Singapore is offering refiners and petrochemical companies rebates of up to 76% for its planned carbon tax in 2024 and 2025 to help them ease cost stress and remain competitive versus rivals elsewhere, according to four sources familiar with the matter.
The tax concessions are aimed at providing a significant buffer for refiners’ profit margins amid growing competition with newer plants in China and the Middle East. Carbon tax costs are estimated to be between 80 cents and $1 per barrel of crude input basis for refineries based on the $25 per ton of emission rate, which could account for close to a quarter of refiners’ current margins in Singapore.
Under Singapore’s new taxation rate for carbon emissions, which took effect on Jan. 1, businesses that emit more than 25,000 metric tons of carbon annually pay $25 per ton until 2025, compared to $5 per ton in 2019-2023. The rate will subsequently go up to $45 per ton in 2026-2027 and $50-80 per ton by 2030.
Major companies in the refining and downstream sectors have been given rebates on a transitional basis to soften the added tax burden, lowering the final costs to between $6 and $10 per ton of emissions, three of the sources said. The refineries and downstream businesses will still have to pay an outright $25 per ton of carbon emission tax and subsequently apply for the rebates.
The concessions are likely to be in place at least for 2024 and 2025, with the “discounted” rate to be discussed again in 2026 or after, one of the sources said.
Singapore has three refineries with a combined capacity of 1.119 million barrels per day, currently operated by Shell, ExxonMobil, and Singapore Refinery Co (SRC), a joint venture between Chevron and Singapore Petroleum Co.
The carbon tax rebates are part of Singapore’s transition framework introduced last year to support companies in Emissions-intensive trade-exposed (EITE) sectors in their energy transition. The government says the allowances will only be provided for a proportion of the companies’ emissions and are based on internationally recognized efficiency benchmarks or the ambition and robustness of companies’ decarbonization plans.