Taiwan carbon fee source of rebate for EU tariff, applies more broadly: Official

Taipei, Nov. 7 (CNA) Taiwan’s carbon fee will reduce the tariff that Taiwanese exporters will be subject to under CBAM when exporting to the EU, but the exact amount that will be paid depends on many other factors, Climate Change Administration head Tsai Ling-yi (蔡玲儀) said Tuesday.

The European Economic and Trade Office (EETO) jointly held a press luncheon with the Ministry of Environment’s Climate Change Administration to explain the implementation of CBAM (Carbon Border Adjustment Mechanism), the transitional phase of which officially started on Oct.1, 2023.

Aleksandra Kozlowska, head of the trade section of the EETO, said CBAM, a carbon tariff on carbon-intensive products imported by the European Union, is a measure to address the risk of carbon leakage because when the free allocation of EU ETS (Emission Trading Scheme) carbon emission allowance in the EU is gradually phased out, European producers might move their production sites to countries with no carbon emission restrictions.

Six energy-intensive sectors — cement, steel, aluminum, fertilizer, hydrogen, and electricity – will first be covered by CBAM, because, according to Kozlowska, there is a high risk of carbon leakage in these industries and they cover a high share of greenhouse gases (GHG) emissions in the EU.

During the transition period, which runs to the end of 2025, no fees will need to be paid nor certificates purchased; rather, it is a period of “monitoring, reporting, and learning” for both the EU and those exporting into the EU, to ensure a smooth roll-out of the mechanism from 2026 onwards, the EU office official said.

Tsai said the Ministry of Economic Affairs has set up various channels of CBAM consultation for Taiwan’s traders and manufacturers, including seven conferences in October and four CBAM product carbon content calculation workshops scheduled for November and more before the end of the year.

Regarding the price of the carbon tariff, Kozlowska explained that the calculation of CBAM tariffs applicable would be the total emissions — deducting the free allocation of the allowance granted to EU counterparts — times the EU’s ETS carbon price of the time.

Adjustments can be made to the CBAM obligation when “a carbon price has been effectively paid in the country of origin [of the products],” which can be claimed as a rebate to reduce the amount to be paid, she added.

“So if you ask how many Taiwanese exporters will have to pay at the border starting in 2026, I cannot tell you, as it will depend on the design of Taiwan’s [carbon price] system – whether it’s rigid or flexible like the EU’s ETS – and the price of the ETS allowance, which could range from 6 Euros to 100 Euros if my memory serves correctly,” Kozlowska said.

When asked whether Taiwan’s carbon fee rate should match the level of EU ETS price to claim the rebate in its entirety, she said that looking only at CBAM for designing Taiwan’s carbon pricing would not be the right approach because the range of carbon fee coverage is much broader than CBAM.

Tsai also stressed that Taiwan’s carbon pricing mechanism and other supporting measures such as voluntary emission reduction projects are aiming to reduce the country’s overall carbon emissions.

“After all, products exported to the EU account for only a small part of the country’s carbon emissions, so the emphasis of our design of the [pricing] system will be placed on boosting domestic manufacturers’ carbon reduction,” Tsai said.

Asked whether it is feasible for Taiwan to implement a flexible rate as the EU official suggested, Tsai said a carbon fee rate review committee will be set up to examine the effectiveness of the carbon price on the country’s carbon reduction, but how often the rate will be reviewed is still under discussion.

The carbon fee rate, according to the administration, is slated to be announced by the end of the year.