Emissions Trading Scheme in Taiwan and International Linkage Dr. Hui-Chen Chien Deputy...
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Transcript of Emissions Trading Scheme in Taiwan and International Linkage Dr. Hui-Chen Chien Deputy...
Emissions Trading Scheme in Taiwan and International Linkage
Emissions Trading Scheme in Taiwan and International Linkage
Dr. Hui-Chen ChienDeputy Director-General
Department of Air Quality Protection and Noise Control
Environmental Protection Administration
13 October 2010
EU-Taiwan Climate Change Forum
OutlineOutline
1. Existing and Emerging ETS Worldwide
2. Legal Foundation in Taiwan
3. Taiwan’s Emissions Trading Scheme
4. International Linkage
5. Concluding Remarks
2
Existing and Emerging ETS WorldwideExisting and Emerging ETS Worldwide
Taiwan ETSsimilar in size to RGGI
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Elements for ETS LinkageElements for ETS Linkage
• 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 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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6
Government adopted emission reduction targets with the National Energy Conservation and Carbon Reduction Program Returning to 2005 level by 2020Returning to 2000 level by 2025
Taiwan’s Voluntary Reduction TargetTaiwan’s Voluntary Reduction Target
4672009 BAU(GDP High Growth Scenario)
M T
onn
es C
O2
2000 2005 2010 2015 2020200
250
300
350
400
450
500
257
391
341
375
338
370
305
257269265257
243
Return to 2005 level in 2020
Energy intensity -2%/yrLNGRenewables
Nuclear
Taipower offsets
Afforestation
Shortfall(~48 mt)
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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.
Note: GHG emissions are mainly combusted fuel CO2 in Taiwan (90%), Other Non-CO2 emissions declined in recent year.
Our GHG Reduction Goal
Low Growth Scenario Medium Growth Scenario High Growth Scenario
M Tonnes M Tonnes M Tonnes
Growth
emissions
ReductionReductionReduction Sorts of Contribution
Sorts of Contribution
Sorts of Contribution
Oversea Credits
Reduction Gap
(1) Nation Reduction (including yearly 2% energy density decline)
BAU reduction contribution compared to 2020
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Establishing a Legal Foundation for GHG Reduction in Taiwan
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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2
Taiwan Emissions Trading Scheme (ETS)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 StagesGHG Reduction Strategies by Stages
Stage I Stage II Stage III
Cap-and-Trade, Offsets
Performance standards, Offsets
Voluntary Reporting,Early action,EIA offset
Mandatory inventory and reporting
Before the Act
Designated sources to be promulgated by EPA
Designated sourcesand new entrants, account management system
Voluntary、early action and capacity building
National target, distribute to industry authorities, allocate to designated sources, auction
Offset Performance Standard
Offset Emission Credit (Cap-and-Trade)
Carbon Neutral/Carbon FootprintEIA
From Voluntary to MandatoryFrom Voluntary to Mandatory
From Inventory to ReductionFrom Inventory to Reduction
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3
Performance standards/
Offset tradingCap and Trade
Voluntary inventory/reduction
International offsets
Offset trading
Inventory reporting
Performance Stds
Performance standards
Allocation
Auction
GHG Reduction Act ImplementationGHG Reduction Act Implementation
Early action/offset projects
Pilot offset trading
Stage I Stage II Stage IIIBefore GHG Act
Emission Permits
Allowances
Perform std offsets
Mandatory inventory/Voluntary reduction
Inventory reporting
Inventory reporting
Inventory reporting
Verification system Verification systemVerification systemVerification system
Early action/offset projects
Cap and trade
Early action/offset
International offsets
International offsets
Perform std offsets
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Current Participants of the Taiwan ETSCurrent 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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Recent ProgressRecent 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
3
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• EIA Offsets• Performance Standards• Cap and Trade
Designated Sources
Emissions Intensity
ISO14064-1
Reduction Project
MethodologyISO14064-2
Organization-based reduction credits Offsets Project-based
reduction credits
Early Action Offset Projects
Early Action Crediting ProgramEarly Action Crediting Program
May choose either one but NOT both
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3
• 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)
Early Action CreditingEarly Action Crediting
Emission Reductions = (Intensity Standard – Calculated intensity) x Activity (e.g., production units)
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3
• 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
Offset CreditingOffset Crediting
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3
Emission Credits Management SystemEmission Credits Management System
SectorAllocation
Emission SourcesInventories
NationalInventory
VerificationBodies
(international)
InternationalOffsets(CDM)
InternationalOffsets(CDM)
Trading Platform
Domestic(Early action
offsets)
Domestic(Early action
offsets)
National Registry
Emission Credits
Platform
Project Proponents
EPA
AccreditationEntity
EPA Completed
Under development
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3
Pilot Emissions Trading PlansPilot 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.
Clearing system
Trading system
Registry system
Emission Credits Management
SystemElectronicoperations
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Validation/Verification
Early Action / OffsetProgram
Domestic Reduction Project
Acquire Credit
Central GHG Registry
Off
set
EP
A A
ppro
val
International Offset
Before CAP
After CAP
EIA
PerformanceStandard
Permit
Allowance
CERs
Others approved by the UNFCCC
Reduction Credit Source and ApplicationReduction Credit Source and Application3
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IndustryEnergy Transport Resident/Commercial
Economy-wide Target
Allocation
ETS Sector coverage
SourceA
SourceB
SourceC
SourceD
Acct.A
Acct. B
Acct.C
AcctD
Central Registry
Govt.Approval
Acct.A
Acct.B
Acct.C
Acct.D
Others?
Clearing
Domestic Trading Platform
Early action,Domestic offset
International Offsets 35-50%(CERs, etc.)
Other policy instruments
Preliminary ETS Scheme Design
Carbon Price Signal
3
Implications of Taiwan Entities for Getting CERs Implications of Taiwan Entities for Getting CERs
To assist emitters to use available resources in the most cost-effective 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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International Offset Credits AcquisitionInternational Offset Credits Acquisition
Set up foreign entity and Annex-I account
Entity participates in CDM projects in non-Annex I countries
Transfer CERs to foreign account
CERs from primary, secondary markets
CERs cancellation for domestic offset (EIA, cap)
Annex I country issues LoA
Account Administrator (EPA Registry)
Issue domestic credits
Establish Foreign Account
Develop CDMProjects
CERs Management
Indirect Transfer to Taiwan
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• 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.
International LinkageInternational Linkage4
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Linkage with International Carbon MarketLinkage with International Carbon Market
e.g., EU Linking Directive
e.g., EU ETS, Norway, Switzerland, etc.
e.g., CDM, international offsets
Regional 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 Asia-Pacific region.
Taiwan ETS would inevitably linked with the international carbon markets
4
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Concluding RemarksConcluding 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 cost-effective 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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