Taiwan's Carbon Fees Align with the EU's CBAM Deduction Framework

The industrial sector has expressed concerns about how Taiwan's carbon fee system will align with the EU's Carbon Border Adjustment Mechanism (CBAM) in the future. In response, the Ministry of Environment (MOENV) reiterated that, according to the official EU CBAM text published on May 17, 2023, Taiwan's "carbon fee" qualifies as an effective form of carbon pricing under CBAM, making it eligible for offsetting.

The MOENV explained that, in accordance with the CBAM implementation timeline, a transitional period will begin in October 2023, during which importers are required to report the carbon emissions of imported products. From 2026, when CBAM is officially implemented, product importers must purchase CBAM certificates to financially adjust and account for carbon costs. The MOENV further clarified that, according to the CBAM deduction rules, products subject to CBAM regulation in the EU that benefit from free emission allowances will not bear the carbon cost for the corresponding emissions. Additionally, if the product has already incurred carbon costs in its country of origin (such as through carbon taxes, carbon fees, or emissions trading), documentation may be submitted for deduction. For example, Taiwan's steel industry, which is subject to carbon fees, can deduct the paid fees for steel billets exported to the EU, as they have already incurred carbon costs. The exact deduction calculation will follow the EU's future published guidelines.

At the end of August, Taiwan announced 3 sub-laws for carbon fees, officially launching the carbon fee system, with collection beginning in 2025. To encourage entities subject to the carbon fee to enhance and accelerate emissions reduction, the MOENV has introduced measures such as the "Voluntary Reduction Plans" for preferential rates upon meeting specific targets and the opportunity for industries at high risk of carbon leakage to submit self-reduction plans to adjust their emission coefficients. These efforts aim to reduce the carbon fee's impact on industries, while also urging entities to align with national reduction goals, plan early for carbon reduction measures, and move towards Taiwan's 2050 net-zero target.