Passage of Greenhouse Gas Reduction Act in Taiwan Brings Business Opportunities

Author: Jamie C. Yang

The Greenhouse Gas Reduction and Management Act (溫室氣體減量及管理法) passed on June 15 and became effective on July 1, 2015 after more than four years under legislative review. The Act aims to reduce Taiwan’s greenhouse gas emission in 2050 to half of the volume emitted in 2005. Besides reconfirming Taiwan’s devotion to environment protection, the Act creates opportunities for green businesses including those from overseas.

The Act envisages a cap-and-trade system to be adopted in three stages in Taiwan. The greenhouse gases covered by the Act include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro fluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), nitrogen trifluoride (NF3).

The Act will be implemented in three stages:

Stage One

Taiwan Environmental Protection Administration (Taiwan EPA) shall audit emission of certain high emission industries. On September 14, 2015, the first set of industries to be audited were announced by the EPA: these include power plants, steel, concrete, semiconductor, LCD, petroleum refinery and other industries burning fossil fuel and emitting over 2.5 tonnes of CO2 per annum.

Stage Two

Taiwan EPA shall announce a list of “Emitters.” These Emitters must conduct annual accounting and register their numbers to their holding accounts. Every three years, the registered numbers shall be audited by a recognized Verification Body. Only internationally recognized Verification Bodies are qualified to perform such audits.

The EPA shall announce the greenhouse gas emission efficiency standard specific to each industry. At this stage, the Emitters are encouraged but not obliged to meet the efficiency standard. Those which meet the efficiency standard shall be granted with Efficiency Quotas.

In parallel, an Offset Program shall be available for Emitters. Emitters may submit a proposal to the EPA describing its action plan (including equipment and material purchase) to reduce greenhouse gas emission. Upon the review of a Verification Body and the approval of the EPA, the Emitters may be awarded with an Offset Quota.

Stage Three

The cap and trade system comes into effect. The total emission of an Emitter would be calculated as the sum of its actual emission minus its Efficiency Quota and Offset Quota. An emitter would be penalized for exceeding the total emission cap it is allotted. However, an emitter has the option of purchasing Efficiency Quotas from others to avoid exceeding its emission cap.

The timely passage not only paves Taiwan’s way to the UN Framework Convention on Climate Change in Paris in December 2015, but also creates great business opportunities for businesses skilled in art of greenhouse gas reduction. In addition, research institutes which qualify as Verification Bodies would be in high demand because Emitters require their services for regular audits and for obtaining Offset Quotas.