Taiwan Today

The ROC government has formulated an energy policy to comply with the limitation of CO2 emissions, as outlined in the Kyoto agreement. What is the rationale behind this policy? What obstacles might it encounter?

In the wake of the signing of the Kyoto agreement on the United Nations Framework Convention on Climate Change by Industrialized Nations in late 1997, the ROC government has formulated a comprehensive strategy aimed at cutting Taiwan's carbon dioxide (CO2) emissions to the projected 2000 level of 223 million metric tons by the year 2020. The strategy will have a profound effect on the island's industrial development, posing a challenge to its sustained economic growth during the next two decades.

The strategy was adopted at the National Energy Conference, held May 26-27, in Taipei, which was attended by government officials, academics, industrialists and environmentalists.

The strategy underscores the nation's unequivocal commitment to a "no regrets" policy on the CO2 emissions problem, as well as the realization of its inescapable responsibility as a member of the global community in the strenuous effort to cope with the increasingly serious greenhouse phenomenon.

Taiwan's government intends to achieve its goal through energy conservation, higher energy utilization efficiency, clean energy options, and industry structure modifications. Premier Vincent Siew announced at the National Energy Conference that the government will allocate NT$10 billion (US$290 million) within the next five years for R&D and promotion of energy conservation and clean energy usage.

The government will encourage the use of more clean energy sources, such as steam-electricity co-generation and liquefied natural gas (LNG) power generation. In addition, Premier Siew proclaimed that the government will not build a fifth nuclear power plant on the island before the year 2020. The Premier announced that the share of nuclear power generation will not exceed the existing level of twenty percent of total power generation; however, in view of Taiwan's heavy reliance on imported sources of energy, which currently stands at over 95 percent, Premier Siew noted that the nation should not abandon such an important energy source, saying that under strict nuclear safety regulations and proper disposal of nuclear wastes, nuclear power should be retained as the last option.

Taiwan will no longer support the development of high energy-consuming industries (basic heavy industries), whose functions will be limited to the satisfaction of domestic needs. In the future, such industries will lose the tax incentives and other subsidies currently accorded by the government. Instead, the government will shift the focus of its support to industries featuring low pollution, low energy consumption, high added-value, and high industrial linkages. Moreover, the government will take CO2 emissions into account in its evaluation of the environmental impact assessment of major investment projects.

Premier Siew also noted that the government expects that the aforementioned programs will not only lead to the emergence of more technology-intensive and high value-added industries on the island, but will also greatly enhance the overall international competitiveness of Taiwan's industrial sector. The adoption of high-efficiency technologies to boost productivity will help lay a solid foundation for the sustained growth of the island's economy.

The ROC government's CO2 emission-control strategy has been formulated following the conclusion of the Kyoto agreement by 38 industrialized nations in December of 1997. The signatory nations agreed to cut their emissions of greenhouse gases (carbon dioxide and five other gases) by an average of 5.2 percent from the 1990 levels by 2008-2010. The timetable has been established, despite its substantial effect on the economic interests of participating nations, as a result of the universal awareness of the catastrophic consequence of global warming.

Although the agreement did not impose a mandatory requirement on developing nations, the ROC believes that it is an inevitable trend and, in view of the lengthy period needed for the adjustment of industrial and energy consumption structure (about ten to fifteen years for the former), the government decided to take action now, so as to minimize the impact on the economy.

The Environmental Protection Administration (EPA), under the Executive Yuan (the Cabinet), chose the year 2000 as the base year for the CO2 emissions-control strategy, since it is the year that Taiwan's sixth naptha cracker, being built by Formosa Plastics Group, and some private power plants will have been completed. By 2000, the island's CO2 emissions are projected at 223 million metric tons, or around 10.1 metric tons per capita, compared with 1997's 8.5 metric tons. The latter figure compares with 10.5 metric tons of the Organization for Economic Cooperation and Development (OEDC) nations, after they have cut their CO2 emissions to five percent below the 1990 level. The EPA aims to have CO2 emissions achieve zero growth between 2008 and 2010 and then effect a reduction to the 2000-level by the year 2020.

The objective will be extremely difficult for the island to achieve. Due to Taiwan's rapid economic development, there has been an appreciable growth of Taiwan's greenhouse gas emissions in recent years. In 1990, the island's total emissions of these gases topped 148 million metric tons, including 112 million metric tons of CO2, 78 percent of the total.

By 1997, Taiwan's CO2 emissions alone had soared by 64 percent to 184 million metric tons. The industrial sector was the largest emissions source, followed by the transportation sector at 17 percent, and the household sector at 11 percent. The Energy Commission, under the Ministry of Economic Affairs (MOEA), points out that if nothing is done, the island's CO2 emissions will hit a staggering 501 million metric tons by 2020.

In order to achieve the goal of controlling CO2 emissions, the government will focus its efforts on power generation, which now accounts for one-third of the island's total CO2 emissions. Initially, it will encourage domestic manufacturing plants to install steam-electricity co-generation facilities, thereby increasing the island's total capacity of co-generation power to 6.36 million kilowatts by 2020, up from the current 2.65 million kilowatts.

Second, the government will promote the establishment of power plants fuelled by liquefied natural gas, with the aim of raising the total LNG-generated power capacity to 16 million kilowatts by 2020, up from 3.3 million in 1997. However, the government must narrow the wide gap between the cost of LNG and coal power generation, since LNG is now 2.9 times more expensive than coal. The government plans to reduce the existing five percent tariff on imported LNG, compared with zero percent on coal and 2.5 percent on fuel oil.

