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Newly unveiled carbon pricing formula gets mixed industry response

01/04/2024 10:20 PM
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Plumes of smoke emerge from an industrial area in Kaohsiung on March 17, 2023. CNA file photo
Plumes of smoke emerge from an industrial area in Kaohsiung on March 17, 2023. CNA file photo

Taipei, Jan. 4 (CNA) Industry has responded with mixed views to the carbon fee charging formula unveiled by the Ministry of Environment's Climate Change Administration (CCA) on Wednesday, with some demanding more leniency for businesses.

A source from Taiwan's Chinese National Federation of Industries on Wednesday praised the new formula as being conducive to "fair competition," adding that since the fee will only be paid when the threshold is crossed, it won't be too punitive on relatively low emitters.

For example, he continued, while there is little emission difference between company A which emits 24,900 carbon dioxide equivalent (tCO2e) a year, and company B which emits 25,100 tCO2e, the "initially expected carbon fee" that B would have been subjected to, would have put it on the back foot when competing with company A.

The "initially expected carbon fee" refers to the method that was orginally expected to be used to calculate the carbon fee: the total carbon dioxide emitted multiplied by the fee rate (Carbon fee = emissions x fee rate).

However, on Wednesday, the government tentatively announced a 25,000 (tCO2e) "free allowance" for big emitters -- those that emit more than 25,000 tCO2e a year (Carbon fee = (emissions - 25,000) x fee rate).

The source added that the government must prioritize fairness when implementing its carbon pricing scheme and that similar regulations would need to apply to imported products, otherwise domestic industries would face unfair competition.

For example, the country imports 25 percent of its cement, and if it does not face a levy, the domestic industry could be negatively affected, the source said.

Another cement industry source said the free allowances may help smaller emitters, but will largely be insignificant to bigger emitters, adding that the characteristics of each industry should have been considered before the fee rate was decided.

Those in the petrochemical industry also voiced concerns regarding the carbon fee.

A source from the industry said Thursday that the industry had recently faced setbacks and a serious decline in profit in the first three quarters of 2023.

FEATURE/Taiwan set on carbon 'fee' rather than 'tax' to cut carbon

Neighboring countries that compete with Taiwan also have less stringent carbon fee rules, he said, adding that in China and Japan, no carbon fees are levied on the petrochemical industry.

Furthermore, in South Korea, petrochemical companies are simply required to purchase carbon offsets if their five-year emissions average exceeds the government cap, he added.

The industry hopes the government will suspend its carbon fees as it is already dealing with global oversupply resulting from China's increased production capacity, the source added.

In addition to those in industry, environmental groups immediately slammed the new proposal, labeling it a poor way to exert pressure on companies to decarbonize.

Jan. 3: Newly unveiled carbon fee calculating formula slammed by critics

Dec. 29: Government releases tentative outline of carbon pricing plans

Meanwhile, the ministry released a statement on Thursday refuting local reports claiming that carbon fees would push up housing prices by at least 15-35 percent.

The statement noted that raw materials only make up 15-35 percent of housing costs, and of that cost, just iron and steel (21 percent) and cement (10 percent) fall under carbon pricing regulations.

The statement added its impact estimate is in line with that of the United Nations Intergovernmental Panel on Climate Change Sixth Assessment Report, which found that the impact of decarbonization on the supply-side -- such as cement and steel industries -- would lead to an increase of less than one percent in the final housing price.

(By Liu Chien-ling, Lai Yen-hsi, and Alison Hsiao)

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