beyondbrics

By Jane Rickards in Taipei

Taiwan’s Premier Wu Den-yih this week urged the island’s Environmental Protection Agency to draw up plans for a cap-and-trade system. At a time when the US and Australia have all but abandoned the idea, Taiwan’s preparations for a green house gas emissions trading system could eventually resemble the one used by the European Union.

But two big obstacles stand in the way of making the system work: local businesses, and Beijing.

Taiwan president Ma Ying-jeou has pledged to reduce Taiwan’s emissions levels to that of 2000 by 2025. Yet, while he is determined to introduce such a system and law makers from his ruling Kuomintang have a clear parliamentary majority, he may find it tough convincing local industries, which believe the move threatens their competitiveness, especially with respect to their rivals in neighbouring Asian nations.

“I think President Ma really means this,” said Cheng Liwun, a KMT law maker who sits on parliament’s environment committee.

“The problem is that the government still has to convince people from industry that this is doable. There is a lot of doubt,” Ms Cheng said.

Many industries strongly oppose the idea or are suspicious, observers said, especially petrochemical companies. The Formosa Plastics Group and the CPC Corporation are both seeking government approval for expansion and the proposed bill may conflict with their plans.

Formosa, which wants to expand its chemical plants on the island, is estimated to produce around 25 per cent of the island’s carbon dioxide emissions, according to Robin Winkler, managing partner of law firm Winkler Partners and an environmental activist.

Strong opposition from local industries has stalled the passage of the greenhouse gas reduction bill since its introduction to parliament in 2006.

In response, Ma’s government in late 2008 revised the bill to make it more flexible and acceptable to businesses, raising new hopes that parliament will pass it.

Under the government’s new revisions, the transition to a cap-and-trade scheme will be done incrementally to help local business get used to the idea, said Minister-without-portfolio Liang Chi-yuan.

In the first stage, businesses will be encouraged to commit to a voluntary nationwide cap-and-trade market, Mr Liang said, and a “relative cap” on the nation’s emissions would be set. The details are still being worked out, he said, but a benchmark cap in the first stage might be a ratio of carbon dioxide emissions relative to the island’s GDP growth.

The later stage, he said, “similar to the EU system”, would set a blanket cap on emissions.

But there’s another problem – Taiwan’s diplomatic limbo.

Winkler said that even if such a cap-and-trade system was established, Taiwan currently is prevented from trading emission credits in international markets due to its political isolation.

Pressure from Beijing ensures that the nation is excluded from United Nations climate treaties, such as the United Nations Framework Convention on Climate Change (UNFCCC).

This means Taiwanese companies would not be able to get internationally-recognized certification for their emission inventories, he said.

Picking a fight with local industry is one thing. Picking a fight with Beijing is another matter altogether.