The Ministry of Environment yesterday announced draft guidelines for evaluating industries and businesses as having high carbon leakage risks, with the goal of enhancing the carbon fee system to align with the EU’s carbon border adjustment mechanism (CBAM).
Industries with a carbon leakage risk of 0.2 percent or more are defined as having a high level of carbon leakage risk, in line with South Korea’s standards, the ministry said.
Up to 17 industries meet the criteria: steel, cement, oil refining, chemical materials, edible vegetable and animal oils and fats, copper, pulp and paperboard, artificial fibers, plastics, glass, spun yarn, woven textiles, fertilizers, bare printed circuit boards, optoelectronic materials, computers and peripheral equipment, and magnetic and optical media, it said.
Photo: Taipei Times
Individual businesses are considered to have high carbon leakage risks if they have an annual carbon fee of more than 30 percent of their gross operating profit, or have a negative gross profit for the taxable year, the ministry said.
Other qualification criteria include situations where businesses are significantly affected by US “reciprocal” tariffs from this year to next year, or their main products are subject to domestic anti-dumping duty regulations, it said.
Climate Change Administration Director-General Tsai Ling-yi (蔡玲儀) told a news conference that carbon fees were brought into effect this year, as the EU’s CBAM would be enforced from Jan. 1.
The CBAM aims to counteract carbon leakage and offers a “discount” on the number of CBAM certificates — which EU importers must purchase to pay a carbon price for their imported goods in line with the EU’s carbon pricing rules — but it requires producer countries of the goods to have an established carbon pricing mechanism, she said.
Therefore, Taiwan must implement carbon fees from this year onward to help local exporters get carbon price rebates from the EU’s CBAM, Tsai said.
Steel is one of Taiwan’s most important exports that would be subject to the CBAM, she said.
However, the carbon fees imposed on steel manufacturers in Taiwan include direct and indirect emissions, while the EU’s CBAM takes into account direct emissions without considering indirect emissions such as power or fuel consumption, Tsai said.
EU authorities have confirmed that Taiwan’s carbon fee is a carbon pricing system recognized by the EU, but how the carbon prices “effectively paid” in Taiwan should be defined and calculated remains to be negotiated, she said.
Businesses within the 17 industries with high carbon leakage in Taiwan can obtain an 80 percent discount on their carbon fees from the ministry, as long as they propose a self-determined reduction plan, Tsai said.
The ministry would develop Taiwan’s CBAM to ensure fair competition for local industry players, she said, adding that the pilot scheme would first be introduced in the cement industry from 2027.
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