Taiwan’s Ministry of Environment (MOENV) released its drafts for three carbon fee sub-laws in April and is expected to hold deliberation meetings in July. While the carbon fee rate deliberation committee will decide the price rate at a later date, the contents of these draft sub-laws have already affected the substantive carbon price companies will be paying, thereby limiting the role of the carbon fee as a price signal that drives companies to decarbonise.
Taiwan Climate Action Network (TCAN) has thus published this policy brief to provide MOENV with suggestions on amending the three carbon fee sub-laws. We urge MOENV, relevant authorities, the industrial sector, and all stakeholders to jointly promote an effective carbon pricing policy to accelerate the low-carbon transformation of the high-emission industries, especially in manufacturing. Our ten policy recommendations cover the overall principles of the carbon fee policy, the carbon fee rate, and relevant supporting measures:
Overall Principles of the Carbon Fee Policy
1. The carbon fee price should be more ambitious, coupled with medium- and long-term planning regarding the fee rate hike path and schedule for lowering the levy threshold. These pathways should be set as soon as possible to help industries plan their decarbonisation strategies early.
2. The carbon fee should be collected as scheduled, and the collection should be based on a full year (2024). Therefore, Article 4 of the Draft Regulations Governing the Collection of Carbon Fees, which allows for a proportional calculation of the carbon fee according to the number of months from the effective date of the fee in case the first year is less than a full year, should be deleted.
3. The use of the carbon fee revenue should be transparent. Sustained dialogue with stakeholders is needed to ensure revenue is used to develop innovative low-carbon technologies and a just transition, laying the foundation for Taiwan’s long-term net-zero transformation.
Carbon Fee Rate Design
4. The carbon price (general rate) should start at NT$500/ton and gradually increase to align with international trends and increasingly stringent targets over time.
5. A carbon price floor (post-preferential treatment) should align with the carbon pricing levels of developed countries and should not be lower than NT$300/ton. This helps ensure that carbon prices companies pay can be utilised domestically—if the carbon fee rate is too low after preferential treatment, and the carbon intensity of companies’ export products is higher than other countries average, companies may have to pay additional fees abroad (e.g. under the European Union’s Carbon Border Adjustment Mechanism).
6. Preferential rates should only be given to companies that exceed national reduction targets. Relevant data should be made public, including the basis for setting industry-specific technical benchmark reduction rate targets, evaluation data, and the average and benchmark carbon emissions of major manufacturing processes and products. Data transparency, public dialogue, and communication are fundamental to the success of the carbon fee system.
7. Carbon offsets cannot replace companies’ internal decarbonisation efforts and should be strictly limited to a cap of 5% of chargeable emissions. To prevent the use of low-quality or questionable carbon offset schemes (carbon credits), we recommend
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- deleting Article 9, Paragraph 2 of the Draft Regulations Governing the Collection of Carbon Fees to disallow the use of pre-project reduction credits for carbon fee deduction;
- deleting Article 9, Paragraph 1, which allows companies to use voluntary reduction projects and offset projects as credits to offset their chargeable emissions at a ratio of 1.2;
- modifying Articles 9 and 10 to limit the use of carbon credits to offset chargeable emissions under the carbon fee to 5%;
- re-evaluating the applicability of current methodologies and eligibility criteria for domestic and international carbon credits alike, eliminating methodologies that are not robust, and stipulating strict environmental integrity standards for carbon credits.
Carbon Fee Supporting Measures
8. The carbon fee should be set based on the polluter-pays principle. MOENV should delete the carbon leakage risk coefficient and the 25,000-ton exemption clause in Article 5 of the Draft Regulations Governing the Collection of Carbon Fees, and accelerate the planning of a Taiwanese CBAM per Article 31 of the Climate Change Response Act.
9. If MOENV decides to retain the carbon leakage risk coefficient, it should at least add a specific timeline for adjusting the risk coefficient in Article 6 of the Draft Regulations Governing the Collection of Carbon Fees to align with the EU CBAM mechanism so that the discount scheme can be completely phased out before 2034.
10. Carbon pricing policy needs to be accompanied by a comprehensive industry transformation strategy and policy tools to reduce the transformation barriers for hard-to-abate industries. Relevant authorities should utilise the performance standards in Article 23 of the Climate Change Response Act., subsidies and incentives for investments in GHG-reduction technologies under the GHG Management Fund, and Article 26-1 of the Government Procurement Act as to formulate complementary policy measures and create policy synergies that encourage major emitters to actively deploy innovative low-carbon technologies, replace high-emission production processes, and accelerate the net-zero transition.
Statement by:
TCAN Research Centre, Environmental Rights Foundation, Green Citizens’ Action Alliance, and Citizen of the Earth Taiwan.
policy brief （only CHT edition）：download
