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Various countries have proposed carbon border adjustment mechanisms, and scholars estimate that Taiwan will pay 36 billion carbon tariffs in 2026.

The European Union (EU) has been implementing a carbon pricing mechanism since 2005 and has been gradually expanding its carbon trading system to allow industries to "pay for carbon emissions". The first wave of tariffs will be imposed on five major industries, including electricity, cement, fertilizer, steel and aluminum, and will begin in 2026.

"In the future, the EU may continue to expand the control of industries and increase the regulation of indirect emissions." Connie Huang, Associate Professor of Finance and Taxation at Feng Chia University, said that more importantly, the U.S., Japan, and Korea are also likely to implement carbon tariffs in the next few years, which will have a significant impact on the international competitiveness of Taiwan's industries.

In the report "The Coming Net Zero Race: The Impact of International Carbon Boundary Taxes on Taiwan," published by Greenpeace in cooperation with Academia Sinica, Professor Lin Shih-Mo of the Department of International Trade at Chung Yuan University estimated that if Taiwan did not implement any carbon pricing, the EU's CBAM in 2026 would impact the cement, chemical, and metal industries by a total of 360 million in output value, with the cement industry's export costs likely to rise by up to 10%. In addition, the United States, Japan and South Korea to expand the scope of carbon tariffs, the maximum impact may reach 75.7 billion output value, the electronics and electrical industries may also be affected, the impact on Taiwan's industry is very high.

Professor Lin Shimo of the Department of International Trade at Chung Yuan University. Sun Wen Lin photo

The impact of the carbon tariff on the international market in 2026 could be as high as 75.7 billion dollars. Photo by Wenlin Sun

Connie Huang said that the EU CBAM specifies that if the exporter's country of origin has implemented a carbon pricing system, the EU will reduce its tax amount to avoid double taxation; if the carbon price in the country exceeds the EU, or is equivalent to the EU, it will be exempt from the carbon border tax. "Therefore, if Taiwan's exports are to avoid being subject to carbon tariffs imposed by the EU, a carbon pricing system that is similar to the EU's carbon price must be proposed as soon as possible.

According to Candy Huang, the current carbon price in the EU is between 50 and 60 euros per ton (about NT$1,600-2,000), and the carbon fee is also linked to the EU's carbon trading price. Taiwan should follow the EU's approach in implementing carbon pricing and gradually introduce the levy in different industries.

Scholars point out that if Taiwan does not implement carbon pricing, it will be subject to high carbon tariffs from abroad. Image source: Greenpeace

If Taiwan does not implement carbon pricing, it will be subject to high carbon tariffs from abroad, according to the study. Source: Greenpeace

Researchers estimate that up to $75.7 billion of Taiwan's output could be affected. Source: Greenpeace

A study by academics estimates that Taiwan's industry could be hit by a $75.7 billion output value. Source: Greenpeace

Advantages of "Effective Carbon Pricing": Improving Industry Competitiveness, Boosting GDP, and Accelerating Carbon Reduction

The Greenpeace report also points out that if Taiwan implements "effective carbon pricing", it will not only improve the international competitiveness of industries, but also boost consumption and investment, promote the growth of gross domestic product (GDP), and accelerate the effectiveness of carbon reduction in Taiwan, which will help achieve the 2050 net zero carbon emissions target.

The Greenpeace Project Director, Mr. Cheng Chu-Hsin, pointed out that price is the key point of "effective carbon pricing", and it is currently rumored that the Environmental Protection Agency is planning to charge only 100 yuan per ton of carbon, which is too low to meet international standards and also difficult to achieve carbon reduction incentives. Although it is difficult for Taiwan to directly levy a carbon fee at EU prices, it should at least start at $300 per ton and increase by 10% each year to keep up with international prices.

The carbon pricing system reflects the cost of carbon emissions in the production process, which will inevitably cause energy and price increases," said Hsiao Daiji, a researcher at the Institute of Economic Research, Academia Sinica. Guiding the industry to invest in low-carbon technology, and the public to switch to low-carbon living and consumption, which in turn will promote GDP growth.

Cheng Chu-Hsin said, a comparative analysis of the difference between 100 yuan per ton of carbon price and 300 yuan, 100 yuan is too cheap will lead to GDP decline in consecutive years, and carbon emissions may continue to grow; if the 300 yuan levy and yearly increase, it is estimated that in 2050 can catch up with the international carbon price level, the long-term can drive GDP growth of about 1%, and promote carbon reduction of 50%.

In fact, the current draft amendment to the Environmental Protection Agency's "Greenhouse Gas Control Law" does not specify the rate nor the time frame for the levy, but only states that "the method of levy shall be determined by the central competent authority". In order to avoid administrative laziness, it is proposed that the levy schedule, rate and yearly increase provisions should be explicitly incorporated into the law," Cheng said.

The Environmental Protection Department said that it will master the EU CBAM carbon content calculation method, and gradually establish a mechanism for checking the carbon content of our products. We will pay close attention to the international carbon reduction measures and communicate with the relevant domestic industries and other stakeholders to propose suitable solutions for our country.

Source: Greenpeace https://e-info.org.tw/node/232097