Taiwan should speed up detailed carbon pricing regulations and the creation of a carbon credit exchange to reduce carbon emissions and help local manufacturers deal with the impending “carbon border tax” levied by the EU.
Taiwan has lagged behind developed countries in implementing policies to reduce greenhouse gas emissions. According to a report released by the World Bank in May, 68 countries had carbon pricing initiatives, with 36 levying carbon taxes and 32 having emissions trading systems.
Taiwan’s proposed Climate Change Response Act (氣候變遷因應法), which would provide key regulations related to achieving the government’s commitment to net zero carbon emissions by 2050, has been passed first reading in the Legislative Yuan in May. The Environmental Protection Administration aims to pass the law in the final legislative session that began this month.
However, the bill lacks substantial content and detailed regulations on carbon pricing or penalties for violations. It stipulates that local businesses emitting more than 25,000 tonnes of carbon per year would be required to pay a carbon fee, rather than the commonly adopted carbon tax. It is not clear how much these large emitters should pay, but the fee could range from NT$100 to NT$300 ($3.26 to $9.77) per tonne of carbon emitted.
Nor would the carbon levy provide sufficient incentive for local manufacturers to reduce their carbon footprint. The levy is well below the carbon tax of over NT$500 per tonne that Singapore intends to levy from 2024. The city-state began collecting carbon taxes in 2019 and has quadrupled the tax in February. Local businesses can choose to pay the relatively low carbon fee, if applicable.
The carbon charge, which will come into effect as soon as 2024, would initially cover around 287 companies in high-emitting industries such as the steel, semiconductor, cement and petrochemical sectors. Industry leaders such as China Steel Corp, Taiwan Semiconductor Manufacturing Co and Formosa Plastics Group would be on the list.
The carbon charge is only a small part of the carbon reduction measures implemented by some EU countries, the United States, Japan, South Korea, China and Singapore. Other measures typically include carbon trading to help companies offset carbon emissions by funding an equivalent carbon dioxide saving elsewhere.
Taiwan should set up a carbon credit exchange or trading system to meet growing domestic demand. Local exporters face increasing pressure to reduce their carbon footprint to secure their orders. Since carbon emissions are included in their customers’ carbon emissions reports, companies with lower carbon emissions would have an advantage.
Local businesses should prepare for the implementation of the EU’s Carbon Border Adjustment Mechanism – an import tax designed to incentivize other countries to tackle climate change.
The border carbon tax could take effect from 2026. About 212 categories worth NT$24.5 billion from Taiwan are expected to be affected by the EU tax.
Since Taiwan does not have a carbon market, companies are looking overseas. Chimei Corp, which makes polymer materials, synthetic rubbers and specialty chemicals, said it joined Singapore’s Climate Impact X (CIX) global carbon exchange in April and became the first Taiwanese company to complete a credit transaction. carbon thanks to the purchase of 10,000 tonnes of carbon credits. of the CIX Project Marketplace.
As Taiwan’s economy depends on exports, government agencies should catch up with the world by implementing a comprehensive carbon emission reduction mechanism that includes carbon levies and carbon trading. This would help local businesses reduce costs, secure orders and create new revenue streams by selling carbon savings.
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