High-quality carbon offsets have the potential to reduce the impact of the carbon tax hike.
Impetus to decarbonize
Today, companies are exposed to multiple emerging drivers that will require them to manage climate change holistically. Increasing regulations such as a higher carbon tax, enhanced climate reporting for Singapore Exchange-listed companies, evolving expectations from institutional investors focusing on a net-zero portfolio as well as consumer demands for high-quality, environmentally friendly products and services have been the main drivers for decarbonization.
In general, a business should look into four key elements when developing its emission pathway to net zero: optimizing the energy mix, exploring electrification opportunities, reducing process emissions by investing in new technologies and focusing on R&D to innovate product offerings. Each of these will have its own set of challenges and nuances.
The world is heading toward a low-carbon future that is powered by renewables and sustainably financed. Considering the climate emergency that we are in today, there is a price to pay for continued carbon emissions at the same rate or a growing one. We can pay this price via the ambitious carbon tax or through the cost of inaction in the form of climate calamities and financial instability. For businesses that look at the long term, the choice is clear.
Summary
Singapore’s greater-than-expected increase in its carbon tax provides the financial impetus for companies to lower their carbon emissions. While the Government has yet to provide details on what would qualify as high-quality carbon offsets, this option can potentially cushion the impact of the carbon tax hike.
When developing their emission pathways to net zero, companies should consider optimizing the energy mix, exploring electrification opportunities, reducing process emissions by investing in new technologies and focusing on R&D to innovate product offerings.