Energy Policy and the Development of Green Economy In Taiwan

1. Energy Policy and the Development of Green Economy In Taiwan Dr. Chi-Yuan Liang Minister without Portfolio The Executive Yuan Taiwan, R.O.C. March 29, 2010

2. Energy Policy

3. Background • Since 1990, the performance of energy conservation and CO2 reduction has not been good in Taiwan. • In 2007, the CO2 emission totaled 276 million tones, which accounted for 0.95% of the world emission and ranked the 22th in the world. • Per capita CO2 registered 11.6 tones, ranked 16th in the world. Per capita energy consumption was 4.81 tone oil equivalence, i.e., 2.6 time of the average level of the world.

4. Background • During 1990-2007, the CO2 emission increased 144.7%, much greater than the average of the world（38.2%）and that of developing countries (99%). • Causes • Export-oriented economy. Export shared 70% of GDP • High energy intensity（Energy/GDP） • High CO2 emission per kWh of electricity generation (0.63 kg/kWh) • During 1999-2006, the energy intensity increase 3.4%, compared to a decrease of 20 percent during 1982-1999. • Causes • The energy price in Taiwan was among the lowest in the world. • High energy consumption share of energy-intensive industries.

5. Background • Taiwan’s energy prices were one of lowest countries in the world. • Since state-owned Chinese Petroleum Corporation and Taiwan Power Company enjoy monopolistic power in Taiwan’s oil and electricity market, respectively, there are always a pressure asking government to intervene the energy markets when import energy prices increase. • The former government even strongly intervened the domestic energy market. The energy prices were ‘frozen’ when crude oil price increased from USD$80 to USD$147 per barrel during Nov. 2007 – May 2008.

6. Background • State-owned Chinese Petroleum Corporation and Taiwan Power Company lost NTD$120 billion and NTD$75 billion, respectively, in 2008 • Since June 2008, the new government has unfrozen the energy prices and adjusted upward: oil price by 15 percent; electricity by 25 percent and natural gas by 30 percent. • As a result, under the new government, the energy intensity has decreased by 7 percent in the second half of 2008.

7. Sustainable Energy policy Sustainable Energy Policy Framework To increase energy efficiency To develop clean energy To increase energy efficiency • Energy efficiencywill • increase 2% annually in next • 8 years. • In 2015, energy intensity will • decline 20%comparing to • the level in 2005. • In 2025, energy intensity will • decline 50% comparing to • the level in 2005 via • breakthrough technology • and package measures. • The amount of CO2 emission • will go back to the level in • 2008during 2016 to 2020,. • The amount in 2025 will go • back to the level in 2000 and • the amount in 2050 will be a • half of the level of 2000. • In power generation system, • the share of low-carbon • energy will increase from 40% • to above 55% in 2025. • In order to satisfy the • increasing demand of energy • with growing economy, we will • establish the supply system of • energy security. • We will enhance the degree of • dependence on quasi • indigenous energy.

8. Energy Policy ~ Energy Price • Energy pricing policy • Energy price should fully reflect its internal and external cost Challenge: • The economic committee of the Legislative Yuan past a resolution on Nov.11,2009 that the domestic oil price should be frozen once premium gasoline price reach NTD$32.5/liter (reflecting WTI around USD$87/barrel) Possible Solutions: • Option1: oil price fully reflects its cost increase( without cap) but government provides energy subsidies to the low income families • Option2: oil price reflects part of its cost increase if WTI reach above some levels, such as USD$100 per barrel

9. Energy Policy ~ Tax • Carbon tax (energy tax) and green tax reform • Tax on CO2 emission • Progressive approach • Green tax reform The tax revenue should be used • To reduce the personal and business income tax rate • To lower the burden of social welfare (retirement fund and Medicare) of the employers • Subsidies of energy expenses to the low income families • To purchase CO2 emission credits from abroad • To refund the enterprises with outperforming energy efficiency. • Energy R&D • Ministry of Finance is drafting the “Energy Tax Bill” to reflect the external cost of CO2 emission

10. Energy Policy~Industrial Restructuring • Industrial restructuring • To promote the less energy-intensive industries, such as service industry • To require energy-intensive industries (such as steel, cement, petroleum chemical) to provide a CO2 offset plans when investing in new projects • Taiwan has amended the “Energy Management Act” on July 8, 2009 to promote energy saving measures • The Executive Yuan has sent the “Greenhouse Gas Emissions Reduction Bill” to the Legislative Yuan for approval. • To join the UNFCCC

11. Energy Policy ~Energy Restructuring • Energy restructuring • To promote the renewable energy (see Table 1) Table 1. The renewable Energy Development Plan of Taiwan Unit: 10 thousand KW Source : Bureau of Energy (2007.11.21) ，number in ( ) is the suggestion of National Energy Conference in 2005

