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  1. Heading Towards a Sustainable Future ~Policy towards Green Economy in Taiwan~ Dr. Kung, Ming-Hsin Vice President, Taiwan Institute of Economic Research August 25, 2011

  2. Outline 1. Green House Gas reduction: Global Trend 2. International Green New Deal 3. Taiwan’s Vision of Sustainable Future and Industrial Policies 4. Taiwan’s Green Investment and Green Industry Policies 5. Annex

  3. 1. Green House Gas reduction: Global Trend

  4. The fourth IPCC evaluation report Trend of Green House Gas Emission Reduction(1/2) • Global Consensus:The emission of green house gas including CO2 has gradually resulted in global warming. • Current Development: In 2007, COP13 passed “Bali Road Map”, new protocol was planned to be created in 2009 originally, however from 2008, the focal point of global climate change has transferred from “Post- Kyoto Protocol Track ” of “Bali Road Map” to more widely covered “Copenhagen Track. • Challenges Faced: More severe in demanding the emission reduction from power generation and industrial organizations in each country. Transferring into low-carbon industrial structure is a must. 2006 2010 2007 2008 2009 COP16 COP 12 肯亞奈洛比 COP 13 印尼峇里島 COP 14 波蘭波茲南 COP 15 丹麥哥本哈根 Bali Action Plan Kyoto Protocol further committed to build work team (AWG-KP) Copenhagen Track Special work team for long term cooperation AWG-LCA Article 3.9 of the Protocol: Negotiation of Post-Kyoto Target Review of the Protocol(Article 9) Source: EPA, “Explanation & Review of Green House Gas Emission Reduction Policy “

  5. Trend of Green House Gas Emission Reduction(2/2) • Post-Kyoto Target advocated by mayors around the world, expecting the emission reduction of 30% by 2020 comparing with 1990《The Second World Mayors Council on Climate Change (WMCCC)》 • In the Copenhagen Accord resolved from COP15 at the end of 2009, all attended nations had reached the initial consensus of controlling the rising of the global temperature not to exceed 2℃. Requesting the nations listed in Attachment 1 to set quantified target of reduction by 2020, the nations not listed in Attachment 1 to set National Appropriate Mitigation Actions (NAMAs). • According to Cancun Agreementsin 2010, the nations listed in Attachment 1 shall reduce carbon emission by 25~40% before 2020 using 1990 as the base line. • Currently, international investment organizations have included energy saving and carbon reduction as the key of enterprise risk evaluation, and requesting global 500 to disclose CO2 emission volume. • Taiwan’s target of green house gas emission reduction: reduced to the level of 2005 by 2020 (National Council for Sustainable Development, Executive Yuan)

  6. Strategies of Each Country in Reducing Green House Gas Emission Japan Korea China Singapore India Taiwan • Each nation stresses the emission reduction effectiveness of power generation departments, and creates the taxation reform on internalizing the external cost and emission trade mechanism. Low carbon power generation Coal purification Technology Taxation Reform Forest Carbon Absorption Voluntary Reduction Agreement Trade Mechanism CDM registered emission investment nation (12.35%) and the nation of number of investment (9.62%) Nihon Keidanren promoting industrial voluntary reduction program Increase nuclear power percentage Developing gasifying combined-cycle power generation,realizing zero emission by 2030 Planned to levy environmental tax on fossil fuel that emits CO2 after burned The most active country with good performance ? One of the top 3 countries currently honored CERs number of cases (8.85%) Motivate new and renewable energy development Planned to levy carbon tax on petro-made products from 2008 The possibility of introducing the voluntary reduction agreement into taxation system Developing nuclear power & renewable energy to increase coal pure comprehensive use Increasing supercritical burning efficiency units Studying to levy environmental tax and the taxation policy on enhancing the development of new energy One of the top 3 CDM countries registering the number of cases (13.41%) Encouraging power generation enterprises to use natural gas Encouraging enterprises to attend emission trade program Promoting balanced development of various energies, optimizing energy structure Currently the first place country registered by CDM on emission Diversified energy use, promoting co-generation Planned to levy energy tax, steadily adjusting taxed amount by year Promoting the study of pure coal power generation, increasing the efficiency of coal burning Creating industrial CO2voluntary reduction agreement Unable to directly attend international emission reduction

