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Key Objectives of Bill to Amend Greenhouse Gas Reduction and Management Act
Key Objectives of Bill to Amend Greenhouse Gas Reduction and Management Act
In response to the rising global concern on climate change issues, the Executive Yuan passed the draft bill to amend the Greenhouse Gas Reduction and Management Act (hereinafter "GHG Management Act") in April 2022, and changed the legislation title to the Climate Change Response Act (hereinafter "CCRA"). On January 10, 2023, the Legislative Yuan passed the bill after the third reading, which the President announced on February 15. (For full text of the Act, please go to: https://www.president.gov.tw/Page/294/48697) Key reforms include:
I. Stipulating the goal of net zero carbon emissions by 2050 in the law.
Article 4 of the GHG Management Act set Taiwan's greenhouse gas emission reduction goal to decrease by 50% from 2005 levels by 2050. The CCRA takes this a step further, stipulating the reduction goal of "net-zero emissions by 2050.”
The definition of "net-zero emissions" is provided in Subparagraph 9, Article 3 of the CCRA: "Net-zero emissions: a state where the greenhouse gas emissions are in balance with the carbon sink." Subparagraph 8 of the same article states: "Carbon sink: trees, forests, soil, oceans, stratums, facilities or places that absorb or store CO2 or other greenhouse gas emissions that have been removed from the source of emission or the atmosphere." That is, only greenhouse gas emissions that have been removed by carbon sinks are calculated in the amount of decreased emissions under the CCRA.
II. Collecting carbon fees from domestic emission sources.
The CCRA adds new regulations on "carbon fees." Article 28 stipulates that the competent authority, the Environmental Protection Administration of the Executive Yuan, may collect the carbon fee in stages from emission sources that directly or indirectly emit greenhouse gases. According to Paragraph 2 of the same article, by providing documentary proof of the amount of emissions from electric power consumption, electric utilities may deduct that amount from that of its direct emissions. The amount of emissions from electric power consumption would be calculated as indirect emissions from electric power consumers.
III. Implementing carbon border adjustment mechanisms on imported products.
According to Article 31 of the CCRA, to avoid carbon leakage, a business that imports products selected by the competent authority shall declare the amount of carbon emissions from said product to the competent authority. The business shall obtain a reduction quota in accordance with the amount of carbon emission allowances approved by the competent authority from platforms designated by the competent authority. However, when the exporting country has already implemented emission trades or collected carbon taxes or carbon fees which have not been refunded upon export, the business may apply to the competent authority with documentary proof for approval for a deduction of the emission reduction quota.
IV. Diversifying applications of the greenhouse gas emission reduction quota.
The reduction quota obtained by businesses or governments at all levels for complying with offset or early action plans, or voluntary reduction plans by Paragraph 1, Article 25 of the CCRA, can be transferred, traded, or auctioned by Paragraph 3 of the same article. According to Article 26, it may also be used to offset emission increase under Paragraph 1, Article 24 of the CCRA, to deduct the amount of direct or indirect emissions used for calculating carbon fees under Paragraph 1, Article 28, to deduct the carbon emission gap amount from imported foreign products after implementation of the carbon border adjustment mechanism under Article 31, or to offset emissions above the allowed quota under Paragraph 2, Article 36.
In addition, businesses that have obtained foreign reduction quotas which have been approved by the competent authority may use them to reduce the amount of direct or indirect emissions used for calculating carbon fees under Paragraph 1, Article 28, or to offset emissions above the allowed quota under Paragraph 2, Article 36.
Based on the amendments to the CCRA, Lee and Li suggests as follows:
I. Businesses should implement carbon accounting and keep records of greenhouse gas emissions.
In order to carry out greenhouse gas emission reduction plans, a business must be fully aware of the amount of emissions produced by its operations. Lee and Li advises businesses to keep records of direct emissions that are related to production processes (Scope I) and indirect emissions that are related to energy consumption (Scope II) to facilitate future inspections.
II. Evaluate the possibility of adopting offset, early action, or voluntary reduction plans.
In response to the possible additional costs (e.g., carbon fees) caused by the CCRA, businesses are encouraged to consider adopting offset, early action, or voluntary reduction plans to mitigate the potential effects of cost increases.
Lee and Li dedicates itself to the issues of climate change and greenhouse gas emission reduction. We are a premium member of the Association of Taiwan Net Zero Emissions. Several of our colleagues have been trained by the Taiwan Institute for Sustainable Energy and are certified as Sustainability Managers. In 2022, attorneys from Lee and Li began teaching the course "Net Zero, Carbon Neutrality, and Corporate Legal Compliance" at the Taiwan Corporate Governance Association. Dozens of domestic listed conglomerates have invited Lee and Li to conduct director and supervisor training and share its practical experience.
If you have any questions about new business opportunities, related issues or other questions about the strategies for or implementation of greenhouse gas emission reduction after the amendment of the CCRA, please contact Wei-Sung Hsiao (wshsiao@leeandli.com ) or David Chang (tunweichang@leeandli.com; +886-2-2763-8000 ext. 2545) of Lee & Li, Attorneys-at-Law.