Draft:Net-Zero Emissions policy across sectors in Taiwan

Introduction

In response to global climate change, countries worldwide have employed adaptation and mitigation strategies to deal with extreme weather events, increasing state level of resilience. To stabilize temperature rise, currently more than 130 countries globally have proposed their own carbon neutrality goals by 2050 or 2060. Eager to join the international trend, Taiwan is no exception despite its ambiguous country status in the global scene. On April 22, 2021, during her second-term presidency, Tsai Ing-wen formally announced that Taiwan will achieve the carbon neutrality goal by 2050. This article will first explore Taiwan’s overall policy implementation framework for the sake of net-zero emission targets. Then the respective industry situation related to greenhouse gas emissions, main features and policy measures for achieving net-zero emissions in Taiwan’s different sectors, especially critical ones, will be introduced and highlighted.

Policy and Implement

In March 2022, the official report published by the Taiwan National Development Council (NDC), “Taiwan’s Pathway to Net-Zero Emissions in 2050”, formulates a comprehensive transition plan for different stages that Taiwan has to get there, based on twelve key strategies and four directional aspects: energy, industrial, lifestyle, and social. There are also proposed amendments to the existing Greenhouse Gas Reduction and Management Act, renaming it as the “Climate Change Response Law”, and put Taiwan’s net-zero target for 2050 into law.

Accordingly, Taiwan’s net-zero emission policy implementation is divided into two main stages, 2020-2030 and 2030 to 2050, with the following chief strategic features.

The Net Zero Plan, Policy Stage 1: 2020–2030, aims to implement existing carbon reduction measures to achieve low-carbon emissions, stop building new coal power plants, and increase renewable electricity capacity and its share in the power sector to mitigate the climate change impact by reducing greenhouse gas emissions. By 2026-2030, the emission will reduce by 20%, compared to the level in 2005. The plan is expected to attract over NT$4 trillion in private investments and create NT$5.9 trillion in industry production value from 2023 to 2030.

The Net Zero Plan, Policy Stage 2: 2030–2050, aims to implement a long-term net-zero plan by actively investing in various innovative low-carbon technologies (e.g., Carbon Capture, Utilization, and Storage, CCUS) so that the technologies can be well placed to accelerate carbon-emission reduction in the stage two.

Four major transformations are as follows:

1. Energy Transition: Initiate a paradigm shift from thermal-power generation to other renewable energy sources such as geothermal, wave power, and ocean-power for electricity generation
2. Industrial Transition: The industrial transformation lies mainly on four big sectors: manufacturing, commerce, construction, and transportation. A step-by-step plan is set out to achieve stage progress, spreading from the public to private sectors and moving from large to small enterprises.
3. Lifestyle Transition: The focus is people-oriented thinking and change of mindset. By increasing awareness and consensus on climate change and net-zero emission transformation, behavioral changes could take place in everyday lives, facilitating policy-match and their effects.
4. Social Transition: It consists of two components: just transformation and participatory civic engagement. Compensation mechanism has to be established for vulnerable groups affected during the transition. All walks of society should be embraced and networks be expanded to assist the government in communicating with different stakeholders in the transition.

(TABLE) Transition to Renewable Energy from 2025 to 2030, Taiwan

Target cumulative total installation capacities for all types of renewable energy generating facilities in Taiwan
Type of renewable energy	2025	2030
PV	20GWp	31GWp
Offshore wind	5.6GW	13.1GW
Geothermal	20MW	56-192MW
Biomass	778MW	805-1,329MW
Hydrogen	91MW	891MW

Source: National Development Council, December 2022

Energy Power Sector

The government has scheduled the decommissioning of the remaining nuclear power plants by 2025, in line with its “Non-nuclear Homeland” policy earlier implemented . As Taiwan's role under global division of labor is based on OEM in electronics and high-tech manufacturing industries, especially semi-conductor manufacturing OEM, lots of electricity power generation is still essential to its economic growth from the point of view of the government. Moreover, foreign enterprises pose increasingly strict requirements on green electricity power used by Taiwan's manufacturing plants in the OEM production process. Therefore, searching for alternative energy as strategic replacement to meet the big demand is a urgent need and key to success of policy goal.

Wind power in Taiwan is under rapid development, boosting a phenomenal growth in sector industry. It has become Taiwan's two most important alternative renewable energy source in recent years, after the phasing out of nuclear energy. Taiwan Power Company (Taipower, 台灣電力公司) data has indicated that Taiwan produced more solar and wind energy than coal for the first time in March 2023, with renewables generating 31.53 percent of the Island’s energy.