  7. OECD Green Economic Growth Strategy • The origin of OECD’s Green Growth Strategy (GGS) • Global financial crisis since 2007 has forced many countries to believe that they should go after “a different kind of economic growth”. Meanwhile, economy should move to “a green recovery”. • In the process of recovering, resources and design policies shall be re-allocated, in order to promote the transforming of the economy to green. • OECD Green Growth Declaration • In 2009, 34 nations in OECD Ministry Conference signed “Green Growth Declaration” to commit strengthen the effort of each nation in pursuing green growth of the economy as a part of the actions in responding to economic crisis. • The ministry conference agreed that “Using natural resources with innovative and sustainable methods, effectively using energy and caring the services provided by eco-system can expand economic growth and job opportunities.” • Both economic and environmental policies shall be analyzed at the same time, in order to take care of both low carbon economy and growth. • Using policy tools to enhance the economy to green-recover from crisis, and creating index system to monitor whether the economy has a “green growth”.

  8. 2. International Green New Deal

  9. International Goal and Development on Green Policies (1/2) Overall Objectives Consumption Saving Purified Energy Economic Measures Infrastructure Nuclear Energy Low Carbon Energy Low carbon Renewable Energy Carbon Management Performance/ Standard Carbon Capture and Storage Others Introducing CDM capital & technology (China & Korea) Offshore carbon right (EU &Japan) Carbon Credit Resource Reuse CO2 Green Policy 1. For increasing green GDP and employment 2. Based on market competition 3. Pursuing infrastructure supporting green growth 4.Gaining maximum benefit for the brand names of the nation Production Value Key points High-value Source: Industrial Development Bureau

  10. International Goal and Development on Green Policies (2/2) Consumption Saving Low Carbon Infrastructure Purified Energy Smart grid / Information & comm Economic Measures Green building & Transportation Nuclear Energy Oil/Water/Electric prices react the actual cost Low carbon city & community Encourage green investment (Korea) By 2030 Japan will set 14 new units(Now 54 units) ? Performance / Standard Green taxation reform and green finance(Korea) By 2030 Korea will set 18 new units (59% of total) Energy tax (EU, UK) High efficient appliances Low carbon vehicle / fuel Carbon Management Renewable energy Storage battery/LED Lighting Cap and trade (including carbon linkage, eliminate free quota by steps) Solar, Wind Power, Tides, Wave, Biomass, etc. Performance of industrial process Voluntary reduction Implementing the commitment of carbon reduction on low energy consumption industries (UK) Others Low Carbon Energy Introducing CDM capital & technology Carbon Budget+ Reduction on each department (UK) Purifying Coal, Expanding the Use of Natural Gas Offshore carbon right MRV(Monitoring, filing and verification) Carbon credit Carbon Capture and Storage Carbon disclosure Resources reuse

