Identifier
Created
Classification
Origin
09TAIPEI1453
2009-12-09 22:36:00
CONFIDENTIAL
American Institute Taiwan, Taipei
Cable title:  

TAIWAN'S GHG REDUCTION STRATEGY FACES CARBON

Tags:  SENV ECON ENRG EINV TRGY PREL TSPL TW XE 
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PP RUEHCHI RUEHCN RUEHDH RUEHFK RUEHGH RUEHHM RUEHKSO RUEHPB RUEHSL
RUEHTM RUEHTRO RUEHVC
DE RUEHIN #1453/01 3432236
ZNY CCCCC ZZH
P 092236Z DEC 09
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 2903
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEHKO/AMEMBASSY TOKYO PRIORITY 0905
RUEHUL/AMEMBASSY SEOUL PRIORITY 0371
RUEHBK/AMEMBASSY BANGKOK PRIORITY 4773
RHMFISS/HQ EPA OIA WASHINGTON DC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHHJJAA/JICPAC HONOLULU HI PRIORITY
RHHMUNA/USPACOM HONOLULU HI PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
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RUEHC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 06 TAIPEI 001453 

SIPDIS
SENSITIVE

STATE FOR EAP/TC, IO, OES/EGC, OES/ENV, OES/PCI, OES/STC,
EPA FOR KASMAN, TROCHE AND HARRIS, DOE FOR INTERNATIONAL,
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 12/10/2019
TAGS: SENV ECON ENRG EINV TRGY PREL TSPL TW XE
SUBJECT: TAIWAN'S GHG REDUCTION STRATEGY FACES CARBON
TRADING HURDLE

REF: A. TAIPEI 1243

B. TAIPEI 1093

C. TAIPEI 937

D. TAIPEI 784

E. TAIPEI 487

F. TAIPEI 302

Classified By: Deputy Director Eric Madison for reasons 1.4 (b) and (d)
.

C O N F I D E N T I A L SECTION 01 OF 06 TAIPEI 001453

SIPDIS
SENSITIVE

STATE FOR EAP/TC, IO, OES/EGC, OES/ENV, OES/PCI, OES/STC,
EPA FOR KASMAN, TROCHE AND HARRIS, DOE FOR INTERNATIONAL,
COMMERCE FOR 4431/ITA/MAC/AP/OPB/TAIWAN

E.O. 12958: DECL: 12/10/2019
TAGS: SENV ECON ENRG EINV TRGY PREL TSPL TW XE
SUBJECT: TAIWAN'S GHG REDUCTION STRATEGY FACES CARBON
TRADING HURDLE

REF: A. TAIPEI 1243

B. TAIPEI 1093

C. TAIPEI 937

D. TAIPEI 784

E. TAIPEI 487

F. TAIPEI 302

Classified By: Deputy Director Eric Madison for reasons 1.4 (b) and (d)
.


1. (C) SUMMARY: Taiwan is one of the world's largest per
capita emitters of greenhouse gases (GHG). Officials,
academics, and civil society have found common cause in the
idea of creating a "low-carbon society" in Taiwan, motivated
by political, economic, and disaster mitigation goals. The
central authorities have proposed a series of GHG reduction
targets that appear obtainable in the near-term, but would
require ambitious reductions from 2025 onward. The current
slate of proposals to achieve GHG reductions chiefly covers
energy production, the industrial sector, transportation, and
buildings. Individuals familiar with the GHG reduction
policy doubt that it would be able to meet Taiwan's stated
goals unless it is augmented with the use of carbon offset
credits. However, Taiwan's exclusion from UN climate change
agencies creates an obstacle to engaging in carbon trading,
and this situation has led the Taiwan Environmental
Protection Administration (TEPA) to formulate an unwieldy and
possibly unworkable carbon trading plan. Academics and civil
society groups have argued that the authorities should
instead focus on implementing an effective energy tax to
address artificially low energy and fuel prices, as opposed
to making plans to engage in "speculative" carbon trading.
Taiwan has taken some useful steps towards implementing
policies to stem GHG emissions, but could be encouraged to go
further, and to use the expertise it has gained from 16 years
of bilateral cooperation with the U.S. to become a regional

model for environmental management. Active U.S. support for
Taiwan's meaningful participation in international
environmental fora could pay dividends in reducing GHGs,
building cross-Strait cooperation, and opening commercial
opportunities for U.S. businesses. END SUMMARY.

