On July 16th, China's national carbon market officially began. Throughout the first week of the trading, there is a slight increase in terms of pricing. The closing price on July 23rd has increased by RMB 8.97 from the opening price of RMB 48 per ton. However, there are few possible problems that might be encountered by the national carbon market: 1. Excessive allowances lead to price instability Currently, allowances are free of charge, which causes big trouble with carbon pricing. At the same time, carbon pricing has not met international standards. The national authority needs to pay attention to its carbon market management measures. 2. Limited participants and single transaction Only those who are obligated can participate in the transactions. Other organizations such as financial institutions and investors are not able to join the trading. Although it can lower the risk of market speculation, it will not help expand the market size, including funding and trading activities. 3. Carbon emission inventory system The inventory data and improvement of the carbon market will be a crucial step for China's carbon neutrality commitment. The national authority is considering including more industries in the process of gradual improvement. The current mechanism is relatively complicated. The national authority needs to enhance its carbon emissions inventory system and also improve carbon trading policies. To help achieve carbon neutrality, tightening free allowances need to be considered. Even though it's expected that the market size will expand to 8-9 billion tons per year, but there are still few challenges to be overcome. Reference: Link 1

With climate change, many countries have formulated many policies about carbon reduction. Resulting from the CBAM draft of the European Union, China, the United States, and other countries have also announced related policies, such as the national carbon emissions trading market, carbon tariff, and other carbon pricing mechanisms. Taiwan, however, has no practical regulations and measures to help reduce GHG emissions except for the "carbon fee" mentioned in the draft amendment to the GHGs Emission Reduction and Management Act (溫管法). As a result, Taiwan will only be the one to be dominated when various policies to reduce GHG emissions are issued internationally. In the face of such difficulties, China Steel Corporation makes a policy ahead of the government, decided to increase the price of exports, by imposing a tax on the cost of carbon emissions from next year. While the added price depends on the carbon footprint of the product. China Steel Corporation’s action follows Tata Steel Ltd.’s step and will be the first steel industry in Asia to impose a carbon surcharge. For Taiwan, this is undoubtedly a big breakthrough in carbon pricing policy, after all, reducing GHG emissions is still a matter of individual enterprises to start. References: Link 1, Link 2

文：石門山綠資本有限公司 莊湘緹、許文瑜、管芸慈、石倩蓉、李亭萱、莊昇勳

Along with the termination of FiT subsidies for onshore wind power and some of the PV power projects in China, the country has entered the “grid parity” era. The national Green Electricity Certificates (GECs) introduced in 2017 became an alternative to subsidies. To initiate the market for parity GECs, the State Power Investment Corporation traded 60 GECs at the end of June. Following the first transaction, at the beginning of July, one of Apple’s suppliers had bought 100,000 parity GECs, which was the largest parity green certificate transaction in the world so far, with a single transaction volume exceeded the cumulative volume of parity green certificates for both I-REC and GEC. To date, more than 300 companies worldwide have committed to the RE100 initiative, indicating a huge need for renewable energy. As a result, it is predicted that GECs trading will see rapid growth in the future and become the new necessity in the Chinese market. References: Link 1, Link 2

As widely known, ICT sectors consume a massive amount of electricity and water to support their operations. At the same time, many countries are starting to strengthen their strategies towards sustainability, which makes the ICT sector needs to actively seek a more sustainable option. Over the last 10 years, 52% growth of revenue from the ICT sector is coming from the Asia Pacific region and it is predicted the APAC region will be the fastest-growing location for data centers. In addition, one-fifth of RE100 members are the ICT industries which means the demand for renewable electricity is set to grow further. APAC market is one of the most challenging regions in terms of renewable energy procurement. In order to successfully overcome the challenge, ICT sectors need to have clear and ambitious goals with some flexible strategies. Flexible strategies are an important factor for ICT industries to counter the complexity of policies in each country. For example, only EAC is currently available in most APAC countries, but in the coming years, other solutions such as PPA, VPPA, and green products. Although the progress has been slow, the APAC market is evolving with more and more companies commit to renewable consumption. APAC-based companies such as TSMC and Tencent have set ambitious goals and indirectly can put pressure to decarbonize the region. 周知の通り、ICT分野では、その事業を支えるために大量の電力と水を消費される。その一方で、多くの国が持続可能性に向けた戦略を強化し始めており、ICTセンターはより持続可能な選択肢を積極的に模索しなければならなくなる。 過去10年間でICT分野の収益の52%がアジア地域からのものであり、APAC地域はデータセンターの設置場所として最も成長すると予測されている。また、RE100のメンバーの5分の1はICT産業であり、再生可能エネルギー電力の需要がさらに高まることを意味している。 APAC市場が再エネの調達は最も難しい地域の一つで、この課題を乗り越えるためには、情報通信産業は明確で野心的な目標を持ち、かつ柔軟な戦略を立てる必要がある。柔軟な戦略は、ICT産業にとって各国の複雑な政策に対応するには大事な要素だ。例えば、現在APACのほとんどの国ではEACしか利用できず、今後数年のうち、PPA, VPPAグリーン製品などのソリューションも利用できるようになるでしょう。 進捗は遅いものの、APAC市場は発展しつつあり、より多くの企業は再生可能な消費にコミットしている。TSMCやTencentといったAPACに拠点を置く企業は野心的な目標を掲げており、間接的に地域の脱炭素化に向けた促進することが可能となる。 Reference: Link 1

