In Singapore, carbon tax is calculated and collected based on a company's greenhouse gas (GHG) emissions. Companies must measure and report their carbon dioxide equivalent (CO₂e) emissions annually based on the standards set by the National Environment Agency (NEA). Reported data must be verified by an accredited independent third-party body to ensure accuracy and compliance.

The total verified emissions are then taxed at the applicable carbon tax rate, which is SGD 25 per ton of CO₂e starting in 2024. Companies are required to pay the carbon tax to NEA within the stipulated timeframe after the reporting year. Failure to comply may result in fines or enforcement actions by NEA. This mechanism ensures that companies bear the cost of their emissions while encouraging emission reductions and sustainable development.

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Companies should first conduct a greenhouse gas (GHG) emissions inventory to identify emission sources and quantify them. Common accounting standards include the GHG Protocol and the ISO 14064 series. This requires the collection of relevant data on energy consumption (e.g., electricity, fuel), business travel, logistics, raw material procurement, and production processes. It is advisable to engage a qualified third-party organization to prepare the report to ensure accuracy and regulatory compliance.

A well-structured CRD process enhances a company’s ESG performance, regulatory compliance, and ability to identify energy-saving and carbon reduction opportunities, laying the foundation for a successful low-carbon transition.

Companies should establish a Measurement, Reporting and Verification (MRV) system that adheres to international standards (such as ISO 14064) or regulatory requirements to accurately calculate Scope 1, Scope 2 and Scope 3 emissions. This includes utilizing standardized tools, setting up dedicated teams for data management and conducting regular independent third-party verifications to ensure accuracy and compliance. Additionally, companies should enhance employee training, stay updated on policy changes and continuously optimize management processes. By implementing these measures, businesses can ensure regulatory compliance, improve environmental management and contribute to sustainable development goals.