In addition, the government may need to assist the private sector with the huge investments required for the installation of the facilities for the storage and transportation of LNG. To further narrow the gap between the cost of coal and LNG power generation, the government will also study the feasibility of imposing a CO2 tax on coal power generation, which tax may also be levied on other industrial operations with high CO2 emissions.

The Energy Commission, under the MOEA, notes that in order to achieve the dual goals of CO2 emissions control and sustained economic growth, the island cannot afford to abandon a key source of clean energy: nuclear power. Despite stiff opposition from environmentalists, the Energy Commission proposes to install six additional nuclear power generators at the first, second and fourth nuclear power plants, following the establishment of the fourth plant.

The third nuclear power plant is exempt from the additions because it is located inside Kenting National Park. The existing three plants are all equipped with two generators each, as will be the fourth plant which is now under construction. The commission estimates that the six additional nuclear generators will help cut annual CO2 emissions by 41 metric tons.

The government will also endeavor to promote energy utilization efficiency and energy conservation, areas where the island's performance has been lackluster. At present, the island can generate only US$3.5 of production value for every liter of oil equivalent of energy consumption, compared with US$6.5 in Japan and US$7 in Italy. One reason for the comparatively low energy utilization efficiency is low energy pricing. The island's premium gasoline prices are 46 percent lower than those of Japan, South Korea, Hong Kong and Singapore. Its fuel-oil prices are also lower than those of Japan and the Philippines, although they are higher than South Korea's and Thailand's.

The government will also revise the Statute for Industrial Development, as well as other relevant laws, so as to provide local firms with tax incentives and financial support to encourage their efforts in the fields of low-pollution and high energy-efficiency manufacturing processes, the development of "green products," the development of substitute energy, and energy or resource recycling.

Similar methods will also be used to induce the shift of the island's industrial structure to one featuring high energy efficiency and low pollution. The MOEA has mapped out the island's industrial structure for 2020: twenty percent for traditional industries, 26 percent for basic industries, and 54 percent for technology-intensive industries, compared with 24.3 percent, 36.1 percent, and 39.1 percent (respectively) in 1997. The MOEA, however, reports that it will effect the shift of the industrial structure via the use of proper policy tools, rather than by resorting to direct government intervention.

Despite these assurances, the island's basic heavy industry--mainly steel, petrochemical, cement, and paper manufacturing--will face particular difficulties in the coming years. One noticeable victim is likely to be Pinnan Industrial Zone Project, the island's largest heavy-industry project, planned for Tainan County in southern Taiwan.

The project was originally jointly proposed in 1994 by the two industrial giants Yieh Loong Enterprises and the Tuntex Company. Yieh Loong plans to invest NT$112 billion (US$3.25 million) to construct a large steel mill capable of turning out 7.5 million metric tons annually, with the output targeted to replace materials that are now imported.

Tuntex wants to build Taiwan's seventh naphtha cracker, a NT$271 billion (US$7.86 million) petrochemical complex, that can process 300,000 barrels of crude oil daily. Combined with the sixth naphtha cracker, the proposed facility will boost the island's self-supply ratio of ethylene to 100 percent, up from just 43 percent.

The project, however, has been stalled by stiff opposition from environmentalists over the past few years. The site, located at Chiku village in Tainan county, encompasses extensive tidal lands at the mouth of the Tsengwen River, which sustains an abundance of small marine creatures. The area is also a fertile habitat for migrant birds, most notably the highly-endangered black-faced spoonbill, which is on the brink of extinction, with a worldwide population of only 600. Two-thirds of these birds fly into the Chiku tidal basin every winter, and conservationists claim that the project will be a calamity to the survival of this precious species.

To reduce the impact of the project on the tidal lands, the developers have cut the amount of land set aside for the petrochemical complex and the large steel mill to 893 hectares and 845 hectares, respectively, from the original 1,000 hectares each. They have also reduced the ratio of tidal land in the project site to thirty percent, down from the original 100 percent. The developers stress that the southern boundary of the site is actually nine kilometers from the projected zone for migrant birds, and claim that it will not affect their rest or their food supply.

Another major problem facing the project is water supply. The factories in the zone are expected to consume 290,000 metric tons of water daily, further straining the already tight supply of water in southern Taiwan.

The most critical issue will be CO2 emissions. The petrochemical complex and large steel mill will churn out 33 million metric tons of CO2 annually, equivalent to 18 percent of the island's CO2 emissions in 1997. This means that these factories will account for 85 percent of the remaining quota, before the island's CO2 emissions reach the targeted ceiling of 223 million metric tons. As a result, the project is facing extreme difficulty in passing the ongoing screening of its environmental impact assessment by an ad hoc committee consisting of government officials, experts, representatives of the developers, elected representatives, and environmentalists.

The MOEA complains that the goal of CO2 emission control set by the EPA is too stringent. It claims that even if the government successfully implements its various programs for the reduction of CO2 emissions, Taiwan may still be unable to attain the goal of cutting these emissions to the 2000 level by 2020. The Energy Commission estimates that these programs, including the controversial addition of six nuclear generators, can cut the island's CO2 emissions at most to 345 million metric tons by 2020, still 122 million above the targeted ceiling.

Consequently, the island will have to raise the targeted ceiling for CO2 emissions or accept the prices of lower or even negative economic growth and higher unemployment. The EPA, however, insists that the goal is a proper one, which demonstrates the nation's sincerity in dealing with the global problem, and that it is therefore likely to be accepted by the international community.

Despite the controversies, it is evident that the control of CO2 emissions has become an urgent task for Taiwan. The longer the necessary decisions and actions are postponed, the higher the costs will be.

Copyright (c) 1998 by Brian Liu.