1

Greenhouse effect and CO2 emission

Chi-Yuan LiangInstitute of Economics, Academic Sinica

November 1, 2006

2

1. Introduction

3

2. The impact of Kyoto protocol on Taiwan

4

2.1 Investment and trade risk before 2012 (1/2)

Three EU environmental directives:(1) WEEE (Waste Electrical and Electronic

Equipment) Effective since August 2005(2) ROHS (Restriction of Hazardous

Substance) Effective since July, 2006(3) EUP (Eco-design Requirement for Energy

Using Producers) might be effective after 2008

5

2.1 Investment and trade risk before 2012 (2/2)

• Energy productivity of Taiwan was 47% lower than the EU.

• EU accounted for 13 percent of the exports of Taiwan in 2004. In the meanwhile, exports accounted for 60 percent of GDP of Taiwan.

• The trade and economic growth of Taiwan will be significantly affected once EU implement the directive of EUP.

6

An International Comparison of Energy Productivity

0

2

4

6

8

10

12

Taiwan Italy Japan France Germany England America SouthKorea

Canada

US

doll

ars

(199

5) /

kgs

7

2.2 Investment risk after 2012

1.6

46.3

111

0

20

40

60

80

100

120

Unit: %The growth of

CO2

Appendix 1 countries

Non-appendix 1countries

Taiwan

An International Comparison on CO2 Emission

8

2.3 Causes of acceleration in CO2 emission since 1999

Year The growth rate of CO2

The growth rate of GDP (%)

CO2%/GDP%

1996-99 4.68 5.40 0.87

2000-03 5.07 2.55 1.99

1996-03 4.91 3.77 1.30

2The growth rate of CO* The elasticity of income =

The growth rate of GDP

The growths of CO2 and GDP in Taiwan, 1996-2003

9

Energy Structural Changes in Taiwan (1996-2003)

2732.6

2.7 1.4

11.38

53.450.8

5.6 7.3

0

10

20

30

40

50

60

1996 2003

Unit:%

年

Coal

Hydraulic Power

Nuclear Energy

Petroleum

Natural Gas

10

The changes in energy efficiency in Taiwan (1996-2003)

Year The growth rate of energy productivity ($NT/l)

The growth rate of energy intensity (l/$NT)

1996-99 -0.22% 0.21%

2000-03 -8.85% 9.76%

11

An international comparison of oil prices

Country Diesel 92 gasoline 95 gasoline

Korea 42.26 52.17 54.87

Singapore 27.80 36.57 37.22

Japan 32.23 38.80 --

The average price of adjacent countries

34.10 42.51 46.05

Taiwan 24.50 27.90 28.60

Differences in oil prices between Taiwan and the average price of adjacent countries (%)

-28.15% -34.37% -37.89%

Unit: NT dollars/litre

12

An international comparison of electricity prices for lighting

1 .2 7

2 .0 4 2 .0 72 .3 1 2 .4 3 2 .4 9

2 .6 73 .0 1 3 .11 3 .2 3

3 .5 8 3 .6 7 3 .7 0 3 .7 13 .9 4

4 .11

4 .5 8 4 .6 1 4 .7 1 4 .7 8

5 .7 8 5 .8 5 5 .9 2

6 .3 86 .7 7

9 .4 6

0

1

2

3

4

5

6

7

8

9

10$NT/kilowatt-hour

Taiwan: $2.49

Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad , 2004.

13

An international comparison of electricity prices for industry

1 .1 0

1 .4 41 .5 7

1 .6 7 1 .7 2 1 .7 6 1 .7 7 1 .8 01 .8 8

2 .0 8 2 .1 1 2 .1 52 .2 4

2 .4 1

2 .7 9 2 .8 4 2 .8 63 .0 1

3 .1 13 .2 1 3 .2 1 3 .2 1 3 .2 2

3 .3 4

5 .0 2

5 .4 1

0

1

2

3

4

5

6$NT/kilowatt-hour

Taiwan: $1.76

Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad (TNB) , 2004.

