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Commentary: Green bonds and other ideas for sustainability in the Budget

08 Mar Commentary: Green bonds and other ideas for sustainability in the Budget

by Simon Tay and Lau Xin Yi

Some credit the recent Singapore Budget as being responsible and responsive. Many ministries face spending cuts, while infrastructure spending will increase to position Singapore for “vibrant and innovative” economic growth.

Other comments focus on the goods and services tax, which will be increased by 2 percentage points some time from 2021 to 2025. Fears are that this will hurt the average consumer’s pockets. In response, Finance Minister Heng Swee Keat highlighted the necessity of the tax hike for a “very important purpose” to finance Singapore’s rising expenditure needs. Higher social spending will aim to ensure that no one is left behind.

Another notable change is the introduction of a carbon tax. At an initial $5 per tonne of greenhouse gas emissions for the first five years, this is lower than many had expected. Minister for the Environment and Water Resources Masagos Zulkifli explained that this allows companies to adjust and improve their emissions.

Taken together, the 2018 Budget shifts Singapore towards sustainability – giving attention not only to economic growth but also to social and environmental concerns. Further steps can come in three areas.


The carbon tax targets large emitters, namely facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year. While starting lower at an initial $5 per tonne of greenhouse gas emissions, plans are to increase the tax to between $10 and $15 per tonne by 2030. This will increase costs but companies can remain competitive by improving their energy efficiency. For this, the Government will provide additional support from next year through the Productivity Grant (Energy Efficiency) and the Energy Efficiency Fund.

Another area where carbon can be reduced and government revenues increased is in the transport sector. This generates the second-largest share (14.5 per cent) of projected 2020 business-as-usual emissions, after industrial sources.

Taxing private vehicles can support a car-lite Singapore that the Sustainable Singapore Blueprint has identified as a focus area. The Vehicular Emissions Scheme will evaluate vehicles not only on energy efficiency but also on four other pollutants – namely, hydrocarbons, carbon monoxide, nitrogen oxides and particulate matter. But this step must come in tandem with improved public transport as well as electric car-sharing schemes.


Infrastructure is another area where finance can achieve environmental benefits.

The 2018 Budget considers the need for borrowing by statutory boards and government-owned companies to build infrastructure. The Government is also considering the provision of guarantees for some of these long-term borrowings for critical national infrastructure. These steps can allow infrastructure to be funded in ways that are lighter on government expenditure.

A further step towards sustainability can come from evaluating environmental and social impacts to address risk factors and increase long-term financial viability. To support the right kinds of infrastructure investments, the Government can explore green bonds and other financial instruments to encourage the flow of capital to activities that are sustainable and responsive to climate change.

This is not unknown in the region.

Last month, Indonesia became the first Asian country to sell green bonds internationally in a US$1.25 billion (S$1.65 billion) deal. The proceeds from its green bonds are expected to finance projects such as in renewable energy, green tourism and waste management. Such actions show a commitment to sustainable initiatives and can spur demand for more projects across Asean.


The recent Budget also reflects the Government’s recognition of the need to “build deep skills for workers of all ages”. This aims to build a foundation for workers to innovate and to compete, and will be increasingly essential to support the low-carbon transition.

Currently, various schemes are in place to cater to different segments of workers. Professionals, managers, executives and technicians, for instance, can look to the Professional Conversion Programmes (PCPs) to undertake skills conversion and enter new and promising occupations or sectors.

While PCPs offer numerous positions in a wide range of industries, a dedicated position to equip people for sustainability or green-related jobs will be increasingly important for the future. Developing a pool of talent with the relevant knowledge and skills will not only support companies to go green but also increase Singapore’s appeal as a regional hub that offers green solutions to the region.

As the Budget seeks to position Singapore for the future, balancing the interests of corporations and individuals is vital for economic growth and shared prosperity.

Moreover, as notions and expectations of sustainability evolve, the role of finance will become increasingly essential to achieve Singapore’s environmental and social goals, both in the immediate and the long term.

Simon Tay, an associate professor of international law at the National University of Singapore, is also chairman of the Singapore Institute of International Affairs, where Lau Xin Yi is senior policy research analyst (sustainability). This article was originally published in the The Straits Times on 6 March 2018.