The ECCT's Low Carbon Initiative (LCI), together with PwC, arranged the "Carbon market dialogue: Corporate strategies for addressing Taiwan's carbon fees and the EU’s CBAM". The half day forum brought together representatives from EU and Taiwan authorities and companies operating in Taiwan in an interactive session to explore how businesses can adapt to Taiwan’s evolving carbon fee mechanisms and offer insights on navigating carbon regulations and climate change mitigation. At the event, opening remarks were made by Shih Wen-Chen, Deputy Minister of the Ministry of Environment (MOENV), Tsai Yi-Tai, Partner at PwC Taiwan and Jeniffer Wang, former ECCT Director and LCI Co-chair. This was followed by presentations by guest speakers, including Deputy Minister Shih, Carter Liu, Technical Coordinator for Bureau Veritas Certification and Andrew Lee, Director at PwC Taiwan. The event concluded with a panel discussion.

In her presentation, Deputy Minister Shih gave a snapshot of Taiwan’s carbon governance measures to date and an introduction to Taiwan’s carbon fee plans. She emphasised that Taiwan uses the term fee rather than tax because the fees will be used specifically for carbon reduction efforts, not for other government programmes. Entities that will be subject to carbon fees initially include power and gas supply industries, as well as manufacturing industries, with annual emissions of 25,000 metric tons of CO2e or more. It is estimated that around 500 installations (from 281 companies) will be subject to carbon fees. Collectively, these entities account for 54% of Taiwan’s total emissions. The carbon fees will take effect on 1 January 2025 with payment for 2025 emissions to be made by May 2026.

The standard carbon fee rate has been set at NT$300 (US$9.34) but preferential rates have been set for installations that undertake 2030 emissions reduction goals and submit voluntary emissions reduction plans to the MOENV: NT$50 for those that are willing to commit to industry-specific emissions reduction goals that are based on the SBT-aligned standard and NT$100 for those that adopt benchmarked-based emissions reduction goals that are aligned with Taiwan’s 2030 goals. Industries classified as at risk of high carbon leakage may apply for an emission adjustment coefficient to their chargeable emissions on the condition that they submit voluntary emissions reduction plans and have them approved by the MOENV. The initial emission adjustment coefficient will be 0.2. In the future, the coefficient will increase to 0.4 in the second phase and 0.6 in the third phase. For industries not classified as at high risk of carbon leakage, the annual emissions will be reduced by the carbon fee threshold value K (25,000 metric tons, with future phased adjustments). In addition, domestic credits can be used to offset up to 10% of the chargeable emissions. International credits must be approved by the MOENV and can only be used by industries not at risk of high carbon leakage, with a maximum offset limit of 5%.

By 30 April of each year, installations must submit a progress report of their voluntary emissions reduction plan for the previous year for review. The report must include details on any required improvements and circumstances that could lead to the cancellation of preferential rates. If, upon review, the installation fails to meet the designated targets, the rates for that year will revert to the standard rate.

Fees will be used for: Implementation (emission source inspections, emission reduction implementation, platform account management, carbon footprint management, international affairs, and a just transition); Reduction (subsidies and incentives for emission reduction efforts and research and development activities); Adaptation (coordination, formulation, and promotion of climate change adaptation initiatives); Education (climate change and GHGs reduction education and outreach initiatives) and other costs related to climate change. These uses are specifically stipulated in Article 33 of the Climate Change Response Act.

Taiwan’s initial fees are about half of the level of South Korea’s and about a quarter of those of Japan. However, the Rate Review Committee has suggested that the standard carbon rate after 2030 should be between NT$1,200 and NT$1,800 per ton, based on international carbon price levels. According to the MOENV’s calculations, while the standard fees would have a significant impact on certain industries, the impact would be minimal if they succeed in applying for and implementing carbon reduction plans that would qualify them for preferential carbon fees. The imposition of carbon fees is also not expected to have a significant impact on Taiwan’s GDP, inflation or the cost of construction (including housing).

Regarding the EU’s Carbon Border Adjustment Mechanism (CBAM), we are currently in the transition period during which importers into the EU are subject to reporting but not yet actual charges. From 2026 onwards the CBAM will be fully implemented, requiring importers to purchase CBAM certificates to make financial adjustments and balance carbon costs. Carbon fees paid on products in Taiwan will qualify as having already paid carbon charges and can be deducted. However, the EU's method for calculating such deductions has not yet been announced. Starting in 2025 the carbon emissions of entities subject to Taiwan's carbon fee will be included in the carbon fee calculation.

Shih concluded by saying that Taiwan’s carbon fee is designed as an economic incentive tool that encourages reduction while also considering a smooth transition process. Once implemented, Taiwan's carbon fee system will combine public and private sector funds driving new green growth in Taiwan.

In his presentation, Carter Liu spoke about challenges and transformation opportunities for Taiwanese enterprises exporting to the EU under CBAM. He went on to introduce his company, which has 83,000 employees in 1,600 locations globally that serve over 400,000 clients in providing certification, auditing and training services for a variety of industry sectors. The company is committed to support new ESG requirements on the circular economy and supply chain control and can provide the necessary third-party certifications for companies to meet CBAM reporting requirements.

The speaker went on to talk about CBAM, which will first affect high carbon industries exporting products to the EU. High carbon emission industries such as steel, cement, aluminium, plastics and the chemical industry will face rising costs, greater pressure from EU customers to provide supply chain carbon emission transparency and be required to establish a complete carbon emission data reporting system.

This will entail a product carbon footprint inventory mechanism, import carbon verification and certification and an optimisation process to reduce emissions. But it also offers an opportunity for companies to increase energy independence by investing in renewable energy, as well as green manufacturing technologies, such as green hydrogen and carbon capture, to accelerate industrial automation, to improve energy efficiency and develop and innovate materials to reduce carbon emissions.

Liu concluded by saying that if companies can meet the carbon reduction challenges they will not only be aligned with international norms and expectations but will also increase their global competitiveness.

In his presentation, Andrew Lee offered some best practices for businesses to reduce greenhouse gas emissions. He noted that interim decarbonization targets have not been met, making it more urgent to take action in the forthcoming years. 75 countries now have carbon reduction schemes in place. Taiwan’s fees are towards the lower end of the range. Most countries opt for either a carbon tax or a voluntary emissions trading scheme. Japan is exceptional in that it has both. Japan has also made progress towards reducing its emissions. It has already cut emissions by 25% compared to 2013 levels and targets to reduce emissions to 46% below 2013 levels by 2030.

To prepare for Taiwan’s carbon fees, Taiwanese companies should prepare and submit carbon reduction plans early if they wish to qualify for preferential rates. They could also apply for carbon credits if they install their own solar panels, for example. The speaker went on to give a detailed explanation of how carbon fees will be calculated.

The event concluded with a panel discussion moderated by Tsai Yi-Tai, in which the guest speakers Carter Liu and Andrew Lee participated and were joined by Christoph Saurenbach, Head of the Trade Section of the European Economic and Trade Office.

In the panel discussion, Saurenbach explained that CBAM is part of the European Green Deal, the purpose of which is not to raise revenue or a protectionist measure but rather to promote global carbon reduction efforts and to level to playing field by imposing a carbon price on imported goods to ensure that products coming into the EU are subject to similar carbon costs as those produced within the EU. He added that CBAM is compatible with WTO rules. EU authorities have received feedback on the scheme and are taking this into account in drafting implementation rules, which will be finalised and published in 2025.