In terms of mitigating its environmental impact, Taiwan is in a difficult position. Its carbon emissions per person rank above most European countries and neighbors such as Japan or Singapore. However, the main driver behind these emissions is its industrial sector and, within that, a significant chunk of the emissions contribute to the exports that form a key pillar of its economy. On top of that, “difficult-to-abate sectors,” such as steel, cement, petrochemical and heavy road transport contribute 40% of Taiwan’s CO2 emissions. So, decarbonization likely comes with higher financial costs than in other places, both financial and political. And this is before we even get onto the fact that this small island is home to 23 million people, which makes even finding the space for renewable energy infrastructure a difficult task.
So what’s Taiwan going to do about these difficult dynamics?
Most fundamentally, the deal is this. The Democratic Progressive Party government has what it calls a four-pillar energy transition principle of “reduce coal, increase natural gas, promote green energy, achieve nuclear free.” Behind that rhetoric, in March 2022, the current administration announced the Pathway to 2050 Net Zero Emission, the first comprehensive strategic planning document for Taiwan’s climate governance. That in turn was followed up by the Climate Change Response Act on January 10th 2023, which among other things established the 2050 net-zero emission target in law.
The transition methods contained within those documents are multifaceted. On the one hand, around 900 billion New Taiwan dollars in government money (roughly $30 billion USD) has been allocated to be spent on transition measures by 2030. Renewables and hydrogen are set to receive NT$210.7 billion, grid and energy storage NT$207.8 billion, energy saving and boiler replacement NT$128 billion and electrification of transport vehicles NT$168.3 billion. On the other hand, a carbon levy scheme — where the government sets a price that emitters must pay for each ton of greenhouse gas emissions they emit — is in the process of being developed.
Thus, there’s a hypothetical split between market-based solutions and government-led planning. But where is the emphasis? “[Market-based solutions] definitely [have] not been the emphasis and the carbon levy scheme will be a new thing,” John Chung-En Liu (劉仲恩), an associate professor at National Taiwan University and author of a recent introductory report on the internal dynamics of Taiwan’s climate change mitigation policy explained to me via video call. “The carbon fee … will only come online in maybe 2025. Take the U.K. for example, its cap-and-trade [program] has been around since 2008, so we are more than 15 years late in putting a price on carbon.”
The aforementioned report frames Taiwan’s approach to cutting carbon emissions as that of a “developmental” state — basically a state that’s willing to invest and organize areas of its economy that others aren’t. “I think the Taiwanese state plays a much bigger role in [managing] the economy than most [Western] countries,” Liu adds. “For example, now a big thing in the carbon world is that Taiwan has 1.5 million small and medium-sized enterprises [中小企業]. That’s less than 30 people. They have no clue how to do carbon accounting. And the government spent a lot of resources to support these companies to do that.”
Despite that willingness to intervene, there’s still a sense of a lack of urgency from the government. And Liu’s (co-written) report suggests business may in some ways have been more proactive than government in pushing a transition. Facing pressure from higher up supply chains from major companies like Apple making carbon neutral by 2030 pledges, for instance, companies such as Foxconn, Apple’s largest supplier, have followed that with a pledge of their own to reach net-zero by 2050.
However, that’s not to say business in Taiwan has exactly drunk the environmentalist Kool-Aid. The price of the carbon levy is not yet set, but when I asked Liu where the initial price is likely to be set he told me, “It’s 100 Taiwan dollars, 300 Taiwan dollars, 500. These are all on the table.” That’s very low compared to other places. And the reason for this is simple: “The pressure mainly comes from the business associations,” Liu says.
Business fears international regulation that will already make them pay for carbon emissions. Notably they are thinking of CBAM, the EU’s forthcoming Carbon Border Adjustment Mechanism, an import tariff on carbon-intensive goods from abroad, designed to match the price already imposed on carbon emissions for goods made within the EU. There, importers will have to purchase certificates covering the emissions “embedded” in the products they import and submit annual declarations. With this as context, Taiwanese firms support the carbon fee because there is international pressure. “And if they want to pay some form of tax, they’d rather pay a domestic one, but not at a high rate,” Liu summarises via email.
So, among these different dynamics, is there room for optimism anywhere? So, amongst these different dynamics, is there room for optimism anywhere? “I guess Taiwanese industry is especially known for being flexible, for adapting to change. And I think that’s a characteristic of medium and small enterprises. Compared to South Korea or Japan [for instance] that’s one major difference: We tend to be more flexible and can change quite rapidly when our outside environment changes,” Liu says — after thinking for a while. “Renewable energy has also enjoyed quite a big boom in the past few years. During the daytime there can be as much as 20 to 30% of power generation [from renewables] which was almost unthinkable just five years ago……overall there’s some progress [to celebrate.]”
Correction: The paragraph on Taiwanese business’s reaction to regulation was edited to correctly summarise Liu’s description of Taiwanese business’s view on a carbon levy. And a reference to one country was replaced with “Western” in order to more accurately represent Liu’s intention.
Image: Photo by Yi Chun Chen on Unsplash
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