Experts discuss International carbon credit use

In Taipei on March 21, experts from various nations convened at a carbon market forum, delving into the intricate landscape of international carbon credit utilization within their respective countries’ carbon pricing frameworks. This assembly of minds offered a diverse spectrum of insights, furnishing valuable perspectives to inform Taiwan’s imminent implementation of a carbon pricing system.

At the Global Carbon Market Forum, a culminating event of the Net Zero City Expo, attendees were enlightened by presentations elucidating the structures and operational modalities of distinct carbon credit markets across Europe, Japan, Singapore, and China. This exchange not only broadened local understanding but also facilitated cross-border knowledge sharing, paving the way for informed decision-making in Taiwan’s carbon pricing endeavors.

A point of overlapping focus in the discussion was the use of carbon credits from the international voluntary carbon market — meaning credits developed voluntarily out of carbon-reducing projects — in each country’s own carbon pricing system to offset emissions.

Joyce Goh (吳佳佳), commercial director of Singapore’s carbon exchange Climate Impact X, said Singapore uses the mechanism of a carbon tax to control the country’s emissions, and carbon tax-liable companies can offset up to 5 percent of their taxable emissions with international carbon credits.

Goh added that the tax was raised five-fold from an initial S$5 (NT$119) per tonne in 2019, when the mechanism was first put forward, to S$25 in 2024. “And in 2026 it is expected to further rise to S$45, and in 2030 to about S$60 to S$80.”

An expert from Tokyo Stock Exchange’s Carbon Credit Market Office, Saki Kawakubo, said as the Japanese government has aims for both carbon emission reduction and economic growth, “the government would hesitate to accept international credits, which [are believed to have little to] contribute to the domestic economy, in the mandatory [carbon pricing] scheme” if the latter were established.

Japan has so far not established a mandatory/compliance pricing scheme requiring major emitters to reduce emissions or pay carbon tax; its current “J-credit” system encourages enterprises to set their own targets and trade the emissions, according to Kawakubo.

Jin Boyang, an analyst from the London Stock Exchange Group who is well acquainted with China’s carbon credit market, said from China’s experience, there is the risk of oversupply of voluntary credits if an offset limit is not imposed or a well-researched methodology for what counts as good quality carbon credits not applied.

Jürgen Landgrebe, head of the “Climate Protection, Energy and German Emissions Trading Authority (DEHSt)” division at the German Environment Agency, stressed that international carbon credits on a voluntary basis “will not be eligible in the EU mandatory scheme in the future.

In the past a lot of different kinds of carbon offset units, similar to the current voluntary carbon credits, were allowed in the EU’s mandatory trading scheme, he said, but ultimately “we lost our priority because you cannot sell your emission deductions and reduce at the same time.

“The offset is a good starting point… but it’s not the solution,” Landgrebe said. “You have to have a high ambition [for carbon emission reduction].”

The EU Emission Trading Scheme is a typical mandatory carbon pricing system that puts a cap on the total level of emissions and allows those industries with low emissions to sell their extra allowances to larger emitters whose emissions exceed the cap.

Although the carbon fee rate has yet to be set, Taiwanese companies that emit more than 25,000 metric tons a year will be required to pay carbon fees starting in 2025. The draft of the regulations on carbon fees, announced last December, proposes that the use of international carbon credits, following Singapore, will be capped at 5 percent of a company’s total emissions in the preceding year.

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