Although the Taiwan Stock Exchange has approved a proposal to establish the nation’s first digital carbon exchange, seen as an important step in reaching the government’s carbon neutral goal by 2050, the exchange would not be ready until next year, while the Environmental Protection Administration (EPA) is still working out carbon pricing and trading rules. However, Taiwan is already lagging behind the rest of the world in tackling climate change, and trading carbon credits, one of the last resorts in trying to limit emissions, is only part of a broader strategy.
From its inception, the carbon exchange would only be a consultancy offering suggestions about carbon emissions and future carbon credit trading. It would have initial capital of NT$1 billion (US$32.62 million), jointly funded by the Taiwan Stock Exchange and the National Development Fund.
Many developed countries have or plan to launch a carbon exchange this year. The EU has been leading the world in tackling climate change, and also seeks to be carbon neutral by 2050. To reach that goal, it created the Carbon Border Adjustment Mechanism (CBAM), which went into effect earlier this month. Under the agreement, importers of targeted goods must buy CBAM certificates to cover the emissions associated with their products. As the tariff initially only covers select heavy emission industries such as cement, iron, steel, fertilizer, electricity, aluminum and hydrogen, the effect on Taiwanese exporters appears limited. The CBAM also seeks to avoid “carbon leakages” — the replacement of less carbon-intensive EU goods or allocation of manufacturing sites from the EU to areas with less strict requirements.
About 5 to 7 percent of Taiwan’s information and communications technology companies and 15 to 25 percent of metal goods producers are included in the CBAM. While that represents a small portion of Taiwan’s industries, as the rules broaden to include more categories, the number of affected businesses will grow. Companies have already started calculating their carbon footprints and are seeking certifications to comply with the law, as well as to meet requests from customers.
In announcing its 2050 ambitions, the government provided only rough guidelines to the public and industries. While Taiwan has a clear energy policy and aims to dramatically increase the percentage of energy from renewable sources, the government did not set caps on carbon emissions and did not disclose specifics on cutting emissions, leaving businesses and households in the dark on how to comply. Collecting carbon fees and launching a carbon exchange are a good start, but efficiency is the next problem. The EPA has not yet set a carbon pricing mechanism and carbon trading rules, which are the foundation of a carbon market. Meanwhile, Taiwan is also falling behind some developing countries in Southeast Asia. Indonesia and Malaysia announced that they would launch carbon exchanges in the second half of this year.
Taiwanese exporters are under mounting pressure to match customers’ needs to lower carbon emissions or risk losing orders. About 19 local enterprises including the world’s biggest contract chipmaker, Taiwan Semiconductor Manufacturing Co, have joined the global initiative RE100 to reduce emissions. To help companies meet customer demands and overseas regulations, the EPA should quickly establish prices and come up with rules for buying and selling carbon credits.
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