--------------
SMALL ISLAND, BIG POLLUTER
--------------


2. (SBU) On a per capita basis, Taiwan ranks among the
world's twenty largest greenhouse gas (GHG) emitters, ahead
of South Korea, Japan, and the OECD average. Although the
island is home to only 0.35 percent of the world's
population, it accounts for 1 percent of global emissions,
and Taiwan's annual GHG emissions have more than doubled over
the last twenty years. Under a "business-as-usual"
trajectory, emissions will double again by 2025, reaching
over 530 million tons of CO2 equivalent emitted annually.
The bulk of Taiwan's GHG emissions come from the energy
sector (65 percent),the industrial sector (17.6 percent),
and the transportation sector (13.6 percent). Energy sector
emissions are overwhelmingly the result of burning fuel to
generate electricity. A deeper and more accurate analysis of
Taiwan's emissions sources would therefore look at a sectoral
breakdown of emissions after electricity allocation. In this
analysis, Taiwan's emissions sources are as follows:
industrial sector (53 percent),residential sector (15
percent),transportation sector (14 percent),service sector
(14 percent).

--------------

TAIPEI 00001453 002 OF 006


WHY BUILD A LOW-CARBON SOCIETY?
--------------


3. (SBU) Taiwan officials, academics, and civil society
groups have all begun using the phrase "low-carbon society"
when describing their vision for Taiwan's future development.
President Ma Ying-jeou and Premier Wu Den-yih in recent
months have made public statements reaffirming that Taiwan is
concerned about global warming and emphasizing that Taiwan
wants to actively contribute to reducing global GHG
emissions. Taiwan's Environmental Protection Administration
(TEPA) stated in its official position paper on the subject
that: 1) climate change is a global problem, and Taiwan, as
"responsible global citizen," has a duty to act; and 2)
reducing GHG emissions and sharing Taiwan's environmental
management experience with the rest of the world will bring
positive international attention to Taiwan.


4. (SBU) Taiwan environmental experts, meanwhile, have
offered scientific arguments relating climate warming to
increasingly intense rainfall and rising sea levels, both of
which could negatively affect Taiwan. Intense rainfall such
as that experienced during the August 8 Typhoon Morakot
disaster would lead to flooding and mudslides in many areas
of the island. Morakot caused over 700 deaths and an
estimated USD 3 billion in damage, and climatologists here
predict more such episodes of intense rainfall if the climate
continues to warm. In terms of sea level, a one meter rise
would flood an area of roughly 270 square kilometers,
affecting industrial centers and towns along Taiwan's highly
developed western coast. Political figures in Taiwan,
following Typhoon Morakot, have begun to regularly link
climate change with natural disasters, and the authorities
have tended to portray promotion of the low-carbon society
concept as taking positive action on the issue of disaster
preparedness.


5. (SBU) Industrial development is another motive driving
some of the low-carbon society proponents. Taiwan
authorities have launched a multi-billion USD investment plan
to develop "green technology" industries, such as
photovoltaic cells, LEDs, and electric vehicles. Taiwan
hopes that with increased global attention to alternative
energy and low-emissions technologies, the island can
leverage existing competitive advantages in advanced
electronics manufacturing to capture market share. Economic
planners have estimated Taiwan's green industry development
plan could create 110,000 new jobs and bring over USD 7
billion in investment to Taiwan over the next five years.
Although it is not clear that producing green goods in Taiwan
will actually lower the island's own GHG emissions (because
most of these goods are likely to be exported),the green
industries development plan is moving forward with widespread
official and corporate support, and is cited by the
authorities as an important part of Taiwan's transformation
into a low-carbon society.

--------------
SETTING EMISSIONS TARGETS
--------------


6. (C) Taiwan developed a Sustainable Energy Policy
Framework in 2008, which laid out a plan to reduce GHG
emissions to 2008 levels between 2016-2020, to 2000 levels by
2025, and to 50 percent of 2000 levels by 2050. In early
2010, Taiwan's Legislative Yuan (LY) is expected to pass the
landmark Greenhouse Gas Reduction Act (GHGRA),which will
codify those targets and mandate emissions caps. Senior

TAIPEI 00001453 003 OF 006


administration officials and TEPA stepped up their public
support for the bill in the weeks leading up to the COP-15
meeting in Copenhagen, and have reportedly reached a
consensus with the LY to harmonize the GHGRA to the
conclusions of the COP-15 meetings. The GHGRA was first
submitted to the LY in 2006, but languished because of
opposition from large polluters like CPC Taiwan and Formosa
Plastics.


7. (C) Senior researchers at Academia Sinica who reviewed
Taiwan's GHG reduction targets at the request of President Ma
told us that the 2016-2020 target is "soft," and could be
easily achieved. To hit the 2025 target, however, Taiwan
would need to cut 310 million tons of CO2 equivalent from its
business-as-usual trajectory, which the researchers at
Academia Sinica tell us would be extremely difficult.
President Ma Ying-jeou, if re-elected, would complete his
second term in 2016, thus leaving the difficult work of GHG
reductions to a successor, the academics noted. They added
that the GHGRA does not define clearly enough how emissions
caps would be allocated, and also allows room for Taiwan
authorities to essentially scrap the plan if it negatively
affects corporate/industrial interests.

