summary:
Climate change and anomalies have serious consequences not only for the environment but also for the economy, and are regarded as issues that the world can no longer ignore. A report by British economist Sir Stern pointed out that climate change can be described as a serious market failure that may lead to global GDP losses of up to 20%. In order to solve this problem, governments around the world have decided to control greenhouse gas emissions through a "carbon pricing mechanism", and carbon tax is one of the carbon pricing mechanisms. In addition, according to the World Bank report, the trend of countries around the world implementing carbon taxes is increasing, and the global carbon tax rate trend is gradually rising. In response to climate change, our country passed the "Climate Change Response Act" in February 2023, and plans to implement it in 2024. Carbon fee collection measures will be implemented on enterprises as a corresponding countermeasure. Although the price of carbon fees has not yet been determined, this measure will become an important measure for my country to integrate with the world; at the same time, it will also become the first example of the implementation of carbon fees in the world. In the future, Chinese companies will actively conduct comprehensive carbon inventories and plan comprehensive carbon reduction strategies to achieve the net-zero goal.
1. Background:
Global climate change and anomalies have always been a thorny issue. In recent years, humans have realized that climate change is not only related to the environment for human survival. From an economist's perspective, climate change is the world's most serious market failure, according to British economist Nicholas. Sir Nicholas Stern's first report on environmental woes shows that the cost to humanity of climate change could be as high as 20% of global GDP. Many studies have shown the importance of pollution emissions, forcing countries to pay attention to environmental issues. However, in order to overcome problems such as climate change and market failure, government agencies or legislative bodies in various countries or regions have decided to price the things that cause such damage, that is, greenhouse gas emissions, and carbon tax is One of the commonly used carbon pricing mechanisms differs from other mechanisms in that it uses price to control emission reductions.
The establishment of carbon tax is based on the user-pays principle, which transfers the social cost responsibility of carbon pollution to emitters, which helps companies reduce their carbon footprint and commit to the goal of reducing their carbon footprint. In addition, the key to carbon tax lies in the setting of carbon tax rate, which is different in different regions for different departments or fuel users. For the government, the imposition of a carbon tax can promote the use of renewable energy and technology and reduce harm to the environment. Secondly, it can be used as a source of revenue for the government, which can be used for social welfare, infrastructure development, etc. In addition, because the carbon tax price does not fluctuate in response to market mechanisms, but is set in advance, it allows companies and investors to better plan and make long-term investments. However, for enterprises, the increase in operating costs leads to a decrease in profits, and the company will pass the costs on to consumers. In addition, in order to avoid high carbon taxes, companies may transfer their production and investment to low-cost countries, causing carbon leakage.
2. Current situation:
1. International trends
According to the 2023 "State and Trends of Carbon Pricing 2023" released by the World Bank, countries that have implemented carbon taxes include Canada, Spain, Switzerland and other countries that have implemented carbon taxes. , plus the EU Emissions Trading System (ETS) and Carbon Offset as a combination; the United States, the United Kingdom, Sweden and other countries use taxes and fees plus the EU Carbon Offset, which is both the same as the former. It is a combination of multiple mechanisms including carbon tax; as well as Argentina, Chile, Colombia, Singapore and other regions that implement a single carbon tax and fee mechanism. Although many Asian countries have established carbon trading platforms and used carbon tax mechanisms, compared with Europe, the United States and other regions, there are very few countries in Asia that have implemented carbon tax mechanisms. They started late and the prices are below the global average.
In terms of global carbon tax rates, 2020 showed steady development. By 2021 and early 2022, the average increase was US$6 per ton of carbon dioxide equivalent (tCO2e) (approximately NT$184) and US$11 per unit (approximately NT$337). Yuan), tax rates in most areas increased compared with the previous year. In terms of the carbon tax rate in 2022, Uruguay in South America ranks first in the world with US$137 (approximately NT$4,200) per ton of carbon dioxide equivalent (tCO2e), followed closely by Sweden in Northern Europe. The unit in British Columbia, Canada, is US$40 (approximately NT$1,226) in America, and the unit in Ireland in Europe is US$37~45 (approximately NT$1,134~1,380). Looking at Asia, there are only a few countries that have levied carbon taxes. Singapore, for example, which started promoting it earlier, has implemented a phased increase in carbon taxes. In the first phase (2019-2023), the carbon tax is US$3.73 per ton of carbon dioxide equivalent (tCO2e) (approximately NT$114), which will be raised to US$18.65 per unit (approximately NT$571) in the second phase in 2024; Japan levied a US$2 per unit (approximately NT$61) two years ago (2021) . It can be seen from the above that Asia, which has only begun to impose carbon taxes in recent years, has lower carbon tax prices than Europe and America and other regions.
