Taiwan yesterday took a major step in fighting climate change by launching its first carbon exchange, the Taiwan Carbon Solution Exchange (TCSE). The exchange aims to facilitate the trading of carbon credits for businesses to offset their greenhouse gas emissions and achieve the goal of reaching carbon neutrality. The exchange is expected to also help Taiwan meet its net zero pledge for 2050.
After two years of preparations, Taiwan finally joined South Korea and Japan in introducing a carbon trading platform to meet growing demand for carbon credits — from manufacturers in particular. South Korea launched a government-run carbon credit market in 2015, issuing credits only to permit carbon dioxide emissions from companies’ production processes. Seoul plans to introduce a voluntary carbon market later this year to expand access to individuals.
Japan started initial operations last year, and plans to launch credit trading this year.
Taiwan’s carbon exchange is to commence trading in the first half of next year after a carbon pricing mechanism and law supporting the Climate Change Response Act (氣候變遷因應法) are finalized later this year. Based on its initial plan, the Environmental Protection Administration (EPA) is considering charging NT$100 to NT$300 per tonne of carbon emissions. The administration did not reveal whether it preferred a progressive rate or differential pricing to encourage voluntary carbon reductions. Only corporations are allowed to buy and sell carbon credits on the exchange.
More than 500 local manufacturers that produce heavy greenhouse emissions of more than 25,000 tonnes a year are required to pay carbon fees under the act. Those companies account for about 90 percent of the country’s carbon emissions. Buying carbon credits is a common approach corporations adopt to mitigate emissions and save on carbon fees or carbon taxes, to ultimately become carbon neutral.
Taiwan does not cap carbon emissions, but has a more relaxed approach and encourages corporations to reduce emissions through means such as trading carbon credits.
However, buying carbon credits might not be enough. The exchange must make it clear to local businesses that carbon credits, which are issued by either the Switzerland-based Gold Standard Foundation or other global agencies, would not be used to offset emissions and save carbon border tax on imports to the EU. The EU’s new rules only accept carbon allowances and genuine carbon reductions to avoid greenwashing.
In addition, the problem most businesses face is the trustworthiness of carbon credit sellers. Even large-scale global companies with rich experience in trading carbon credits can mistakenly buy “worthless credits” or “phantom credits.”
The exchange first plans to introduce carbon credits issued by global certifiers to avoid greenwashing. It is unclear whether the certificates issued by the EPA could be traded on the exchange. It is also unclear which agency would be responsible for issuing local carbon credit certificates. It seems that the TCSE is only a trading platform.
The launch of the TCSE is helpful to meet rapidly growing demand for carbon credits for local corporations to offset emissions, especially for exporters who need to meet strict global carbon emission standards.
However, it is also important that they can access good-quality carbon credits to avoid greenwashing. A qualified local carbon credit certifier would be required for the healthy development of local carbon credit trading.
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