Transcript Future Development & Regulatory Requirement for Reduction

Emissions Trading Scheme in Taiwan and
International Linkage
EU-Taiwan Climate Change Forum
Dr. Hui-Chen Chien
Deputy Director-General
Department of Air Quality Protection and Noise Control
Environmental Protection Administration
13 October 2010
Outline
1. Existing and Emerging ETS Worldwide
2. Legal Foundation in Taiwan
3. Taiwan’s Emissions Trading Scheme
4. International Linkage
5. Concluding Remarks
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1
Existing and Emerging ETS Worldwide
Taiwan ETS
similar in size to RGGI
1
Elements for ETS Linkage
•
•
•
•
•
•
•
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Cap (absolute vs. intensity-based, stringency of cap)
Coverage (sectors and GHGs)
Allocation rules (free vs. auction)
MRV standards (methods for monitoring, reporting,
verification)
Offsets (eligibility of Kyoto and non-Kyoto units)
Cost containment (offsets, borrowing, price cap, etc.)
Registry system (inter-registry linkage, technical issues)
Trading platform (trading of various units, liquidity)
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1
Complementary Measures of Taiwan ETS
• MRV Mechanism: assures that all sectors follow international
MRV requirements when reducing their GHG emissions or
generating offset credits.
• National Registry: serves as the national GHG emissions database,
and provides a transparent management system for emitters.
• Offset Project Management System: managing early action that
the government has been promoting over the past years, and issues
offset credits following MRV requirements.
• Carbon Credit Management and ETS: establishing a system
which is capable of linking with international markets, offers
participants a fair and open trading environment.
• Foreign Offset Credit Transfer Mechanism: provides a strict
reviewing process to ensure the credibility and cancellation of
foreign offset credits, in order to avoid reselling.
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2
Taiwan’s Voluntary Reduction Target
 Government adopted emission reduction targets with the
National Energy Conservation and Carbon Reduction Program
 Returning to 2005 level by 2020
 Returning to 2000 level by 2025
500
2009 BAU
(GDP High Growth Scenario)
467
M Tonnes CO2
450
391
400
375
370
341
338
350
305
300
257
265 269
257
Return to 2005 level in 2020
200
2000
2005
LNG
Renewables
Nuclear
Afforestation
Taipower
offsets
Shortfall
257 (~48 mt)
243
250
Energy
intensity
-2%/yr
2010
6
2015
2020
Our GHG Reduction Goal
2
GHG reduction goal in Taiwan – Return to 2005 level in 2020, it means 45%
BAU decreasing percentage in 2020.
This BAU reduction percentage is far more than those comparative countries
as Taiwan (Korea declines 30% GHG emission of BAU , Singapore declines
16% GHG emission of BAU); and IPCC suggested developing countries shall
set a goal as decreasing 15-30% GHG emission of BAU in 2020.
Growth
Low Growth Scenario
M Tonnes
emissions
BAU reduction
contribution
compared to 2020
Medium Growth Scenario
Sorts of
Contribution
Reduction
M Tonnes
Sorts of
Contribution
Reduction
(1) Nation Reduction
(including yearly 2%
energy density decline)
Oversea
Credits
Reduction
Gap
Note: GHG emissions are mainly combusted fuel CO2 in Taiwan (90%),
Other Non-CO2 emissions declined in recent year.
High Growth Scenario
M Tonnes
Sorts of
Contribution
Reduction
2
Establishing a Legal Foundation for GHG
Reduction in Taiwan
• In order to achieve the target, “Green Policies” will be
the important legal foundation for “Energy Saving and
Carbon Reduction” :
– Energy Management Act and Renewable Energy
Development Act have already been passed in the
Legislative Yuan in 2009.
– The above-mentioned bills are complementary to
Greenhouse Gas Reduction Bill and Energy Tax Bill,
waiting to be reviewed and promoted the Legislative
Yuan and Executive Yuan.
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3
Taiwan Emissions Trading Scheme (ETS)
• The design of the Taiwan ETS is according to the spirit of
low-cost and cost effectiveness in the GHG Reduction
Bill, currently being reviewed by the Legislative Yuan.
