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Taiwan's Ministry of Environment announces three Carbon Fee regulations, officially ushering in the era of carbon pricing

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To establish a carbon pricing system in Taiwan and promote steady carbon reduction, on August 29 the Ministry of Environment (MOENV) announced three carbon fee related regulations: the "Regulations Governing the Collection of Carbon Fees," the "Designated Greenhouse Gas Reduction Goals for Entities Subject to Carbon Fees," and the "Regulations for Administration of Self-Determined Reduction Plans." These three regulations comprise the supporting mechanism for implementation of the carbon fee system. They also align with President Lai Ching-te's strategy of promoting a "dual-axis transition to digital and green industries." By promoting carbon pricing and market mechanisms, companies are encouraged to pursue low-carbon transitions. The implementation of the carbon fee system marks Taiwan's official entry into the era of carbon pricing. In the future, the government will combine public and private sector funds to make the carbon fee system a new driving force for Taiwan's green growth.

The MOENV emphasizes that the purpose of carbon fee collection is to accelerate and scale up the carbon reduction efforts of entities subject to carbon fees. If all entities subject to carbon fees can submit Self-Determined Reduction Plans, it is estimated that by 2030, CO2e emissions could be reduced by 37 million metric tons, approximately 14% of the nation’s 2005 emission levels. The MOENV and MOEA will conduct more than 10 informational sessions related to the three Carbon Fee regulations and provide sufficient time for entities to prepare and plan their carbon reduction measures up to 2030, and seek the most suitable reduction paths and technologies. This will be supported by preferential rates and related assistance mechanisms from the Ministry of Economic Affairs, creating opportunities for green growth.

On April 29, 2024, the MOENV announced the draft of three supporting sub-laws for the carbon fee system. It also convened nine briefing sessions and one public hearing with industry and civil society groups to fully communicate on issues. After considering the opinions and suggestions from different stakeholders, the MOENV made adjustments to the provisions. Below are the key points of the three regulations on carbon fees:

"Regulations Governing the Collection of Carbon Fees"

  1. Entities subject to carbon fees: Initially, the fee will be levied on power and manufacturing industries that emit more than 25,000 metric tons of carbon dioxide equivalent per year. To ensure fair competition within an industry, entities may deduct a threshold of 25,000 metric tons from their chargeable emissions when calculating the fees.
  2. Payment timing: Starting from the year following the rate's effective date, feepayers must calculate and pay the carbon fee by the end of May each year, based on the greenhouse gas emissions from the previous year (January 1 to December 31).
  3. Carbon fee calculation: The payable carbon fee is determined by multiplying 'chargeable emissions' by the 'fee rate'. To address concerns about international competitiveness and the need for a transition period to low-carbon operations, an emission adjustment mechanism has been designed. This mechanism provides different adjustment coefficients for industries with high carbon leakage risk. Entities with high carbon leakage risk must submit and have a self-determined reduction plan approved by the central competent authority to qualify for this mechanism. In addition, the charged emissions of such industries must not be deducted from the 25,000 metric tons of carbon dioxide equivalent.

"Designated Greenhouse Gas Reduction Goal for Entities Subject to Carbon Fees" and "Regulations for Administration of Self-Determined Reduction Plans":

According to Article 29 of the Climate Change Act, entities that submit a self-determined reduction plan—including strategies such as switching to low-carbon fuels, adopting negative emission technologies, improving energy efficiency, utilizing renewable energy, or enhancing industrial processes—may apply for approval of preferential rates.

  1. Designated GHG Reduction Targets: Two methods are provided for determining designated reduction targets: one is based on the industry-specific reduction rates derived from the Science-Based Targets initiative (SBTi), and the other uses benchmarks from both domestic and international best available technology alongside Taiwan’s 2030 Nationally Determined Contributions (NDC).
  2. Self-Determined Reduction Plan: Entities wishing to qualify for the preferential fee rate must select one of the target calculation methods, set their designated reduction targets for 2030, and submit a self-determined reduction plan for review by a team formed by the central competent authority.
  3. Performance review: The central competent authority will annually review the implementation progress of self-determined reduction plans. Entities must submit a report on the previous year's progress in implementation of their self-determined reduction plan before the end of April each year. If entities meet progress targets, they may apply for the preferential fee rate for that year.

To encourage carbon fee payers to drive reductions among non-payers, the MOENV has set a ratio of 1.2 for the use of emission reduction credits from voluntary reduction projects and offset projects towards deductions from chargeable emissions, with a cap of 10% of the feepayer's total chargeable emissions. Additionally, for industries that are not at high risk of carbon leakage, the ratio for using the credits from pre-implementation project reductions in the first two years of carbon fee implementation is set at 0.3. These non-high-risk industries are also permitted to use internationally recognized reduction credits, up to 5% of their chargeable emissions.

The MOENV  pointed out that carbon pricing has become an international trend. The Ministry plans to hold the 5th Carbon Fee Rate Review Committee meeting on September 9 to discuss the impact of different rate scenarios on individual industries. It is expected that the rate review and announcement will be completed by the end of the year, thus finalizing the last piece of Taiwan's carbon pricing system and steadily advancing towards the net-zero transition goal.

Taiwan's Ministry of Environment Announces Three Carbon Fee Regulations, Officially Ushering in the Era of... by ccappr on Scribd

Source: 
Ministry of Environment
Updated: 
2024-09-23
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