The Taiwan Carbon Exchange (TCE) announced yesterday (August 3rd) that it plans to establish its presence in Kaohsiung on August 7th. As a trading platform for voluntary carbon reduction credits, the exchange will initially facilitate international carbon credit trading, with domestic trading to follow after relevant domestic regulations are enacted. The formal introduction of carbon credit trading has raised concerns about triggering "carbon credit greenwashing." Legislators Hung Shen-han and Lin Chu-yin held a public hearing inviting industry, government, and academia to discuss the issue. Scholars pointed out that carbon credits must be "externalistic." They do not count if they are legally required or profitable. Furthermore, companies should first take drastic carbon reduction actions before purchasing carbon credits.
A carbon rights exchange will be established, and the Environmental Protection Agency has proposed a draft that "reduction quotas can be resold." The Taiwan Carbon Rights Exchange will conduct domestic carbon rights trading, foreign carbon rights trading, and carbon consulting. The head office is expected to be located in Kaohsiung, and the information trading center will be located in Taipei, operating under a dual-center concept. This symbolizes a new milestone in net zero. Lin Chuyin pointed out that before the Environmental Protection Administration proposed the carbon rights trading sub-law, the stock market had already seen a surge in "carbon rights concept stocks." The Financial Supervisory Commission and the stock exchange should be wary of possible speculation or fraud. Chen Hongda, the former chief secretary of the Environmental Protection Administration, also reminded that carbon trading is to make companies bear the cost of carbon emissions. The initial cost of carbon reduction technology is relatively high. If the cost of carbon rights trading is too low, companies will not invest in carbon reduction technology. On June 29th of last month, legislators held a public hearing on "Avoiding Greenwashing! What should the Carbon Rights Exchange do?" On the same day, the Environmental Protection Agency announced the draft of the "Greenhouse Gas Voluntary Reduction Project Management Measures," which is one of the three sub-laws that the Environmental Protection Agency will prioritize since the Climate Change Response Act came into effect in February this year. The others include the greenhouse gas inventory registration method and the incremental offset method.
Five Principles for Identifying Good Carbon Credits: Scholars: Externality is Key
Future carbon reduction efforts will operate on two parallel tracks: in addition to imposing carbon fees on major emitters, others will be encouraged to voluntarily reduce emissions through carbon trading. According to the draft voluntary reduction plan, entities not subject to carbon fees can submit voluntary reduction projects and apply for "reduction credits" (carbon credits), which can then be resold to interested businesses through the carbon credit trading platform. The draft also emphasizes compliance with the principles of measurement, reporting, and verification (MRV), incorporating international standards.
What are "good carbon credits"? Citing guidelines from an international environmental think tank, Associate Professor Liu Zhongen of the Department of Sociology at National Taiwan University explained that good carbon credits should possess five key principles: externality, permanence, no overvaluation, exclusive ownership of the reduced emissions, and no significant harm to society or the environment.
Liu Zhongen explained that externality means that carbon credits must be "additional" to carbon reduction activities. Carbon credits cannot be considered carbon credits if they are already legally mandated or help businesses reduce costs. For example, replacing energy-efficient lighting lacks externality. At the same time, companies must ensure that carbon reduction activities are "permanently irreversible", such as afforestation may be destroyed by forest fires; if they overestimate carbon reductions, underestimate actual emissions or fail to calculate indirect impacts, it will lead to excessive issuance of carbon rights; there must be a rigorous financial regulatory mechanism to ensure exclusive ownership of reductions to avoid double counting.
Prioritize Substantial Carbon Reductions; Scholars Suggest Clearly Capping Carbon Credit Offsets. Scholars participating in the public hearing unanimously agreed that companies should first exhaust substantial carbon reduction actions before engaging in carbon credit offsets. Liu Zhongen cautioned that the closer one gets to net zero, the less room there is for "voluntary" reductions. Zhao Jiawei, Director of the Taiwan Climate Action Network Research Center, cited the Net-Zero Tracker, a core project of the international anti-greenwashing ecosystem, as an example. The project examined 43 Taiwanese companies and found that only Pou Chen and Hua Nan Bank clearly outlined the use of carbon credits. Zhao Jiawei further reviewed the EPA's draft voluntary carbon reduction plan, noting that some elements, such as replacing energy-efficient appliances and rooftop photovoltaics, do not align with international trends in high-quality carbon credits. These elements, such as those already regulated by law and not removed from the draft, do not conform to international trends in high-quality carbon credits. He suggested that carbon credit trading should include a sunrise clause, requiring carbon fee rates to reach a certain level and be rigorously regulated, to prevent companies from purchasing carbon credits in lieu of substantial reductions. And who should determine the quality of carbon credits to prevent "greenwashing"? Shi Wenzhen, a professor at the Department of International Management and Trade at National Chengchi University, believes that it is unreasonable for carbon rights exchanges to bear all the responsibility for greenwashing. The exchange can only ensure that the carbon rights are legal, and whether they are greenwashing should be determined by the investing companies themselves.
Source: Environmental Information Center (https://e-info.org.tw/node/237091)
