Inresponse to Taiwan's target of net-zero emissions by 2050, the Climate ChangeResponse Law was promulgated and came into effect on February 15, 2023, and theTaiwan Carbon Solution Exchange was formally established in August. In order toperfect the carbon pricing and carbon trading mechanisms, the Ministry ofEnvironment (MOE) also announced relevant sub-laws, which will move Taiwantowards its target of net-zero emissions by 2050.

Firstly,with respect to entities subject to inventory and registration of greenhousegas emissions, and in response to the passing of the Climate Change ResponseAct, on May 31, 2023, notice was given for the amendment and the renaming ofthe regulations as "Regulations for Emission Sources Obligated toMeasuring, Reporting and Verification Its Emission by Entity." Industriessubject to the regulations include the power generation industry, the steelindustry, the petroleum refining industry, the cement industry, thesemiconductor industry, the thin-film transistor LCD industry, etc. (the firstbatch announced in 2016), and manufacturing industries with annual greenhousegas emissions over 25,000 metric tons (the second batch announced in 2022).

■The MOE amended and promulgated the regulations one by one. 

Accordingto Article 21 of the Climate Change Response Act, "Entities with EmissionSources designated by the central competent authority shall conduct emissioninventories to be submitted to the Registry by the deadline. For entitiesdesignated by the central competent authority, the data about emissioninventories shall be verified by a verification body.” To this end, the MOEamended and promulgated the "Regulations for the Registration andInspection of Greenhouse Gas Emission Inventory" on September 14, 2023,and provided in Articles 6 and 9 that the deadline for registration ofinventory is April 30th of each year, and the deadline for uploading the inspectionresults is October 31^st of each year. It also provided thecalculation method for emission levels in Article 4and the matters to beincluded in the inventory report in Article 7.

Whatshould be especially noted is, according to Paragraph 2 of Article 8, theinspection shall not be carried out by the same lead inspector for sixconsecutive years, and if there is any violation of the provisions of the Regulationsfor the Registration and Inspection of Greenhouse Gas Emission Inventory, afine may be imposed in accordance with the provisions of Article 15. 

Correspondingto the inspection operations required by the Regulations for the Registration andInspection of Greenhouse Gas Emission Inventory, on October 5, 2023, the MOE, inaccordance with the provisions of Article 22 of the Climate Change Response Act,amended and promulgated the "Regulations on the Administration ofGreenhouse Gas Certification Institutions and Inspection Institutions,” whichexplicitly provide the qualifications and management of certification institutionsthat carry out the certification of greenhouse gas inspection institutions (Article3 and below), and the qualifications and training of inspection institutionsand inspectors (Article 9 and below), so that a wide range of professionalfields such as farming, animal husbandry, forestry management, etc. may beincorporated to enhance inspection capacity and strengthen the inspectioncapabilities of inspectors in their respective fields.

As forrules to be followed in the inspection, they are provided in Article 25 andbelow to ensure the independence and impartiality of the inspection institutionsand that relevant operational procedures are followed to safeguard the qualityof inspections, in order to promote greenhouse gas inventories and inspectionsand other related operations. 

As forthe development activities that require environmental impact assessment andinvolve an increase in greenhouse gas emissions, on October 12, 2023, the MOE promulgatedthe “Regulations for the Management of Offsetting the Increased Greenhouse GasEmissions" pursuant to Article 24 of the Climate Change Response Act. Withrespect to development activities such as the establishment of factories whoseannual greenhouse gas emissions exceed 25,000 metric tons of carbon dioxideequivalent, the construction or expansion of parks, the construction oraddition of machine units of thermal power plants or cogeneration plants (excludingthose using natural gas as fuel or the construction of new units of 25,000kilowatts and below per unit), and the development of high-rise buildings, the Regulationsfor the Management of Offsetting the Increased Greenhouse Gas Emissionsprovides that 10% of the increment may be offset every year for ten consecutiveyears. Violators will also be subject to penalties.

■Still soliciting opinions on the collection of carbon fees

Toencourage businesses and governments at all levels to actively participate ingreenhouse gas emission reduction, the MOE promulgated the "Administration of Voluntary Greenhouse Gas Emission ReductionPrograms " on October12, 2023 pursuantto Article 25 of the Climate Change Response Act. In addition to conforming tointernational principles for verification of voluntary emission reduction programs,Article 10 explicitly provides that the programs should conform to theprinciples of trackability, reportability, and verifiability, and have thefeatures of "additionality, robust quantification, permanence, no doublecounting, and avoidance of environmental hazards." Reduction creditsobtained through voluntary emission reduction programs can be used in thefuture to offset carbon fees or to be traded with those in need of them. Regardinghow such credits can be traded, it is still pending the announcements ofrelevant regulations and guidelines by the competent authorities and the TaiwanCarbon Solution Exchange. 

Toachieve the goal of net-zero emissions by 2050, the government has formulatedrelevant sub-laws in response. However, the carbon fee collection system underArticle 28 of the Climate Change Response Act and the monetary substitutionsystem to avoid carbon leakage under Article 31 of the Climate Change ResponseAct are still in the stage of extensive solicitation of opinions and continuousdiscussions. The transition period of the European Union's Carbon BorderAdjustment Mechanism (CBAM) came into effect in October 2023, and the CleanCompetition Act (CCA) of the U.S. has completed its second reading even thoughit is currently on hold. In addition to expecting the government to speed upthe establishment of the systems, the enterprises concerned should also payattention to the international regulatory developments, because the era ofcarbon pricing has officially arrived.

This article waspublished in the Expert’s Commentary Column of the Commercial Times. https://www.ctee.com.tw/news/20231116700092-439901