Carbon tax policy aims to reduce greenhouse gas (GHG) emissions by taxing carbon-intensive activities. The policy was introduced in 2019 in Singapore at S$5 per tonne for GHG emissions and is scheduled to increase to S$25 in 2024, and S$50-S$80 by 2030. While it is an effective way to tackle climate change, it can adversely impact SMEs with tight budgets.
The authors study the impacts of carbon tax increase on SMEs and end consumers. For businesses, the increase in carbon taxes will result in higher energy costs, thus impacting their bottom line. On the other hand, carbon pricing can lead to higher electricity prices, which will affect low-income households.
How can SMEs mitigate the impact of higher carbon tax?
- Increase product prices to pass on the indirect cost as a result of higher carbon tax to their consumers.
- Reduce electricity consumption to mitigate the impact of a higher carbon tax on their bottom line.
- Mitigate the impact of the carbon tax increase and higher electricity prices.
Xin Chang, Simba is a Professor of Finance at Nanyang Business School and Associate Dean (Research) overseeing PhD programs and research activities at Nanyang Business School. He specializes in corporate Finance, especially capital structure, mergers and acquisitions, and stock valuation. He had taught various courses to undergraduate, honours, master, and PhD students at HKUST, the University of Melbourne, the University of Cambridge, and NTU.
Hong Ru is an Associate Professor of the Banking & Finance division at Nanyang Business School, Nanyang Technological University. His research interests include financial intermediary, Chinese economy, corporate finance, and household finance.