70 percent of Taiwan’s offshore wind farm projects are being built at the coast of Changhua County in the mid-western part of Taiwan island, one of the best wind power scenes in the offshore sea around the world. According to government plans, the Round 3 wind farms will be connected to the grid between 2026 and 2035, adding a total 15 GW of installed offshore wind capacity. If they generate maximum output, it could provide almost 40 percent of Taiwan’s peak electricity demand. Government regulations thus stipulate that the Changhua Fisheries’ Association must agree to any offshore wind farm development. Foreign enterprises and Western capital play very important roles in Taiwan's wind power development, such as Ørsted, Siemens Gamesa and Vestas from Denmark, the leading companies in the field.

Transportation Sector

In the transportation sector, the Ministry of Economic Affairs has put forward a vision of achieving a 100% price-to-sales ratio for electric vehicles by 2040, to enhance the electrification and reduce carbon emission. Since the whole island is highly connected by the railway system, the public transportation sector should not be neglected too.

High-speed railway system is treated as a new-generation public and green transportation system. It is a public-private partnership, running from Taipei to Kaohsiung. By adopting the carbon footprint (CFP) label since the early 2000s, high-speed railways in Taiwan play pivotal role in lowering greenhouse gas (GHGs) emissions. It is the first such certified railway system in Asia. The certified CFP label is printed on the ticket with 38g CO2 equivalent per person-km, which is equivalent to one-third of the carbon emission by a passenger car. Through the Taiwan High-Speed Rail Corporation (THSRC) website, passengers can check the CFP between stations to understand the amount of carbon emissions per trip. If calculated by total passenger distance traveled in 2015 (i.e., about 16 billion km), it revealed fewer CO2 emissions than all cars in Taiwan by over one million tons.

Agricultural Sector

In 2022, the Minister of the Council of Agriculture, Executive Yuan, announced that the Taiwan agricultural sector will achieve the net-zero emission target by 2040, even a decade earlier than the whole Taiwan island. The agricultural sector accounts for around 2% of greenhouse gas emissions of Taiwan. However, its transition to green agriculture has profound implications for urban-rural sustainable development and lifestyle change (development of urban agriculture) in Taiwan, in line with gardening city policy implemented in Taipei since 2015.

Policy Pillars

The following five features distinguish Net-zero emission policy strategy of Taiwan's agricultural sector:

Adaptation

• Protect Resources & Environment
• Climate-smart Agri-Tech
• Early warning & Adjustment Mechanism of Business Model
• Disaster Warning & Response System
• Disaster Relief & Agri-insurance
• Monitor & Management of Protected Areas

Reduce Carbon Emission

• Build an agriculture carbon emission data platform
• Develop low carbon farming technology (e.g. paddy water management )
• Adopt precision fertilization and pesticides
• Adopt precision nutrition and feeding systems
• Push forward the use of electronic farm machinery

Enhance Carbon Sink

• Enhance carbon sinks of forest, soil and ocean
• Strengthen forest, soil, ocean, and wet land management
• Develop carbon negative farming methods (e.g. planting green manure crops)
• Strengthen carbon sink R&D

Circular Agriculture

• Turn agriculture residues into resources and energy
• Promote reuse of manure
• Enhance biogas and biomass efficiency
• Build cross-disciplinary circular agriculture demonstration sites
• Encourage circular agriculture cooperation among countries, enterprises, and sectors

Green Trend

• Promote green energy (solar energy, fishery and electricity symbiosis, small hydropower)
• Turn agriculture residues into energy
• Set up agriculture carbon pricing and carbon credit trading system
• Drive the value of agricultural carbon sinks and carbon reduction
• Promote green finance and green consumption

Medical Sector

Greenhouse gas emissions from medical institutions in Taiwan account for around 4.5-4.6% of the country's total emissions. Research conducted by the Taiwan Green Productivity Foundation also points out that in 2021, among the energy consumption of domestic non-production industries, hospitals ranked first and accounted for about 16.09% of emissions, higher than 13.54% for transport stations and railways in Taiwan. Therefore healthcare system should not be excluded from the government’s carbon-reduction strategy,

A green hospital movement, calling hospitals in Taiwan to pledge to reduce carbon emissions and to pursue sustainable healthcare is on the road. The Health Promotion Administration (HPA), Ministry of Health and Welfare, Taiwan organized and led the above movement beginning from 2010. Since then, 174 hospitals in Taiwan have pledged to reduce 13% of their annual CO2 emissions by 2020, compared to the level in 2007.

