How to Encourage Businesses to Reduce Their Carbon Footprint? The Carbon Tax Could Be the Solution.
According to a recently published guide on decarbonizing businesses, this economic mechanism, based on the carbon content of products and energy sources, aims to steer producers and consumers towards more ecological choices.
For instance, in Singapore, the carbon tax supports the goals of net-zero emissions and reducing climate change. It is applied to industrial installations with emissions exceeding 2,000 tons of CO2 per year. Those exceeding 25,000 tons must also submit a monitoring plan and pay the corresponding tax.
The mechanism relies on a fixed-price carbon credit system. Installations must purchase credits issued by the National Environment Agency, which correspond to their emissions.
In 2024, they are allowed to use high-quality international carbon credits (ICC) to offset up to 5% of their taxable emissions.
The tax starts at $5/tCO2e (2019-2023) and will gradually increase to reach between $50 and $80/tCO2e by 2030. This progressive rate aims to encourage businesses to reduce their emissions.
Emissions tracking is essential: installations must measure and report their greenhouse gas (GHG) emissions, and an external auditor verifies the reports. This system ensures the transparency and reliability of the data, supporting efforts towards a greener future.