12. Energy Policy ~Energy Restructuring • Energy restructuring • Taiwan has passed the “Renewable Energy Development Act” on July 8, 2009 to develop clean energy • The limitation of renewable energy • more costly than the traditional fuels • unstable power supply • resource of renewable is limited in Taiwan • Hydro energy shares 0.3 percent of total energy supply only • High population Density (637 persons/km2) • ¾ of land is mountain area

13. Energy PolicyReevaluation on Nuclear Policy • Reevaluation on “Nuclear Free Homeland” policy Reasons: • The electricity sector emits around 60% of CO2 in Taiwan. • The CO2 emission per kWh was 0.63 kilogram much higher than most of countries (for instance, U.S., Japan and Korea were 0.52, 0.42 and 0.44). • Risk of energy insecurity • Increase of fossil fuel cost • Nuclear free homeland policy has reversed in the world after the Kyoto protocol and oil price surge.

14. Energy Policy • Suggestions • Criteria for Renewable Energy Promotion 1. Energy output-input ratio ≧ 1 2. (Production cost of renewable energy) – (CO2 abatement cost) – (Net industrial linkage effect) ≦ (Traditional energy production cost) • R&D for renewable power generation To strengthen the R&D for renewable is essential to increase the long-term competitiveness of Taiwan’s renewable energy industries.

15. Executive Yuan-Level Institution Low-Carbon Energy System Green Transport Promotion Green Building Energy Saving and Carbon Reduction Promotion Committee (Since Dec. 28, 2009) Low-carbon Community and Society Low-Carbon Infrastructure Inter-Ministerial Committee Members (14) Energy Saving and Carbon Reduction Technology Low-Carbon Industries Chairman: Vice Premier of Executive Yuan Vice-Chairman: Secretary General of Executive Yuan and Two Minister without Portfolio Energy Saving and Carbon Reduction Education Executive Secretary (Ministry of Economic Affairs) Propagation and Communication Project and Indicator Management

16. The Projection Green Energy Industries by 2015 Source : ITRI. Nov.23,2009

17. ICT Industries in Taiwan With one of the highest population density (637 persons/ km2)in the world, Taiwan might not have enough land to deploy abundant green energy installment but does have the capability to help the world use more green energy with lower cost. • Reason: Taiwan has strong competitiveness in ICT industries which is the foundation of green energy. • The production values of 14 ICT products in Taiwan were ranked as either No. 1 or No. 2 in the world (Table 3 and Table 4) • The production values of LED chips and solar PV were ranked as No. 1 and No. 4, respectively, in the world in 2008.

18. Table 3. Taiwanese Products/Industries in The Global Top Two Ranking (2007) ICT industries in Taiwan Note: the data are only good for products made in Taiwan, excluding the products made overseas by Taiwanese investment Source: IT IS Project, MOEA

19. Table 4. Taiwanese Products/Industries in The Global Top Two Ranking (2007) ICT industries in Taiwan Note: the data are only good for products made in Taiwan, excluding the products made overseas by Taiwanese investment ※ ranking by volume Source: IT IS Project, MOEA

20. ICT industries in Taiwan • Taiwan’s ICT enterprises are keen at “process innovation” which make the cost-down of new energy technologies possible. • The successful experience and policy to promote ICT industry since 1980 will be useful to refer.

21. Executive Yuan-Level Institution New Energy Development and Promotion Committee (Since Dec. 30, 2009) Co-Chaired by: One Minister without Portfolio and Minister of Economic Affairs Inter-Ministerial Committee Members (11) with Industrial Experts (8) Executive Secretary: Director-General of Bureau of Energy 4 Major Tasks Task 1: New Energy Development Policies Task 2: New Energy Promotion Task 3: New Energy Technologies, Research and Development Task 4: New Energy Industries Development

22. UNFCCC:Taiwan Need to Join UNFCCC • Taiwan Should Join the Operation of UNFCCC • Should Taiwan’s Ministers and Government Officers = NGOs Outside the Bella Center (Nine Hours of Waiting per Day) Again and Again? • Taiwan Should not Fight for Natural Disasters Caused by Global Warming Alone

23. UNFCCC:Taiwan Need to Join UNFCCC • Taiwan Should Join the Operation of UNFCCC • Taiwan Industries Need to Join International Mechanisms (Kyoto Mechanism, Clean Technology Development and Transfer……) in Order to Reduce Mitigation Costs • Owning Designated Authority and Accounts for Kyoto Mechanism Operation Is Needed • Joining International Mechanisms for Clean Technology Development and Transfer is Needed

24. Why UNFCCC Need Taiwan? • Approximately 1% of Global GHG Emissions Is Missing from the Total Emission Inventory of UNFCCC • Approximately 1.7% of Global Economic Power Is Excluded from Combating Global Warming • Clean Technology Development Needs Taiwan’s Leading ICT Industries • Key Role for Adaptation (One of the Best Location for Typhoon Monitoring)