First, HPA coordinates “Energy Saving Expert Consultation Team” to assist hospitals to identify issues and energy saving measures. It is showed that electricity usage is at the top of all carbon emission (80%) in hospitals, followed by waste production (9%). Hospitals report their own energy usage data (power, water, fuel, natural gases and waste production) through an online platform and receive advices such as use of higher efficiency HVAC, LED lighting, green-building designs and renewable energy generation (e.g. solar panels). HPA draws upon the dimensions of Global Green and Health Hospital and releases green hospital manuals that share the experiences of foreign and domestic hospitals in implementing sustainable efforts. The growth of Eco-friendly hospitals in Taiwan increases from the initial 128 in 2010 to 174 hospitals in 2017 .

Starting in 2017, the Eco-friendly Hospitals standards were incorporated into part of the Seven standards for Healthy Hospital Certification, which is a simplified and localized version of the Standard of the International Health Promoting Hospital. The pathway of energy-saving leading to cost-saving becomes incentive for hospitals in Taiwan to pursue the goal of net-zero emission.

Construction Sector

Globally, approximately 100 billion tons of waste is caused by construction, renovation and demolition. Taiwan’s residential and commercial buildings sector also plays a major role in determining Taiwan’s carbon emissions as the sector comprises 35 to 37 percent of energy expenditure, which makes the transition to greener buildings an imperative. The construction sector aims to achieve a circular economy by introducing the use of recycled building materials and energy-efficient building design. There needs to be mandatory or voluntary regulations or codes for building energy performance.

It states that by 2030, Taiwan aims to use 100% LED lights in commercial buildings and will endeavor to have all new public buildings qualified as building energy efficiency class 1 structures or nearly zero-emissions, as determined by the Taiwan Ministry of the Interior and Architecture and Building Research Institute, with level 1 serving as the highest efficiency level.  Other areas of policy measures include improving exterior design, increasing energy efficiency, establishment of appliance energy efficiency standards, and the deployment of smart meters.  

Taiwan has made outstanding achievements in the development of international LEED green buildings. As of May 2022, 177 projects have been certified (certified buildings). Green building certifications act to increase local knowledge, creating awareness and training opportunities, and serve as standard for sustainable investment and financing.

High-Tech Manufacturing Sector (plus Commercial & Financial Sector)

In the official report of "Taiwan’s Pathway to Net-Zero Emissions in 2050”, the commerce sector focuses on modifying business models into low carbon energy transition, while the manufacturing sector aims to improve process and convert to energy-efficient practices. The high-tech manufacturing sector plays an crucial role in Taiwan’s economy, yet it is also environmentally damaging. The Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), the world’s largest chip foundry, is projected to consume 7.2% of the electricity generated in Taiwan in 2022. TSMC alone used 57,000 cubic meters of water per day at the Hsinchu Science Park in 2019, and a new 2-nanometer wafer plant is projected to use an additional 120,000 cubic meters of water per day.

Taiwan’s Financial Supervisory Commission (FSC), the financial regulator, and the Taiwan Stock Exchange (TWSE) have adopted a voluntary approach to improving ESG-related disclosures, incentivizing firms to adopt better practices while maintaining some degree of market power. The local regulators employ two main approaches: the ESG Index and voluntary disclosures about climate change and carbon emissions. Recently the Financial Supervisory Commission has issued “The Roadmap for Taiwan listed companies to align with IFRS Sustainability Disclosure Standards” on August 17, 2023, and established a taskforce to promote alignments with IFRS Sustainability Disclosure Standards.

Policy Pillars

The following three features distinguish Net-zero emission policy strategy of Taiwan's manufacturing sector:

Process Improvement

• Replacement of old appliances
• Energy saving (Digitalization)
• Development of hydrogen technology
• Reduction of F-gases

Fuel Switching

• Expanding usage of natural gas
• Expanding usage of bioenergy
• Adopting clean energy/hydrogen

Circular Economy

• Raw material replacement
• Refuse Derived Fuel (RDF)
• Energy Resources Integration
• CCU technology

Carbon fees or Tax in Taiwan? Forward-looking to Carbon Exchange in Taiwan

After years of debate, Taiwan has decided on using a carbon "fee" approach to curb carbon emissions that will be implemented starting in 2024. In late August 2023, the Ministry of Environment announced that 512 companies that emit more than 25,000 metric tons of carbon dioxide a year will be charged carbon fees in 2025, based on verification of their total emissions in 2024.

Taiwan's version of carbon exchange, the Taiwan Carbon Solution Exchange (TCX), opened in August 2023 targeting on carbon trading market. In Taiwan's carbon exchange, companies not subject to carbon fees that voluntarily apply to cut more emissions than a certified baseline will be able to earn carbon credits, verified by certified institutions, to be traded in the exchange. Big emitters obliged to pay carbon fees will be able to purchase the credits to partially offset the fees. Carbon credits will also be needed by enterprises that are required by international clients to achieve net zero. The exchange system is to encourage the development of low-carbon-emission technologies and enterprises through the demand for credits from high-carbon emitters.