Written by Hsin-Ju Li.
Image credit: 森林小路 by tsaiian / Flickr, license: CC BY-NC 2.0.
Taiwan is now at a juncture in establishing carbon emission reduction systems, and the relevant regulations are under intense discussion. This article introduces and comments on the legal frameworks of carbon emission reduction, including the carbon fee and carbon trading schemes. In addition, Indigenous peoples in Taiwan are integrated into these systems via either the ‘consultation, consent, and benefit-sharing scheme’ or the ‘Indigenous carbon sinks’ advocated by some legislators and activists. This article will also review these approaches.
The newly enacted Climate Change Response Act
In response to the UNFCCC and relevant international agreements and conventions, Taiwan enacted the Greenhouse Gas Reduction and Management Act (GGRMA) in 2015. To align with the European Carbon Border Adjustment Mechanism (CBAM) set for 2026, the GGRMA was amended and replaced by the Climate Change Response Act (the CCRA) in 2023.
The CCRA explicitly sets Taiwan’s 2050 net-zero emissions target and introduces carbon pricing schemes, primarily to address the impact on businesses and economic development. However, due to this focus on economic aspects and the urgency of responding to CBAM, Taiwan’s legal framework for carbon emission reduction generally lacks comprehensive and prudent consideration. This is evident in the debates and controversies surrounding the carbon fee and carbon trading systems.
The soon-to-be-implemented carbon fee system
The Act authorizes the imposition of a ‘carbon fee,’ which is expected to begin in 2025, to reduce the tariffs Taiwanese exporters will face under CBAM. This carbon fee scheme might be the sole mechanism in place, serving as a quick solution to the lack of social consensus on a ‘carbon tax’ after years of negotiation.
In Taiwan, as in Germany, a ‘fee’ is a special levy imposed for a specific purpose by a regulatory body. At the same time, a ‘tax’ is collected and incorporated into the national fiscal budget by the central government. Therefore, the collected carbon fee would be allocated as dedicated funds solely for carbon reduction or climate adaptation initiatives, such as subsidies for the payers.
According to the proposed regulations on the carbon fee, in the initial stage, the taxable targets will include power generators and large manufacturers that emit more than 25,000 tons of carbon dioxide equivalent per year. It is estimated that this will affect approximately 550 companies, accounting for more than 70% of emissions in Taiwan. The 25,000-ton threshold is expected to gradually decrease.
The upcoming carbon fee scheme has been criticized by academia and environmental groups. The primary concerns are that the limited use of the dedicated funds would be unfavourable to the development of carbon technologies and that the excessive incentives offered to the payers could violate the polluter pays principle, thereby diminishing the actual effectiveness of carbon reduction. The proposed carbon fee rate might be around US$10 per metric ton of carbon emissions, which is significantly lower than that in the EU Emissions Trading System (ETS), €85. As a result, Taiwanese manufacturers exporting to Europe would still have to pay tariffs under CBAM.
The developing carbon trading system
In addition to the carbon fee, the CCRA also regulates the Emission Trading Scheme and authorizes the Ministry of Environment to establish the Taiwan Carbon Solution Exchange (TCX). The TCX was launched in August 2023, and in December of that year, it facilitated the first matchmaking of purchased verified international carbon credits with domestic companies. The first domestic trade is expected to take place in late September 2024 after the relevant regulations are enacted. At this stage, only voluntary carbon credits are tradable, as the Cap & Trade scheme and allowances have not yet been implemented.
In the voluntary carbon market, the CCRA recognizes carbon credits obtained from three types of projects: namely, the Voluntary Emission Reduction Project, the Offset Project, and the Early Action Project. However, whether these carbon credits recognized by the CCRA will be accepted in global scenarios is uncertain, given the increasingly strict international standards of verification.
The ethical concerns about using markets to reduce carbon emissions, as well as the potential conflicts between carbon fees and emission trading schemes, are also being discussed in academia and by environmental groups in Taiwan. Nonetheless, because these schemes are already explicitly defined and regulated in the CCRA, discussions about their potential issues or conflicts often receive less attention than they deserve.
The ideal versus the reality of Indigenous carbon rights
It is noteworthy that the CCRA includes provisions related to Indigenous peoples, such as the ‘consultation, consent, and benefit-sharing mechanism’ and the potential for Indigenous carbon offsets. The CCRA presents opportunities for Indigenous peoples to participate in carbon markets, whether by passively sharing carbon benefits from project proponents or the government or by actively trading carbon credits. However, the absence of relevant legal frameworks is concerning.
The recent developments in the Katratripulr Tribe (the Tribe) in eastern Taiwan can serve as an example. In Katratripulr et al. v. Ministry of Economy (2022), the plaintiffs challenged permission granted to a third party to install solar photovoltaic power generation equipment on the Tribe’s traditional territory. Ultimately, the Court revoked the permission, ruling that the governmental regulations concerning the ‘consultation, consent, and benefit-sharing mechanism’ violated the International Covenant on Civil and Political Rights (ICCPR), International Covenant on Economic, Social and Cultural Rights (ICESCR), and the Constitution. In response, the Tribe announced its own ‘Regulation’ and called on other tribes to follow suit.
On May 22nd, the Tribe held a pioneering workshop with the City Office to inventory the carbon sinks and potential carbon credits on their traditional territory in preparation for participating in the carbon markets. Shortly thereafter, some members of the Legislative Yuan convened a public hearing on August 6th to discuss ‘Indigenous carbon sinks.’ The issue of Indigenous carbon rights has started to attract attention, leading to a surge in meetings and research.
Overly optimistic, some are eager to plunge into or bring about Indigenous carbon markets. However, the basic legal frameworks for recognizing ‘rights’ on Indigenous traditional territories remain vague, and the requirement for ‘additionality’ in carbon credits seems to be generally overlooked. Additionality is crucial in this context because it ensures that the carbon credits generated are tied to specific, new actions that go beyond any existing environmental efforts, thereby providing a ‘true’ environmental benefit and avoiding double counting of emissions reductions.
Conclusion
International carbon reduction systems, including the Paris Agreement and carbon tariffs such as the EU CBAM or the US Carbon Competition Act (CCA), have a significant impact on Taiwan. While Taiwan has shown great initiative, the related legal framework at this stage could be seen as rushed and unstable. Careful consideration and revisions are required.
For a robust and effective (legal) system, it is essential to confirm that the ultimate goal of carbon pricing is to mitigate climate change rather than to generate profits. Issues such as the imposition of a carbon fee instead of a carbon tax, the deflated carbon fee rate, surplus incentives for carbon fee payers, ethical concerns of carbon trading, potential conflicts between the carbon fee scheme and the carbon trading scheme, lenient recognition of carbon credits, and so forth, all contribute to doubts about the effectiveness of Taiwan’s carbon reduction efforts.
Similar to the development of carbon reduction schemes, the impatient advocacy for Indigenous carbon rights might lead to legal system disorder. The basic legal frameworks of Indigenous rights, such as the aforementioned ‘consultation, consent, and benefit-sharing mechanism’ and the so-called ‘Indigenous traditional territory rights/titles,’ should be given primary consideration. The good news is that, due to the economic incentives of carbon pricing, Indigenous peoples are likely to benefit from thorough discussions on fundamental issues such as Indigenous land rights/titles.
Hsin-Ju Li is a PhD student at the School of Law, Soochow University, in Taipei. Her research interests include public law, environmental law, and Indigenous law.
This article was published as part of a special issue on ‘Taiwan’s Legal Landscapes for Environmental Justice and Climate Action.’
Taiwan Insight 