The lessons from Covid-19 in strengthening resilience are instructive for the larger existential threat of global warming, said Singapore‘s deputy prime minister and finance minister Lawrence Wong at the tail-end of his latest national Budget announcement on Tuesday (14 February).
But apart from existing measures – including progressive carbon tax rate hikes, rebates for cleaner vehicles, energy efficiency grants, and a coastal and flood protection fund – no additional sustainability-related measures were announced in Wong’s annual speech to Parliament.
This was contrary to the expectations of consulting firms like Deloitte, EY, Kearney, and KPMG that had proposed more measures to drive Singapore’s green economy transition as part of its 2030 Green Plan – especially in light of the appointment of its first government chief sustainability officer.
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In a note published in the lead-up to Singapore’s 2023 budget reveal, Deloitte had recommended extending the existing Enterprise Financing Scheme-Green, which provides local enterprises access to green financing, beyond the end-March deadline next year. The consulting giant’s wish list also included investments in green upskilling of the workforce and creation of good green jobs, as well as more clarity on Singapore’s carbon pricing act.
None of these suggestions were directly addressed by Wong in his budget speech. Meanwhile, the government announced that current enhancements to the broader Enterprise Financing Scheme – which enable small- and medium-sized enterprises (SMEs) to borrow more to finance their daily operations and trade needs – will be extended until 31 March next year. Wong also unveiled a new Enterprise Innovation Scheme, which includes tax deductions for five key innovation activities ranging from research and development conducted in Singapore, to sending staff for approved training courses. An energy efficiency grant for businesses will also be extended for another year amid high energy prices.
The Singapore government said last week that a whitelist of carbon credits would be published later this year. Wong did not elaborate on it in the budget speech.
… Singapore will need to move forward as one with the shared purpose and values of a “Forward Singapore” social compact for the next generation. However, these will have to be underpinned by efforts to shore up its climate resilience – which came across as missed opportunities in this Budget if Singapore is to claim a stake as centre for green financing.
Ong Pang Thye, managing partner, KPMG Singapore
Nithin Chandra, managing partner, Southeast Asia of Kearney told Eco-Business that the extension of the Energy Efficiency Grant is a “win-win-win”. “On top of subsidising the upfront capital expenditure for energy efficient equipment, it will also help SMEs reduce their recurring electricity bill and their carbon footprint, he said.
While the proposed schemes provide support to SMEs grappling with challenging economic conditions, there was no explicit reference in the Budget to the innovation needed for Singapore’s green transition – which some found a forgone opportunity for the government.
“Ultimately, to weather any external shocks and crises, Singapore will need to move forward as one with the shared purpose and values of a ‘Forward Singapore’ social compact for the next generation,” KPMG’s managing partner in Singapore Ong Pang Thye said. “However, these will have to be underpinned by efforts to shore up its climate resilience – which came across as missed opportunities in this Budget if Singapore is to claim a stake as centre for green financing.”
KPMG had suggested implementing a national blended finance framework to spur green financing, asset recycling mechanisms to refinance brownfield infrastructure – which refers to previously used infrastructure that is not currently in use – and frameworks to analyse a project’s qualification for green investments to accelerate the decarbonisation of Southeast Asia’s grid.
The management consulting firm Kearney had also hoped for a boost in green financing – what it called the missing “carrot” amid other “effective sticks” like the 2024 carbon tax hike for private sectors to fund a shift away from traditionally emission-intensive operations.
But green initatives are “evergreen”, Lawrence Loh, director of the National University of Singapore’s (NUS) Centre for Governance and Sustainability told Eco-Business. They “need not be specific to any particular budget and should be pursued on a continuous basis.”
More climate-related spending in the medium term
In his budget speech, Wong signalled that climate-related spending will “go up significantly” in the medium term. While details were scarce on this front, he alluded to the need to increase the resilience of Singapore’s infrastructure and other climate adaptation measures.
“While we will do our best to shape and drive this international agenda, we must also prepare for the worst, and that means taking steps to adapt to global warming and especially to rising sea levels,” said Wong.
In 2020, a coastal and flood protection front with an initial injection of S$5 billion (US$3.74 billion) was announced to support the construction of coastal and drainage infrastructure. Then-finance minister and deputy prime minister Heng Swee Keat said that the fund will be topped up subsequently “whenever our fiscal situation allows”. The national water agency PUB has since been conducting site-specific studies for drainage enhancements and coastal protection, starting from the stretch from the city to East Coast, said Wong in this year’s speech.
Singapore has also been building polders – pieces of land that lie below sea level and are reclaimed from a body of water through the building of dykes, drainage canals and pumping stations – at Pulau Tekong. Wong said that the experience gained from this project, set to finish by the end of 2024, will expand the options for the protection of the country’s coastlines.
On why climate mitigation might have featured less in this year’s speech, Melissa Low, a research fellow at NUS Centre for Nature-based Climate Solutions, suggested that the government had already laid out its mitigation targets and plans quite clearly in last year’s Budget and Singapore International Energy Week, with details on an impending carbon tax hike and updates to its Nationally Determined Contribution (NDC) and Long-term Low Emissions Development Strategy (LEDS) provided.
“I’d say we have moved into implementation now, so measures announced last year will need time to take shape, and companies or households will be adjusting to the low-carbon transition,” Low told Eco-Business.
She also mentioned that more information about “building climate change resilience that goes beyond physical adaptation” could come, including helping Singaporeans be more mentally prepared for a changing climate.
Driving the mass adoption of EVs
Existing schemes to encourage electric vehicle (EV) adoption in Singapore were thrown into flux with newly-announced adjustments to the rates of additional registration fee (ARF) – a tax imposed upon registration of a vehicle – to better differentiate between the higher-end cars. Popular electric models by Tesla, Hyundai, and Kia would be affected by the higher ARF and preferential ARF rebate cap, as they have an open market value (OMV) of over S$40,000.
The government made a push for EV adoption in the past few years, rolling out the EV Early Adopter Incentive (EEAI) which provides an ARF rebate of 45 per cent and the enhanced Vehicle Emission Scheme (VES) that grants rebates for cleaner car models. But these incentives are set to end in 2023.
“Based on the information in the Budget so far, it looks like the EEAI will be allowed to sunset in December 2023,” associate professor of economics Walter Theseira from the Singapore University of Social Sciences told Eco-Business. Looking ahead to the upcoming COS debates where more details could come, he adds that “it is certainly possible the scheme could continue” and points out that VES has had a track record of being adjusted and renewed.
Expenditure estimates for the various ministries released in tandem with the budget indicate that S$4.78 million (US$3.57 million) will be allocated in the new financial year for electric vehicle upgrading, as part of a larger project. Estimates under the sustainability and environment ministry also show that about S$611,100 (about US$456,000) will be allocated for the development and operation of an international carbon credits registry.
Theseira gathered that the government seems to be shifting the focus to infrastructure development and relying more on market forces to close the price gap between EVs and internal combustion engine (ICE) vehicles, especially as more mass market EV models from cheaper Chinese car brands get introduced.
Drawing comparison to many other countries where generous EV subsidies are being phased out as they were starting to harm fiscal budgets, Theseira added that “as cost parity draws closer, governments have to switch to taxing EVs on the same basis as ICE or adding new EV specific taxes to cover loss of revenue from fuel taxes.”
Theseira admitted that “sustainability, given the short-term adjustment costs to business and consumers, is probably not going to be a major Budget theme in a year of high inflation and economic uncertainty.” But he has “no doubt that the government is staying the course” given how adaptations that businesses and consumers have to make towards sustainability remain “an existential issue”.