Greenhouse effect and CO2 emission Chi-Yuan Liang Institute of Economics, Academic Sinica November 1, 2006
2.1 Investment and trade risk before 2012 (1/2) Three EU environmental directives: • WEEE (Waste Electrical and Electronic Equipment) Effective since August 2005 • ROHS (Restriction of Hazardous Substance) Effective since July, 2006 • EUP (Eco-design Requirement for Energy Using Producers) might be effective after 2008
2.1 Investment and trade risk before 2012 (2/2) • Energy productivity of Taiwan was 47% lower than the EU. • EU accounted for 13 percent of the exports of Taiwan in 2004. In the meanwhile, exports accounted for 60 percent of GDP of Taiwan. • The trade and economic growth of Taiwan will be significantly affected once EU implement the directive of EUP.
2.2 Investment risk after 2012 An International Comparison on CO2 Emission
2.3 Causes of acceleration in CO2 emission since 1999 The growths of CO2 and GDP in Taiwan, 1996-2003
An international comparison of oil prices Unit: NT dollars/litre
An international comparison of electricity prices for lighting Taiwan: $2.49 Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad , 2004.
An international comparison of electricity prices for industry Taiwan: $1.76 Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad (TNB) , 2004.
2.4 The impact of CO2 reduction on Taiwan The effects of different CO2 abatement approaches on Taiwan Notes: 1. Levying carbon taxes for attaining the objective of CO2 reduction 2. The progressive method is levied annually for twenty years.
3. Rethinking on energy policy (1/3) 3.1 Energy pricing policy Energy price should fully reflect its internal and external cost. • Oil price Floating oil price mechanism is a right direction but should be modified.
3. Rethinking on energy policy (2/3) • Electricity price Price adjustment formula and mechanism is needed. • Automobile fuel fee (Road-maintenance fee) AFF should levy on oil products instead of car.
3. Rethinking on energy policy (3/3) • Carbon tax (energy tax) and green tax reform (i) Tax on CO2 emission (ii) Progressive approach
Carbon tax (energy tax) and green tax reform (Cont.) (iii) 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 quota from abroad • Energy R&D
3. Rethinking on energy policy (2/2) 3.2 Industrial restructuring 3.3 Energy restructuring • The limit of renewable energy • Reevaluation on “Nuclear Free Homeland” policy
Conclusion Remark • To cope with the oil price surge and Kyoto protocol is tough. • However, the truth is that there is no free lunch in the world. • Government should be responsible and takes the right actions. The entrepreneurs and consumers should also react now.