14

The ratio of consumptive industries to total energy between 1980-2004

15

2.4 The impact of CO2 reduction on Taiwan

Item One Step Progressive

Reduction of CO2 (%) -25.77 -25.31

The growth rates of GDP deflator (%)

2.26 1.01

The economic growth rate (%) -1.57 -1.19

Annual average marginal social costs of CO2 reduction

1734 1186

Notes: 1. Levying carbon taxes for attaining the objective of CO2 reduction

2. The progressive method is levied annually for twenty years.

The effects of different CO2 abatement approaches on Taiwan

16

3. Rethinking on energy policy (1/3)

3.1 Energy pricing policy

Energy price should fully reflect its internal and external cost.

• Oil price

Floating oil price mechanism is a right direction but should be modified.

17

3. Rethinking on energy policy (2/3)

• Electricity price

Price adjustment formula and mechanism is needed.

• Automobile fuel fee (Road-maintenance fee)

AFF should levy on oil products instead of car.

18

3. Rethinking on energy policy (3/3)

• Carbon tax (energy tax) and green tax reform

(i) Tax on CO2 emission

(ii) Progressive approach

19

Carbon tax (energy tax) and green tax reform (Cont.)

(iii) Green tax reform The tax revenue should be used (a) To reduce the personal and business income tax

rate(b) To lower the burden of social welfare

(retirement fund and Medicare) of the employers(c) Subsidies of energy expenses to the low income

families(d) To purchase CO2 emission quota from abroad(e) Energy R&D

20

3. Rethinking on energy policy (2/2)

3.2 Industrial restructuring

3.3 Energy restructuring

• The limit of renewable energy

• Reevaluation on “Nuclear Free Homeland” policy

21

Comparison on the costs of generation in Taiwan

2.45 2

20

15

8.5

14

19

1.192.73 2.4

1.480.655

0

5

10

15

20

25Unit: $NT/killowatt-hour

22

The CO2 abatement plan of the 2nd Energy Conference

23

Chart of Total Scores of Monitoring Indicators

24

The international development of nuclear power in 2004 (1/2)

Country Operating ageunder

constructionScheme

Argentina 2 26 1 1 9% 3%

Armemia 1 24 0 0 36% 23%

Belgium 7 24 0 0 56% 19%

Brazil 2 13 0 1 4% 2%

Bulgaria 4 19 0 0 38% 20%

Canada 17 20 0 2 13% 6%

China 10 4 1 4 2% 1%

Czech 6 13 0 0 31% 13%

Finland 4 25 1 0 27% 19%

France 59 20 0 1 78% 38%

Germany 18 23 0 0 28% 11%

Hungary 4 19 0 0 33% 10%

India 14 17 8 0 3% 1%

Iran 0 0 2 1 0% 0%

Japan 54 20 2 12 25% 10%

Nuclear Power

Total Electric Power

Nuclear Power

Energy

25

The international development of nuclear power in 2004 (2/2)Nuclear Power

Total Electric Power

Nuclear Power

EnergyCountry Operating Age Under Construction Scheme

North korea 0 0 1 1 0% 0%

South korea 19 12 1 8 40% 14%

Lithuania 2 19 0 0 80% 38%

Mexico 2 13 0 0 5% 2%

Netherlands 1 31 0 0 5% 1%

Pakistan 2 19 0 1 2% 1%

Romania 1 8 1 0 9% 3%

Russia 30 23 3 0 17% 5%

Slovakia 6 17 0 0 57% 21%

Slovenia 1 23 0 0 40% 21%

South Africa 2 20 0 0 6% 2%

Spain 9 23 0 0 24% 10%

Sweden 11 26 0 0 50% 33%

Switzerland 5 29 0 0 40% 21%

Taiwan 6 23 2 0 22% 9%

Ukraine 14 17 3 0 46% 14%

UK 23 26 0 0 24% 9%

USA 104 25 0 0 20% 8%

26

Conclusion Remark

• To cope with the oil price surge and Kyoto protocol is tough.

• However, the truth is that there is no free lunch in the world.

• Government should be responsible and takes the right actions. The entrepreneurs and consumers should also react now.