At present, the environmental impact assessment project for wind power development in Japan requires four to five years and hundreds of millions of yen, which is an extremely heavy burden for developers. Therefore, in the cabinet meeting held in December 2020, the Minister of Administrative Reform Taro Kono stated that in order not to hinder the development of renewable energy in Japan, he hopes to implement policies more flexibly of review conditions. The required environmental assessment conditions will be increased from the operating scale of 10,000 kW to 50,000 kW and the revision will be completed this year (2021) However, this policy has caused wind power developers to exploit the loopholes in the policy and cut the development case into a scale that is not required by the EIA law. In response to this, the Ministry of Economy, Trade, and Industry has issued relevant countermeasures that do not allow companies to deliberately avoid Environmental Impact Assessment. In mid-July, a review meeting was set up to invite relevant experts and scholars to discuss together, and it was decided that plural development projects of the same industry were merged with the same industry for identification. Reference: Link 1

Carbon neutrality has become the development goal of many industries, including the shipbuilding and shipping industries. Samsung Heavy Industries said in early July that it has succeeded in developing an LNG carrier powered by Solid Oxide Fuel Cell (SOFC) in cooperation with Bloom Energy, a US company. SOFC is an environmentally friendly technology that can displace marine propulsion engines and another fossil fuel-operated equipment. Hyundai Heavy Industries also recently signed a partnership with Hyundai Motor Group that aims to develop hydrogen fuel cell propulsion systems for ships. In response to changing trends, the Korean government is also rapidly formulating policies to encourage local shipbuilding companies to develop environmentally-friendly ships. The government will invest 254 billion won between 2022 and 2031 to develop environmentally-friendly ships that use hydrogen and ammonia. The goal is to develop technologies that can reduce greenhouse gas emissions by more than 70% from 2008 levels. Reference: Link 1

Power Minister R.K Singh said that “India holds a liberal foreign investment policy and allows 100 percent FDI through the automatic route in the renewable sector. This bought an investment of $70 bn in the past seven years across the country”. He also added that as of June 16, 2021, India’s installed renewable energy capacity including large hydro, stands at more than 141 gigawatts and is about 37 percent of the country's total capacity. This shows that Renewal energy installed capacity has increased more than two and half times in the past six years. In terms of solar energy capacity, there is an increase of more than 15 percent during the same period and stands at 41.09 GW. These significances will help India achieving an ambitious target of having 175 gigawatts (GW) of renewable energy by 2022. As of now, India's renewable energy capacity is the fourth largest in the world. Reference: Link 1

Five days after the release of the EU CBAM (Carbon Border Adjustment Mechanism) proposal and three days after the launch of China's carbon market, the United States took further action on their long-planned carbon border tax scheme. On July 19th, Sen. Chris Coons (D-Del.) and Rep. Scott Peters from the Democratic Party announced carbon border tax would be added to the $3.5 trillion reconciliation bill proposed by the Democrats. The carbon border tax, estimated to raise $5 billion to $15 billion for the US government every year, would be imposed on countries that do not meet the US standards on carbon emission. According to New York Times, the carbon border tax will be initiated in 2024 and affect approximately 12% of the imports in the United States. Six products will be covered, including petroleum, coal, aluminum, steel, iron, and cement. The tariff rate will be equivalent to that of the domestic greenhouse gas producers, regulated by federal and state laws. References: Link 1, Link 2