--------------
ARE THE TARGETS ATTAINABLE?
--------------


8. (C) TEPA and the Bureau of Energy (BOE) have described a
multi-pronged strategy for achieving the island's GHG
reduction targets. The first and most important aspect of
the strategy focuses on increasing the use of alternative and
nuclear energies and decreasing energy intensity (i.e., the
amount of energy used per unit of GDP). Taiwan's
much-delayed fourth nuclear power plant is expected to come
on-line in 2011 with two reactor units producing 1,350 MWe
each, increasing Taiwan's nuclear power supply by roughly 50
percent. Contacts in the nuclear field told us they believe
President Ma will also add reactors to existing nuclear
sites, and nuclear power could be expanded significantly in
this way without undertaking the potentially difficult
political task of building new plants. However, a leading
Taiwan academic and advisor to Taiwan EPA noted privately
that even if each existing nuclear site runs its full
complement of reactors, nuclear energy will only be able to
supply 25 percent of Taiwan's projected 2025 power needs
(compared to 18 percent in 2008).


9. (C) For alternative energy, BOE has estimated that
decreasing hardware costs and public subsidies will help
Taiwan increase its share of power produced from alternative
sources from 0.4 percent in 2008 to 15 percent in 2025.
Taiwan EPA contacts privately doubt that alternative sources
could supply more than 8 percent of Taiwan's energy needs by

2025. These contacts also note that although the island's
Renewable Energy Development Act (REDA) went into effect this
November with the goal of incentivizing energy providers to
invest in a wide range or renewable energy sources, the
authorities have not yet set wholesale prices for Taiwan's
utilities to purchase renewable energy. Until feed-in
tariffs for renewable energy are sat at levels similar to
those in South Korea, for instance, TEPA experts do not
believe there will be significant demand for renewable energy
in Taiwan. On efficiency, from 2001-2008, energy intensity
in Taiwan improved by 1.52 percent per year, leaving the
island with lower energy intensity than the U.S. and South
Korea in 2008, but still higher than Japan, Germany, and the
UK. Both TEPA and BOE have estimated as part of their GHG

TAIPEI 00001453 004 OF 006


reduction projections that Taiwan will be able to register 2
percent annual gains in energy intensity moving forward, and
will see a 50 percent improvement by 2025.


10. (SBU) The industrial sector is a second area targeted
for significant GHG reductions. Taiwan has made efforts to
reduce CO2 emissions from large emitters through voluntary
programs spearheaded by TEPA. The most significant such
program targets the top 100 industrial GHG emitters, which
contribute up to 58 percent of all GHG emissions in Taiwan.
As of 2009, 62 corporation were voluntarily reporting,
including TaiPower, CPC Taiwan, TSMC, and AU Optronics, but
other big emitters such as Formosa Plastics chose not to
report. Taiwan's revised Energy Management Act, passed in
June 2009, established guidelines for corporate energy use,
and gave authorities the power to fine violators. There has
been no published evidence to date on the effects this
measure has had on emissions. Although the authorities have
publicly noted that industrial emissions must be reduced to
meet GHG reduction goals, environmental NGOs claim that
official support for major GHG emitting projects such as the
proposed eighth naphtha cracker plant clearly indicate the
authorities are more concerned with economic development than
with environmental protection.


11. (SBU) A third area targeted for GHG reductions is the
transportation sector. TEPA and the Ministry of Economic
Affairs (MOEA) have both formulated plans to address
transportation sector emissions, but these plans are limited
in scope and reach, focusing on promoting increased use of
mass transit, bicycles, and promoting low-carbon
transportation zones. MOEA is offering relatively small (USD
250-350 per unit) subsidies for electric scooter purchases.
Municipalities in Taiwan have begun to purchase hybrid
electric diesel buses, and there is also a plan to refit
90,000 taxis island-wide for liquid propane (LPG) use, but
this effort has been stymied by a lack of LPG refueling
facilities. Members of the Legislative Yuan (LY) have
suggested extending commodity tax cuts for hybrid and
electric vehicles, but have run into opposition from the
Ministry of Finance, which argues commodity tax cuts should
merely be the last in a "well-rounded" package of policies
encouraging the purchase of hybrid and electric vehicles.
The LY recently proposed a freeze on gasoline prices (note:
Taiwan has among the lowest gasoline prices in the world. End
note.) and also rejected a proposed "green tax" that would
have raised gasoline prices by USD 2.89 per gallon over the
next ten years.


12. (SBU) The residential and commercial sector is a fourth
area receiving increased attention as part of Taiwan's GHG
reduction strategy. Taiwan's Ministry of Interior (MOI)
created a green building certification program, requires
green building design for all new public buildings, and has
established a green materials evaluation program. MOI has
also incorporated a mandatory level of green building design
aspects into the building code, thus requiring all new
buildings to be constructed greener. However, contacts in
the region told us MOI's budget for green building promotion
and oversight is small, and the program would be more
successful if scaled up and expanded to include existing
buildings, which represent 97 percent of Taiwan's building
stock.

