that the scope and timeline for the implementation of the carbon pricing. It would initially begin with big emitters, likely those companies under the Energy Conservation Act, since they are already taking action to reduce emissions. I think carbon pricing would take at least 2 years or earliest 2020 before it kicks in, considering the need for legislation change, consultations, setting up the system, and considering the current economic downturn.