Taiwan’s parliament (Legislative Yuan) approved a Greenhouse Gas Reduction and Management Act ("Act") this past June with the aim of reducing emissions in a cost efficient manner. Furthermore, the Act paves a legal way for the introduction of a cap-and-trade style greenhouse gas ("GHG") emissions trading scheme in Taiwan. The Act primarily includes:

Binding GHG Targets to 2050

Although Taiwan is neither a member of the United Nations Framework Convention on Climate Change ("UNFCCC") nor subject to any reduction commitments under any other international framework or agreements, Taiwan is willing to show its commitment in meeting its responsibility as a member of the global community and take voluntary action for carbon reduction. Under the Act, Taiwan will cut its emissions to half of its 2005 levels by 2050, subject to any adjustment made pursuant to the UNFCCC and relevant international conventions and agreements.

To-be-launched Cap-and-Trade GHG Emissions Trading Scheme

Under the Act, the Taiwan Environment Protection Administration (TEPA) is responsible for promoting various climate change adaptive measures, including establishing a GHG cap-and-trade scheme. However, the Act does not specify an exact start date for Taiwan’s GHG market, with the relevant timeframe and trading details to be further decided by TEPA in conjunction with other governmental agencies.

According to a press release published by TEPA, it will implement the local GHG market gradually by (1) identifying those industries that should monitor, report, and verify their GHG emissions; (2) establishing procedures for monitoring, reporting and verifying GHG emissions; (3) setting emission caps; (4) allocating emission allowances (including quotas that are free of charge, for auction and for trade) for firms within governed industries; and (5) establishing a trading scheme.

TEPA is currently working on the promulgation of relevant regulations to implement the local GHG market. From the current draft, industries that should monitor, report, and verify their GHG emissions include electricity power production, iron and steel manufacturing, petroleum refineries, cement manufacturing, IC manufacturing, thin film transistor liquid crystal display manufacturing and other entities having a direct annual GHG emission of over 25,000 metric tons.

For the purpose of the Act, GHG refers to carbon dioxide(CO2), methane (CH4), nitrous oxide (N2O), hydro fluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), nitrogen trifluoride (NF3), and others designated by TEPA.

Introduction of a Controversial Carbon Tax Still Undecided

Although the Taiwan government has been planning to adopt a carbon tax scheme for some time, it faces fierce opposition from the general public in light of the country's current sluggish economic performance. The Act reiterates Taiwan's position of introducing a carbon tax scheme targeted specifically on those industries that are heavily reliant on carbon-intensive imports of fossil fuels. However, no carbon tax would be actually levied before a separate legislation provides further details and legal basis for it.