Posted on 07 Mar 2023
Taiwan will start to levy a carbon tax in 2024, Kallanish notes. However, the expected implementation of the policy will not be as soon as 1 January, according to Chang Tzi-Chin, Minister of the Environmental Protection Administration (EPA), Taiwan.
Taiwan enshrined its 2050 carbon neutrality target into law in February, prompting the need for new laws to clarify issues including carbon taxes.
The EPA said on the 24th of last month that it would start discussions with companies and associations in related industries. The draft is expected to be released by the end of the year at the earliest.
In addition to major direct carbon emitters, the first batch will also include manufacturers that emit more than 25,000 tonnes/year of carbon in the process of electricity consumption and manufacturing.
“It is unreasonable to charge large direct carbon emitters without charging large indirect carbon emitters. Considering fairness, we will discuss in the direction of charging both,” said Chang.
The collection may be quarterly or semi-annual, and adopt a progressive system similar to personal income tax. The greenhouse gas fund which will be raised from the levy will be at least TWD 10 billion ($326 million) in the first half of 2025.
Tax rates are still undecided. Several previous studies have given a range of around TWD 100-300/tonne. Chang said that the minimum is TWD 100/t, and further discussions and approvals are needed.
This is low compared to the carbon trading price in EU. From previous lows, carbon prices have surged in the Covid period, especially due to higher coal demand last year and falling annual issuance. The most-traded December 2023 contract for EUA futures was traded at €92.18/tonne ($97.97/t) last Friday, surging nearly 131% over two years. The price exceeded €100/t once in August last year, and twice last month.
If Taiwan's carbon tax is lower than this transaction price, its steel products exported to the EU will still need to make up the difference under the Carbon Border Adjustment Mechanism (CBAM) when it takes effect. Even an agreement in which Taiwan's carbon tax would offset some of the EU's carbon tariffs still needs to be negotiated.
This suggests that the lower the carbon tax in Taiwan, the more money will flow to Europe, and other countries which are planning to join the CBAM. But too high a carbon tax will also affect the competitiveness of Taiwanese products in other regions.
As for Taiwan's own carbon trade tariffs, Chang said it was not a priority for discussion right now.
According to the latest report from the EPA, Taiwan’ total carbon dioxide emissions peaked at 269.46 million tonnes in 2017, and then declined year by year to 257.38mt in 2020, followed by 2021’s 266.99mt, a yearly increase of 3.73%.
The steel industry is the second largest carbon emitter in the region, accounting for 13.04% of total emissions in 2020.
By company, China Steel Corporation and Dragon Steel ranked second and fourth in 2020, and their carbon emissions occupied 7.4% and 3.4% of Taiwan’s annual total.
Source:Kallanish