Taiwan ETS is a market-based approach used to reduce
the emissions by providing economic incentives. The
scheme also works to develop industries capacity-building.
• MRV Mechanism:
The design of the Taiwan ETS not only follows the
international MRV requirements, but UNFCCC/CDM
mechanism as well, using similar standards for verifying
project-based reduction.
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3
GHG Reduction Strategies by Stages
Before the Act
Stage I
Voluntary Reporting,
Early action,
EIA offset
Voluntary、
early action and
capacity building
Stage II
Mandatory
inventory and
reporting
Designated sources
to be promulgated
by EPA
Carbon Neutral/Carbon Footprint
EIA
Stage III
Performance standards,
Offsets
Designated sources
and new entrants, account
management system
Offset Performance
Standard
National target, distribute to
industry authorities, allocate to
designated sources, auction
Offset Emission Credit
(Cap-and-Trade)
From
From Voluntary
Voluntary to
to Mandatory
Mandatory
From
From Inventory
Inventory to
to Reduction
Reduction
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Cap-and-Trade,
Offsets
3
GHG Reduction Act Implementation
Before GHG Act
Voluntary
inventory/
reduction
Stage I
Stage II
Mandatory
inventory/
Voluntary reduction
Performance
standards/
Offset trading
Stage III
Cap and Trade
Inventory reporting
Inventory reporting
Inventory reporting
Inventory reporting
Verification system
Verification system
Verification system
Verification system
Performance
standards
Performance Stds
Allocation
Auction
Emission Permits
Pilot offset trading
Offset trading
Cap and trade
Early action/offset projects
Early action/
offset projects
Early action/offset
International
offsets
International offsets
Perform std offsets
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International offsets
Perform std offsets
Allowances
3
Current Participants of the Taiwan ETS
• Under the Environmental Impact Assessment (EIA) Act,
facilities that are required to offset their emissions will be the
potential participants of the Taiwan ETS. Other facilities are not
included in the scheme, but voluntary buyers are welcomed.
– EIA commitment: Companies have committed to offset the
increased emissions by purchasing carbon credits.
– Voluntary buyers (e.g., Carbon Disclosure and Carbon
Neutral): In order to strengthen international competitiveness,
companies in Taiwan are participating the Carbon Disclosure
Project and considering making their company carbon neutral
to promote green business image.
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3
Recent Progress
• Since the GHG Reduction Bill is still being reviewed by
the Legislative Yuan, the following guiding principles
were set using Executive Regulations:
– 6 November 2009: “EPA Operational Principles for GHG
Verification Bodies” - establish third-party verification system
– 10 September 2010: “EPA Management Principles for GHG
Emissions Inventory and Registration” – establish MRV system
– 10 September 2010: “EPA Promotion Principles for Early Action
and Offset Projects” – establish emission credit MRV system
– Emission credits management and trading system: under
development
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3
Early Action Crediting Program
Offset Projects
Early Action
Designated
Sources
Emissions
Intensity
ISO14064-1
Organization-based
reduction credits
• EIA Offsets
• Performance
Standards
• Cap and Trade
Offsets
May choose either one but NOT both
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Reduction
Project
Methodology
ISO14064-2
Project-based
reduction credits
3
Early Action Crediting
• Crediting starting from 1 January 2000
• Intensity-based standards
– e.g., emissions/unit production
– To be set in consultation with industry authorities
• Target: designated emission sources before the performance
standards (GHG Reduction Act)
Emission Reductions =
(Intensity Standard – Calculated intensity) x
Activity (e.g., production units)
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3
Offset Crediting
• CDM methodology or those approved by the central
competent authority (EPA)
• Additionality test
• Nuclear power excluded
• Crediting starting date:
– No earlier than EPA registration date (except for those that have been validated
before rules set)
• Crediting period:
– Forestry: 30 years fixed, or 20 years with 2 renewals
– Others: 10 years fixed, or 7 years with 2 renewals
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3
Emission Credits Management System
EPA
Completed
Accreditation
Entity
Under
development
Domestic
(Early action
offsets)
Verification
Bodies
(international)
Emission Sources
Inventories
International
Offsets
(CDM)
Project Proponents
Emission
Credits
Platform
National
Registry
EPA
Trading
Platform
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National
Inventory
Sector
Allocation
3
Pilot Emissions Trading Plans
• Emissions trading platform consist of “registry”, “trading”, and
“clearing” systems
• Trading platform is an electronic database that provides credits
registration and transfer by participants, and linkage to national
registry
• Trading account functions managed by the trading system.
