Page 85 - CMA Journal (May-June 2025)

O THER F EATURES

Key elements include: Chile
• Phased Tax Trajectory: Introduced in 2019 at a Chile presents a developing
carbon tax rate of five Singapore dollars per tonne of country’s approach to carbon
carbon dioxide equivalent (S$5/tCO2e), Singapore’s taxation with expanding
carbon tax is set to progressively increase to a range ambition. Key features include:
of 50 to 80 Singapore dollars per tonne of CO2
• Initial Tax Coverage: As of 2021, Chile’s explicit
equivalent (US$50–80/tCO2e) by 2030. This gradual carbon tax applied to 33.2% of national GHG
approach gives businesses time to adapt while emissions. A broader 55.8% of emissions were
strengthening the carbon price signal over time. subject to a positive Net Effective Carbon Rate NER).
Implicit pricing via fuel excise taxes covered an
• Broad Emissions Coverage: The tax applies to
additional 5.9%, while fossil fuel subsidies remained
facilities emitting over 25,000 tonnes of CO2 at 1.6%.
annually, covering approximately 70% of the
country’s total emissions—one of the highest • Low Starting Rate: Chile’s carbon tax began at a
modest rate of $5 per ton of CO2, which limited its
coverage levels globally.
immediate environmental impact but created a
• Revenue Recycling for Green Transition: Rather foundational framework for future increases.
than generating net revenue, tax proceeds are
• Future Scaling Scenarios: In 2023, the IMF
reinvested in decarbonization initiatives and
proposed four scaling options, ranging from a
household support schemes, ensuring a just
“moderate” path to US$15–50/tCO2 (from 2025 to
transition. 2035) to a “social cost” approach of US$35–75/tCO2
(US$35 in 2024 rising to US$75 in 2030). Other
• Support for Trade-Exposed Sectors: A transition
options included a hybrid model integrating an
framework offers temporary allowances to
emissions trading system (ETS) and a base scenario
emissions-intensive trade-exposed (EITE) industries
excluding transport fuels but increasing fuel-specific
to mitigate carbon leakage while incentivizing levies over time.
cleaner operations.
• Upward Pricing Strategy: IMF encouraged Chile to
• Carbon Credit Offsets: From 2024, companies can maintain a steady, upward pricing trajectory and to
offset up to 5% of emissions using high-quality ensure that revenues are reinvested to support
international carbon credits aligned with Article 6 of communities and workers during the transition.
the Paris Agreement.
Malaysia
Sweden
Malaysia is progressively
Sweden provides a strong advancing its climate strategy by
example of the long-term benefits integrating carbon taxation with
and practical outcomes of voluntary carbon markets to meet both emissions and
economic development goals. Key elements include:
adopting carbon taxation policies. Key features include:
• Stepwise Carbon Pricing Evolution: Malaysia
• Significant Tax Levels: Sweden implements one of
launched its Voluntary Carbon Market (VCM)
the highest carbon tax rates globally—$127 per
initiative in 2022, leading to the establishment of the
metric ton of CO2—leading to substantial emissions
Bursa Malaysia Carbon Exchange and its first carbon
reductions in regulated sectors.
credit auction in March 2023. This market provides a
transparent platform for pricing and trading carbon
• Enduring Policy Approach: Introduced in 1991, the
credits domestically.
longevity of Sweden’s carbon tax has given
businesses and citizens ample time to adjust and • Planned Carbon Tax Implementation: As
innovate. announced in Budget 2025, Malaysia plans to
introduce a carbon tax by 2026, initially targeting the
• Holistic Policy Mix: The carbon tax is iron, steel, and energy industries. This tax aims to
complemented by measures such as subsidies for internalize carbon costs, stimulate cleaner industrial
renewable energy and strict energy efficiency practices, and safeguard export competitiveness in
standards, which collectively enhance its response to the EU’s Carbon Border Adjustment

effectiveness. Mechanism (CBAM).
ICMA’s Chartered Management Accountant, May-June 2025 83