Singapore Budget 2009: Green Issues

January 23, 2009 by  
Filed under Business, Government, Singapore

budget-wordle

Singapore’s Minister for Finance, Mr Tharman Shanmugaratnam, delivered the Budget Speech for the Financial Year 2009 in Parliament this afternoon. A Resilience Package of $20.5 billion was announced and aims to:

save jobs to the maximum extent possible in the recession, and to help viable companies stay afloat. It also prepares Singapore to emerge with strength when the global economy recovers, and enhances our capabilities and competitiveness for the long term.

The Resilience Package involves 5 components:

  1. Jobs for Singaporeans
  2. Stimulating bank lending
  3. Enhancing business cash-flow and competitiveness
  4. Supporting families
  5. Building a home for the future

Read the full Budget Speech here.

Green Issues

There’s two parts of the speech related to green issues. The first part (in E.21. and Annex C-1) is related to the Green Vehicle Rebate (GVR) Scheme and CNG duty levy:

The GVR scheme will be extended for another two years till 31 December 2011.

This is to continue to encourage the adoption of green vehicles.

The GVR scheme will be extended till 31 December 2011 as follows:

(a) For hybrid, electric and CNG passenger vehicles: 40% of the Open Market Value (OMV) of the vehicle at registration

(b) For hybrid, electric and CNG buses and commercial vehicles: 5% of OMV at registration

The special tax exemption for CNG vehicles will be extended for another two years till 31 December 2011. With effect from January 2012, a CNG unit duty will be introduced at $0.20 per kg and the special tax on CNG cars, which had never been imposed, will be removed permanently. CNG cars will also not be included in the Green Vehicle Rebate (GVR) scheme with effect from 2012.

As CNG is substitutable for petrol, it should be subject to a fuel duty, like petrol. The current situation where CNG cars are granted special tax exemption and the CNG fuel is not subject to tax is meant to be a temporary concession. The CNG unit duty will only be introduced in 2012 to allow CNG car owners time to adjust to the changes.

CNG cars will be removed from the GVR scheme as they are not significantly cleaner than petrol cars except for a lower CO2 emission.

The CNG duty will be phased in at $0.20 per kg. The CNG duty of $0.20 per kg remains significantly below the $0.41 per litre we currently levy on petrol. The Government will study the appropriate long-term CNG duty rate, which should be benchmarked against the prevailing petrol duty rate, taking into account the relative impact that these two fuels have
on the environment.

Industrial usage of CNG (e.g. power generation) would be granted duty exemption. Details of the implementation of CNG duty will be announced nearer to 2012.

We welcome the 2-year extension of the GVR and the special tax exemption for CNG vehicles. But we are perplexed about the CNG duty levy to be introduced from Jan 2012 and the reasons given – CNG cars are not significantly cleaner than petrol cars except for a lower CO2 emission; CNG should be subject to a fuel duty, like petrol, as it is substitutable for petrol.

We are not sure how the CNG vehicle owners, fleet operators, and CNG refilling station owners would respond to this news. Would this levy discourage petrol or diesel car owners from switching to CNG?

The second part is related to sustainable development:

G.9. The Government has over the last year been developing our sustainable development blueprint for Singapore. MEWR and MND will be discussing our thinking and plans in further detail during the COS.

G.10. Sustainable development is not new to Singapore. We have always had to work within the constraints of being a city state with no natural resources and a high population density. Over the years we have developed expertise in areas such as urban planning, water and waste management and green technologies. Organisations like the World Bank and the Asian Development Bank are now working with us to share our expertise with other countries.

G.11. However we will have to invest more in sustainable development in the coming years to provide Singaporeans with a high quality living environment while our economy continues to grow. To achieve both these objectives, we need to optimise the use of key resources such as land, energy and water.

G.12. There is also an economic imperative for sustainable development. We need to ensure that our use of scarce resources such as water and energy is efficient so that we can reduce costs and our susceptibility to global energy shocks. Investing in energy-efficient technology will reap cost savings for companies and households in the long run.

G.13. However, the upfront investments sometimes deter the private sector from making investments that are cost-saving over the long term. The Government will therefore provide incentives where necessary to encourage companies and individuals to invest in economically viable technologies. The Government itself will spearhead investments in improved energy efficiency for its own buildings.

G.14. In total, we plan to spend $1 billion over the next five years on sustainable development initiatives. The funds will support programmes such as energy efficiency for industry and households, green transport, clean energy and the greening of our living spaces.

G.15. In so doing, we hope to catalyse the growth of a vibrant cluster of firms with expertise and capabilities in these areas, complementing our R&D efforts. Already we have a base of global alternative energy companies like Neste Oil, who are locating their operations in Singapore. New players are also sprouting up. Like JOil, which has developed elite and high yielding Jatropha seedlings using locally developed plant genetics technology. It has secured a multi-million dollar partnership with Tata Chemicals to market the seedlings in India and East Africa as an economical and sustainable starting source for the production of bio-diesel.

We are excited about the $1 billion plan on sustainable development initiatives over the next five years  to support programmes on energy efficiency, green transport, clean energy and greening spaces. We will await more details of the initiatives in the coming Committee of Supply (COS) debate in March.

The above image is a wordle created from the budget text. Can you find the word “sustainable” in the wordle? Hint: it’s not too big (perhaps a reflection of the low priority on sustainability in this financial crisis?)

Image credit: Wordle.

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