The core principle of carbon trading is to put a price on carbon emissions, making it a vital tool for helping companies meet their decarbonization commitments. However, current systems often rely on retroactive offsetting, indicating significant room for improvement.
According to Je-Liang Liou, Deputy Director of the Center for Green Economy (CGE) at the Chung-Hua Institution for Economic Research (CIER), Taiwan began laying the groundwork for a carbon market over a decade ago. But without a formal regulatory framework, its initial development depended on government subsidies. As the Paris Agreement and the 2050 net-zero target gain global momentum, carbon trading has become an international standard, compelling Taiwan to establish its own comprehensive market mechanism.
Deputy Director Liou explained that the low-carbon transition typically involves 4 stages: emissions inventory, reduction, neutralization, and eventually net-zero. He noted that numerous corporations have already adopted best-available technologies, leaving limited room for further direct abatement. This makes carbon credits and carbon neutrality crucial alternative pathways. An effective trading system empowers those who can reduce emissions most cost-effectively to take meaningful action, while allowing others to contribute financially. This approach ensures a collective decrease in total emissions and encourages companies to make proactive and prospective investments.
Taiwan has currently accumulated over 20 million tons of carbon credits, used by major corporations such as Taipower to offset carbon fees and TSMC to address supply chain pressures. However, Deputy Director Liou cautioned that these credits function like “discount vouchers.” They offset compliance costs but do not equate to achieving genuine zero emissions. He emphasized that the system’s design must include a “carrot and stick” approach—combining carbon fees (the stick) with carbon credit incentives (the carrot)—to effectively encourage widespread decarbonization efforts among all corporations and households.
The ultimate value of a carbon market is driven by demand. If a system only issues certifications without a robust trading mechanism, it risks becoming purely symbolic. Looking ahead, achieving net-zero will require Taiwan to move beyond energy conservation, emissions reduction, and carbon sinks to also develop negative emissions technologies (NETs). Ultimately, only by building a carbon market founded on trust and efficiency can emissions trading become the powerful catalyst Taiwan needs to achieve its net-zero ambitions.
Author: CIER Editorial Team
Date: September 24, 2025