Registry system
Electronic
operations
Emission Credits
Management System
Clearing system
Trading system
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Reduction Credit Source and Application
Domestic Reduction Project
Before CAP
Validation/
Verification
EIA
Performance
Standard
Permit
After CAP
Early Action / Offset
Program
Acquire Credit
Allowance
Central GHG Registry
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EPA Approval
International
Offset
Offset
3
CERs
Others approved
by the UNFCCC
3
Preliminary ETS Scheme Design
Economy-wide Target
ETS Sector
coverage
Energy
Other policy
instruments
Industry
Transport
Resident/
Commercial
Allocation
Source
A
Source
B
Source
C
Source
D
Acct.
A
Acct.
B
Acct.
C
Acct
D
Central Registry
Govt.
Approval
Early action,
Domestic offset
Clearing
Acct.
A
Acct.
B
Acct.
C
Acct.
D
Domestic Trading Platform
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Others?
International
Offsets 35-50%
(CERs, etc.)
Carbon
Price
Signal
3
Implications of Taiwan Entities for Getting CERs
To assist emitters to use available resources in the most costeffective manner to meet their responsibility under our
government’s voluntary GHG reduction program, or provide
credits to new emission sources for meeting their reduction
commitment from the environmental impact assessment.
For those emission sources implementing domestic reduction
and offset as a priority but would still need to meet their
voluntary reduction responsibility through foreign carbon
offset projects, the government would assist them acquire
offset credits from the CDM in order to gain international
credibility, while assuring the effectiveness of their foreign
investment.
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3
International Offset Credits Acquisition
Establish Foreign
Account
Set up foreign entity and
Annex-I account
Annex I country
issues LoA
Develop CDM
Projects
CERs
Management
Indirect Transfer to
Taiwan
Entity participates in
CDM projects in nonAnnex I countries
Transfer CERs to
foreign account
CERs from primary,
secondary markets
CERs cancellation
for domestic offset
(EIA, cap)
Account
Administrator
(EPA Registry)
Issue domestic credits
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4
International Linkage
• Advantages of International Linkage
– Reduce the aggregate cost of the linked systems’
collective emissions target
– By broadening markets for allowances and credits,
linking increases liquidity and improves the functioning
of those markets
– High cost of reduction in Taiwan is one of the reasons to
explore the possibilities of international linkage.
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4
Linkage with International Carbon Market
Establishing a domestic ETS
linking with Kyoto mechanisms
has become the main measure
for countries to reduce CO2
emission.
Taiwan is actively seeking an
opportunity to participate in
international carbon markets and
build bilateral or multilateral
corporations with developed
countries and countries in AsiaPacific region.
Taiwan ETS would inevitably
linked with the international
carbon markets
e.g., EU Linking
Directive
e.g., EU ETS,
Norway,
Switzerland, etc.
e.g., CDM,
international
offsets
Regional Carbon Market
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5
Concluding Remarks
• As a highly industrialized economy, Taiwan is building the
capacity for domestic mitigation, but our reduction cost is
very high.
• We are aiming at measurable, verifiable, reportable (MRV)
management for GHG reduction, and proceeding with
legislation of the GHG Reduction Bill.
• Market mechanisms such as emission trading would allow
us to join the global effort to reduce emissions in a costeffective manner, through linkage with other offset and
trading schemes.
• A clear carbon price signal would promote domestic
reduction, moving us toward a low-carbon society.
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Thanks for your attention,
Comments please…
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