To establish a mechanism for an open and transparent carbon rights trading market, Taiwan’s Ministry of the Environment announced the “Greenhouse Gas Reduction Quota Trading, Auction, and Transfer Management Measures” yesterday, which will officially take effect on August 15th. The Ministry of the Environment expects that the first domestic carbon rights transaction will take place as early as the end of September on the carbon rights exchange.
Taiwan has officially entered the era of valuing carbon emissions. The Ministry of the Environment is implementing a carbon tax levy in parallel with voluntary reductions. Businesses or various levels of government can implement voluntary reduction projects to obtain reduction quotas (commonly known as carbon rights) and then proceed to trade them on the carbon rights exchange, providing for the purchase of carbon fees or the need for incremental offsets.
The Carbon Rights Trading Measures will be implemented
To establish a transparent and open voluntary reduction trading market mechanism in Taiwan, the Ministry of the Environment announced the “Greenhouse Gas Reduction Quota Trading, Auction, and Transfer Management Measures” yesterday. The regulations, which consist of 38 articles, specify the relevant regulations for domestic reduction quotas (carbon rights) in terms of holding, trading or auction, transactions, and usage cancellation at each stage, and will be implemented on August 15th of this year.
The Measures apply to the three types of reduction quotas (carbon rights) for domestic carbon rights trading or auction, including “early-stage projects,” “offset projects,” and “voluntary reduction projects.” The Measures also stipulate three major trading methods, including “pricing trading,” “agreement trading,” and “auction.”
Pricing trading: The seller lists carbon rights on the carbon exchange, indicating the price and quantity, and the buyer then places an order.
Auction: The buyer bids based on a self-set base price. Both pricing and agreement trading are conducted on the carbon rights exchange platform.
Agreement trading: Both the buyer and seller agree to trade quantities and prices privately, but the transaction details must be reported to the Ministry of the Environment for disclosure. If the carbon rights are obtained from early-stage projects, they can only be traded by agreement and will not be traded or auctioned on the carbon exchange.
According to the Measures, future transactions will need to take place on the platform built by the carbon exchange, and the provision of a platform for the mediation, consignment, or sale of reduction quotas by private non-governmental entities is prohibited in order to concentrate the management of the reduction quota trading market, strengthen centralized management, and avoid carbon fraud.
The trading and auction-related information for the reduction quotas are publicly available on the trading platform for public scrutiny and inquiry, effectively avoiding any concerns of greenwashing. Currently, the requirement is for businesses to be buyers, and it is not open for individual trading. After the reduction quotas are traded or auctioned, the transfer is confirmed by the Ministry of the Environment and can only be transferred once.
It is expected that the first domestic carbon rights transaction will appear in Taiwan in September.
Huang Wei-ming, Deputy Director of the Climate Change Bureau of the Ministry of the Environment, said that considering that businesses are purchasing reduction quotas to offset their carbon emission responsibilities, a 5% handling fee will be charged to the buyer for pricing and auction transactions based on the transaction price. If it is an agreement transaction, the buyer will need to pay 5% of the transaction amount multiplied by the carbon fee rate for each reduction quota unit, or 5% of the most recent transaction price for the same type of project unit.
Huang estimates that the first domestic carbon rights will be listed on the carbon exchange as early as the end of September or early October. Prior to this, sellers of reduction quotas need to be identified. As for the sale of reduction quotas, there is a discussion with the Ministry of Finance regarding the issue of levying business tax, and it is expected to be levied in accordance with the sale amount, similar to renewable energy certificates.
Previously, the first batch of international carbon rights trading on the Taiwan Carbon Rights Exchange was officially launched in December last year. On the first day, 27 domestic enterprises purchased the first batch of international carbon rights, with a total trading volume exceeding 88,000 tons and a transaction value of approximately 800,000 USD. At that time, Lin Xiuming, Chairman of the Taiwan Carbon Rights Exchange, announced that he hoped to launch a domestic carbon rights platform in the second half of 2024, marking a new milestone for Taiwan’s net zero journey.
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