Singapore to offer carbon tax rebates up to 76% for refiners, petrochemical firms, sources say

Singapore is offering refiners and petrochemical companies rebates of up to 76 per cent for its planned carbon tax for 2024 and 2025 to help them ease cost stress and remain competitive versus rivals elsewhere, four sources familiar with the matter said.

The tax concessions will provide a significant buffer for refiners’ profit margins amid growing competition with newer plants in China and the Middle East.

Carbon tax costs are estimated at between 80 cents and US$1 per barrel of crude input basis for refineries based on the US$25 per ton of emission rate, according to consulting firms FGE and Wood Mackenzie. That would be close to a quarter of refiners’ current margins in Singapore.

Under Singapore’s new taxation rate for carbon emissions, which took effect on January 1, businesses that emit more than 25,000 metric tons of carbon annually pay US$25 per ton until 2025, compared with US$5 per ton in 2019-2023.

The rate will subsequently go up to US$45 per ton in 2026-2027 and US$50-80 per ton by 2030, the government announced in 2022.

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 US$6 and US$10 per ton of emissions, three of the sources said.

These refineries and downstream businesses will still have to pay an outright US$25 per ton of carbon emission tax and subsequently apply for the rebates, according to the terms and conditions set out by the government, a fifth source said.

Singapore has three refineries of a combined capacity of 1.119 million barrels per day, currently operated by Shell, ExxonMobil Corp, and Singapore Refinery Co (SRC), a joint venture between Chevron and Singapore Petroleum Co,