In June, Vietnam adopted the new Law on Environmental Protection (“New Law”) that introduces a concrete policy on an emissions trading system and carbon tax that will take effect beginning next year. This new law will require businesses to report a database of greenhouse gas (GHG) every two years and an annual GHG reduction report. The list of required businesses will also be released every two years by the Prime Minister and the Ministry of Natural Resources and Environment Vietnam (MONRE). The New Law will implement a distributed emission quotas to these businesses and other GHG emitters and only allowed them to exceed this limit by joining the carbon market. It also states that businesses that want to reduce or are unable to maximize their emission quotas are authorized to sell, transfer, bid, or lend their GHG quotas or carbon credits in the local or international market. GHG emissions limit and emission quotas will be distributed periodically and annually by MONRE. In addition, the New Law will impose a tax on products and goods that are harmful to the environment depending on the potential environmental impact. The government is currently finalizing the decree of the New Law which is expected to submit for review by September 2021. References: Link 1, Link 2

Department of Energy Philippines (DOE)has been eyeing to improve the country’s energy security by emphasizing various policies to adopt renewable energy as a source of power. This forces the private and public agencies to further their efforts for climate change mitigation. No new coal power plant projects DOE is no longer accepting proposals to build new coal power plants with an exemption for few projects since last year. SMC Global Power Holdings Corp (SMCGP), which accounts for 40% of the Philippines’ coal portfolio is targeting to build a 300 M pumped-storage hydroelectric power plant that is expected to fully operate in 2026. SMCGP also announced the cease of three coal-fired projects that have a total capacity of 1.5 GW. Numerous banks also suspended lending funds for new coal power plant projects. New energy sources In June, DOE announced a partnership with the World Bank Group (WBG) to craft the Philippine offshore wind roadmap project. This can help to accelerate the country’s goal of achieving a 35% share of renewable energy in the energy mix by 2030. DOE has currently awarded five wind energy service contracts with a combined potential of 5GW of offshore wind— Guimaras Strait WPP, the Aparri Bay WPP, the Guimaras Strait II Wind Project, the Frontera Bay WPP, and the San Miguel Bay WPP. Based on early estimates by WBG, the Philippines has over 170 GW of offshore wind potential. Moreover, DOE also diversifies energy sources by partnering with Australian and Japanese companies to explore the potentiality of hydrogen in the country. References: Link 1, Link 2, Link 3, Link 4

When the EU's carbon trading mechanism announced its most significant reform since its establishment, China's national carbon emissions trading mechanism, which has been prepared for many years, was launched on July 16. This is one of the important steps for China to reduce greenhouse gas emissions, peak carbon emissions by 2030, and achieve carbon neutrality goals by 2060. Why is it so-called the “largest” ? Prior to the launch of the National ETS, China had pilot emission schemes running in 8 provinces. Historically, the highest of carbon trading price per ton is ¥62 RMB, around $9.5 US Dollar. Ministry of Ecology and Environment Press Spokesperson stated that “ China carbon market covers over 40 billion tons of CO2 emissions equivalent.’’ How does it work? The government grants each company under the regulated industries a certain amount of carbon emissions allowances (CEA) . However, there will be certain companies emitting beyond and/or below their granted emission threshold. As result of this, they can either buy or sell CEAs via the trading system, which comes in the form of agreed transfer, one-way bidding or other means in line with the regulations. How will it impact the world? Let’s start with Taiwan as an example. Taiwan launched the Greenhouse Gas Reduction and Management Act since 2015, the Act outlined it’s carbon reduction goals and targets, as well as regulations and penalties. However, there has not been much regulatory forces in terms of carbon reduction to date. This suggest that countries like Taiwan, can begin by taking from the success and failures from China’s experiences. On the other hand, EU is taking it one step forward with it’s Carbon Border Adjustment Mechanism (CBAM). According to the CBAM, companies importing into the EU (EU importers) will be required to hold carbon certificates corresponding to the carbon price paid by the goods had the goods, had it been produced under the EU’s carbon pricing rules. Conversely, a non-EU producer can also demonstrate that it has already paid a carbon price in the country of production, where the corresponding cost can then be fully deducted for the EU importer. The significance of carbon markets has already become a reality worldwide . The effect of it, is rather extensive. As companies writes of an expenses, some may pass on the cost onto customers. In the worst-case scenario, some companies may not be able to afford the internalized externalities, resulting in shutdowns of the most polluting functions. In any regard, the world’s carbon markets has proven the consensus, that systematic changes are critical to making the earth a cleaner place. ◎你不能不知道：碳排放權交易、55套案，與未來環保趨勢！ - Rti 中央廣播電臺 https://www.rti.org.tw/radio/programMessagePlayer/programId/789/id/125962