Research Database

Singapore is an island city state. It lacks conventional energy resources and is alternative energy disadvantaged. Yet its aggregate carbon intensity, given by the ratio of carbon emissions to GDP, dropped by 30% from 2005 to 2014. Currently it has a relatively low carbon intensity. Using I-O analysis, we study Singapore’s aggregate carbon intensity and the factors contributing to its changes at different levels, i.e. final demand, sector, and transmission levels. It is found that domestic exports accounted for nearly two-thirds of Singapore’s aggregate carbon intensity, followed by private consumption and investment. At the sectoral level, the top three contributors were the petroleum, petrochemical, and land transport sectors. Improvements in emission intensity and final demand structure were major factors contributing to reductions in carbon intensity. Our study contributes to the literature in two aspects. Methodologically, it deals with embodied emission intensity and analyzes its changes from the demand perspective. This differs from most studies in the literature from the production perspective. Empirically, the findings and policy implications are unique as they are applicable to a major city. With urbanization taking place in many developing countries, cites’ role in emissions and environmental sustainability are growing in importance but not many in-depth analyses similar to our study have been reported.

Pricing carbon is a widely used policy instrument for climate change mitigation. Quantitative analysis of carbon pricing are mainly conducted at the regional and national level, rarely at the city level due to data availability. As a representative of coastal megacities that are vulnerable to both climate change and climate policies, Singapore has announced to impose carbon tax on large direct emitters as a complementary mitigation option to technical measures. A city-level Computable General Equilibrium (CGE) model is developed to simulate potential impacts of carbon pricing on the city, including paying border-carbon-adjustment (BCA) on exports or introducing a domestic carbon tax. Different sector coverages and carbon tax revenue recycling schemes are investigated for domestic carbon tax. The simulation results show that a domestic carbon tax is a more cost-effective option than paying BCA. Given an identical carbon price at S$10/t-CO2, GDP, total exports and household consumption would decline less and average abatement cost is much smaller in the carbon tax scenarios compared to the BCA scenario. In terms of absolute emissions reduction, a carbon tax that covers energy, manufacturing and land transport sectors would be preferred, making emissions around 2.7% lower than 2010 baseline level.