--------------
CARBON TRADING IS THE KEY
--------------


TAIPEI 00001453 005 OF 006



13. (C) Taiwan's current slate of carbon reduction policies
is unlikely to meet the island's GHG reduction goals for 2025
and beyond, according to contacts at TEPA, BOE, and in
academia. Environmentalists had high hopes that a proposed
Energy Tax would lead to changes in energy consumption and
provide a strong complement to Taiwan's other GHG reduction
plans, but the bill was shelved in October in the face of
stiff corporate opposition. Premier Wu noted there was no
"timetable" for an energy tax, and the central authority
would not institute any such tax until the economy had
"recovered." In light of Taiwan's artificially low energy
prices and concerns that projected improvements in energy
efficiency and the expansion of alternative energies will not
provide sufficient GHG reductions to meet the 2025 goal,
TEPA, BOE, and academic contacts have all stressed that
Taiwan must be able to participate in carbon trading markets.


14. (C) Identifying a carbon trading platform has been an
important motivating factor behind Taiwan's efforts this year
to join the UNFCCC, according to recent Ministry of Foreign
Affairs and TEPA non-papers. These non-papers argue that the
inability to participate in the UN's Clean Development
Mechanism, for instance, will "have a severe impact on
Taiwan's industrial development." Because of Taiwan's
inability to participate in UN climate bodies, TEPA has
developed a complicated plan to acquire Certified Emissions
Reductions from the Clean Development Mechanism
through-public private partnerships. To this end, Taiwan
plans to choose one or multiple UNFCCC Annex-I countries as
operational bases, and then establish proxy organizations to
open accounts registered in those countries to acquire and
manage carbon credits. TEPA would possibly need to
coordinate with the Ministry of Foreign Affairs to sign
cooperative agreements with the Annex-I country(ies) in
question, and TEPA would need to implement a
double-accounting procedure to keep one set of books for
logging carbon credit purchases and cancellations in the
registered foreign account and another set of books that
would be maintained and managed domestically by TEPA.


15. (C) This plan, according to U.S. experts in the field
who have spoken extensively with TEPA, would be open to
fraud, and would also be difficult to maintain. A better
option, these experts noted, would be to find a country with
an open registry system like the UK, and use credits in that
account to back credits issued by TEPA in Taiwan, analogous
to using gold to back currency. Unfortunately, Taiwan
authorities appear committed to their home-grown plan, and
have shown little flexibility or desire to consider more
direct or simpler methods, despite interaction with and
training by U.S. experts. Meanwhile, local environmental
groups have criticized plans to engage in any form of offset
purchasing, arguing that the trade in carbon will lead to
"speculative bubbles," and urging TEPA to focus on reviving
and lobbying for the energy tax.

--------------
COMMENT: LEVERAGING OUR WORK
--------------


16. (C) Taiwan produces more than its share of emissions on
a per capita basis, but has also publicly stated a clear
desire to create a low-carbon society. Some of the
strategies the authorities are employing to this end are
well-conceived and will likely make a difference in Taiwan's
energy consumption and emissions, while other strategies are
little more than thinly-veiled industrial promotion efforts
that are not likely to make much of a difference at all in

TAIPEI 00001453 006 OF 006


the island's emissions. Nonetheless, there is an obvious
"green" mindset that has emerged here among policy makers
across the political spectrum, and Taiwan's advanced
scientific and technological base, combined with over 15
years of bilateral cooperation with U.S. EPA, have given the
island a strong foundation in environmental management.
Considering the long history of U.S. work here on
environmental management, and the global focus on climate
change, now would be an ideal time to strengthen and expand
our cooperation in this area with Taiwan, with the goal of
making Taiwan a regional "hub" for excellence in
environmental management. This approach could be
particularly useful in terms of the PRC, where Taiwan
academics in environmental fields have strong professional
and personal ties. Increased cross-Strait cooperation in the
field of environmental management/GHG reduction could serve
as both a confidence building measure, and could also provide
a way to transfer to the PRC the skills and knowledge the
U.S. has shared with Taiwan over the past 16 years of
environmental cooperation.


17. (C) In addition, the U.S. should continue to support
Taiwan's meaningful participation in international climate
change fora. Finding a reasonable and efficient means for
Taiwan to engage with the rest of the world on these
important issues, including carbon trading, would help
reinforce Taiwan's own progress towards making GHG
reductions. Moreover, by supporting Taiwan's ability to
stick to its emissions targets, U.S. green technology
companies could find partners, and possibly customers, in
Taiwan as the island looks to meet its reduction goals.
STANTON