The revenue from carbon taxes is usually used for specific purposes. According to the 2023 "Carbon Pricing Status and Trends Report", nearly 40% of revenue is dedicated to green expenditures, and 10% is used to compensate households or businesses. According to report statistics, there are 73 carbon pricing mechanisms in effect, including carbon taxes, and the emissions targeted by these tools account for 23% of total global greenhouse gas emissions.
2. my country’s policies
Carbon fees are similar to carbon taxes in that they also levy fees on carbon emissions, which can be a direct tax or through an emissions trading system or other mechanisms. However, my country has chosen to implement carbon fee measures in response to the severe situation of global climate change, as well as the increasing requirements for carbon reduction in the international industrial supply chain, and the imminent implementation of more stringent carbon emission control measures in various regions. Therefore, in order to complete the foundation of China's climate legal system, a climate change adaptation strategy was formulated. The "Climate Change Response Act" was passed on the third reading on February 10, 2023. The amendments clearly included the goal of achieving net zero emissions in 2050 into the bill, and included The carbon fee is levied into the law. The parent law does not explicitly mention the setting of carbon fee rates and the establishment of a carbon tax, and further sub-laws need to be formulated to authorize implementation. Among them, the most critical one is the "carbon fee" sub-law, which involves important matters such as the rates and objects to be levied. To this end, the Environmental Protection Agency has discussed and plans to propose a draft sub-law within six months. The final version of the sub-law is expected to be announced in 2024, which will provide clearer guidance and legal basis for the specific implementation of the carbon fee system. If implemented, it will be the first case in the world to implement a carbon fee.
The "carbon fee" has been clearly enacted into law and will be levied to the Environmental Protection Department as a dedicated fund. According to the plan of my country's Environmental Protection Agency, it is expected to implement carbon fee collection measures on enterprises in 2024. This collection measure will be carried out in a "large first, then small" and "phased" manner. The first phase of collection will include 287 large carbon emitters. These companies emit more than 25,000 metric tons of carbon dioxide equivalent (CO2e) annually and include industries such as steel, petrochemicals, semiconductors, cement and electricity.
Regarding the price of China's carbon tax, civil society has stated that it should be NT$500 per metric ton, and will be adjusted to NT$3,000 per metric ton in 2030; however, the Environmental Protection Agency has not announced it as of June 2023; according to the Environmental Protection Agency According to the results of the "Carbon pricing options for Taiwan" research report commissioned by the Department of Economics and Political Science and published by the London School of Economics and Political Science (LSE) in 2020, it is recommended that China's carbon pricing will increase from 10 per ton. Starting from USD (approximately NT$300).
Participation, future development
The issue of climate change is the responsibility of every member of the earth. Therefore, whether it is a carbon tax or a carbon fee, we all hope to achieve the goal of net zero. In addition to implementing carbon pricing mechanisms, countries have also implemented many carbon tariffs and other measures. Therefore, our country is actively establishing a carbon fee-related mechanism not only to compensate for the environmental damage caused by greenhouse gas emissions, but also to keep up with the pace of other countries in the world and improve our country's relevant laws and regulations on climate change. It can be seen from the Carbon Border Adjustment Mechanism (CBAM) specifications officially announced by the European Union on May 16, 2023 that international industries will expand and tighten the implementation of emission reduction measures, and relevant supply chain manufacturers will be affected. Because according to the CBAM content, if the exporting country has paid the carbon tax, it can obtain a credit when importing, so our country is export-oriented, and the EU is one of the major export markets. If a good carbon tax or carbon fee levy bill can be formulated, all the fees collected will fall into the hands of others.
The number of regions where carbon taxes are implemented is increasing year by year, even across industrial supply chains. CBAM makes my country's top five companies that bear the brunt of the impact, including cement, steel, aluminum, fertilizer, and electricity, among the five major high-carbon emission industries. The establishment of my country's carbon fee system has increased corporate awareness of emission reductions, thereby achieving environmental protection goals, and has also helped companies start to choose more environmentally friendly operations. However, other commodities have not yet been included in the list. Improving energy efficiency and reducing dependence on fossil fuels can better solve the problem, including improving related technologies, research and applications of renewable energy such as solar energy and wind energy, so that our country can reduce its reliance on fossil fuels. The long-term solution is to reduce the demand for traditional energy, reduce carbon emissions, and establish a more sustainable energy system.
Sponsor: Ministry of Economic Affairs, Small, Medium and New Enterprises Agency, Ministry of Economic Affairs
Execution unit: Plastic Industry Technology Development Center
