SINGAPORE - Incentives to help businesses quickly adopt sustainability standards, support for people to pick up green skills, and tax deductions for green investments are some of the ways to push Singapore’s carbon-neutral ambitions further, observers said.

A large part of the suggestions that came ahead of Budget 2024 on Feb 16 centred on Singapore’s efforts to decarbonise businesses and industries. Singapore has pledged to achieve net-zero carbon emissions by 2050 and, in tandem with that, it has mapped out a list of targets to be achieved by 2030, such as turning 80 per cent of Singapore’s buildings green, having at least 20 per cent of schools becoming carbon-neutral and increasing solar energy deployment.

Analysts from Ernst & Young (EY) made several suggestions linked to decarbonisation, such as letting businesses that buy carbon credits in order to meet their voluntary goals be allowed enhanced tax deductions.

Mr Chai Wai Fook, EY’s tax services partner, said the Government can roll out targeted measures to help big and small firms invest in carbon pricing and modelling solutions and projects.

“These measures can include further deduction on the expenditure incurred or co-funding of such projects, capped at an expenditure level of, say, $400,000. To assess the effectiveness of the measure and motivate companies to embark on this journey, we suggest a limited timeframe of two years of assessment.”

For Mr Chan Hsien Hung, vice-president for integrated enterprise services and sustainability at Aetos Holdings, enhanced funding support would motivate companies to continue investing in essential solutions such as carbon tracking, pricing and modelling.

He noted that firms are now hampered by poor environmental, social and governance (ESG) data quality, and the lack of uniform reporting standards adds to companies’ woes. To address these challenges, Mr Chan said there should be a framework that provides clear standards for companies, especially small and medium-sized enterprises, in carbon accounting and sustainability reporting.

To enhance Singapore’s attractiveness as a carbon-credit trading hub, EY proposed a further liberalisation of the goods and services tax treatment for input tax claims on carbon credit trading-related expenses. Other suggestions include having carbon credits and transition credits designated as investments for funds; a full tax deduction on all borrowing and financing cost incurred by Singapore tax resident companies to acquire or invest in green investments; and tax exemption on distributions such as carbon credits from green investments.

As Singapore transitions to a greener economy, businesses must also have the tools and skills to train and groom their people. Ms Lee Sze Yeng, managing partner at KPMG here, said there is a gap in ESG and sustainable finance competencies in the market.

She urged the Government to create a comprehensive ESG talent-development road map by sector or value chain. “This could comprise upskilling and reskilling initiatives, with incentives such as tax deductions or tax subsidies for employers with a clear training road map.”

Ms Lee said it is vital to be open to foreign talent in selected areas where Singapore is building capabilities, adding that it is time to refresh the curriculum of the institutes of higher learning to include industry needs linked to sustainable finance.

At a more macro level, Deloitte South-east Asia’s tax and legal sustainability and climate leader Wong Meng Yew said a key focus should be the efficient administration of the increased carbon tax, which now costs $25 per tonne and is expected to cover 80 per cent of national emissions.

He added: “This tax hike, expected to generate substantial revenue, should be strategically reinvested into supporting decarbonisation efforts and promoting a circular economy. Further, we advocate directing funds towards enhancing our international trade agreements, particularly in the clean energy sector, to solidify Singapore’s role as a leader in Asean’s climate action.”

He also suggested that the refinement of the International Carbon Credit framework and the development of transition credits should be prioritised so as to align with Singapore’s new tax regime. Transition credits are high-integrity carbon credits generated from the emissions reduced through retiring a coal-fired power plant early and replacing this with clean energy sources.

Mr Aaron Foong, managing director at KTP Consultants, which is linked to Surbana Jurong Group, said for built-environment professionals such as architects and engineers, grants and collaborative policies could nudge them towards innovative outcome-based designs.

Ms Ivy Koh, deputy chief operation officer at SJ Architecture, said those in the built-environment sector are required to upskill and be innovative in implementing green strategies. She said carrots, either in the form of financial rewards or recognition, could be considered for these professionals for their additional scope of specialised work.