  11. EU’s Green Policies Existing legal structure & scope Green Policies-EU Stimulus Program (2008.11) EU Energy Investment Programs (2009.01) Climate & energy Package Law (2009.04) EU Energy Tax Directive • Total Budget: Euro 200 Billion (1.5% of GDP) • Information & Communicatoin • Pan-Europe broadband infrastructure (Euro 5 Billion) • Increase internet popularity (Euro 1 Billion) • Application of energy saving green product technology • Europe green vehicle program(Euro 5 Billion ) • Increase the application of advanced manufacturing technology(Euro 1.2Billion) • Lower VAT of green products • Implementing the environmental performance requirement of external power supply, set-top-box and fluorescent lamps • Total budget: Euro 3.5 Billion • Enhancing the construction of Europe power grid (Euro 700 Million) • The construction of coastal wind power generation (Euro 500 Million) • CCS Programs (Euro 1.25 Billion) • Others Target of 2020: • Reduction of green house gas, lower by 20% comparing with 1990 (If international society is active in reduction, then increasing to 30%) • Renewable energy increased to 20% of the total, biomass energy increased to 10% of the total transportation energy consumption • Energy efficency increased by 20% ETS Directive (aiming at 40% energy-intensive organizations having carbon emission) Carbon reduction sharing resolution (aiming at 60% other organizations that are non-ETS emission) Clean Vehicle New Regulations Renewable energy new laws New criteria for fuel & biomass fuel新標準 Carbon capture/Geological storagenew regulations Source: Industrial Development Bureau

  12. Japan’s Green Policies Multi-sectors: Implementing ”Law of Earth Warming Measures”- green house gas emission check, report and announcement Implementing ”Law of Reasonably Using Energy (Energy Saving Law), -Management of Energy Use Current Japanese Measures Construct low carbon city and region Low carbon community Collective-type city Flexibly use urban planning to manage energy saving Absorbing green house gas Forest preparation City greening Electrical sector Effective use of petro and LPG Develop and prevail renewable energy /new energy Extend the introduction of natural gas Industrial sector Enhance the promotion of industrial autonomy Factory energy management Prevailing energy saving machines Develop and prevail high efficient energy saving technology Enhancing SME’s emission reduction Home sector Promote energy saving buildings Prevailing energy saving appliances Environmental education Promote energy saving equipment (Top runner system) Commercial sector Promote energy saving buildings Energy management Transportation sector Develop low carbon vehicles Effective use in highway (such as ETC) Increase the use of public transportation Increase energy efficiency on rail, airplanes Increase efficiency of logistics

  13. Korea Green Growth Policies 8 4 1 Developing green technology & mobilizing the growth Industry green-nized and facilitating green industry 9 2 5 6 10 3 7 Moving industrial structure to high value Strengthening the ability to cope climate change Reducing relying on petro & energy autonomy Realizing a global green growth model country Creating green homeland and transportation Effective reducing green house gas emission Form a green economic basis Green revolution for living Respond to climate change & energy independent Improve living quality and enhance national position Create new growing power Source: Topology Research Institute Green policy 3 strategies & 10policies 三大策略及十大政策方向

  14. 3. Taiwan’s Vision of Sustainable Future and Industrial Policies ─Guideline of Sustainable Energy Policy (2008)─ ─Guideline of Industrial Development (2011)─

  15. Policy Objectives (1/2) • Sustainable energy development is: • (1) to satisfy the need present economic growth without sacrificing future generation’s right for further development; • (2) to maintain a balance of “Environmental Protection” , “Energy Security” and “Economic Growth” in order to create a triple-win situation among Environment, Energy and Economy; • (3) and to utilize environmentally friendly “clean” energy, make “efficient” use of limited resources, and ensure a “stable” energy supply. Energy Sufficient , stable and affordable energy services Sustainable environments and renewable energy supply Environmentally friendly energy utilization Innovative technologies for green energy industry Environment High quality and stable resources for production Economy Reflecting external cost structure to strengthen economic development

  16. Energy efficiency:2% energy efficiency improvement per annum. • Further reduce energy intensity by 50% in 2025with technological breakthrough and administrative measures. Policy Objectives (2/2) • CO2 Emission:return to 2005 level in 2016 ~ 2020, and further be reduced to 2000 level in 2025. • Share of Low Carbon Energy in Electricity System: up to 55% by 2025. Cleanliness Stability efficiency • Establish a secure energy supply system to support the need of economic development objectives.

  17. Principles of Industrial Development Guideline Diversified and Innovation: The development of industry shall encourage technology, service models, operation strategy and innovated applications, elevate industrial competiveness Creating employment: The development of industry shall stress manpower resource and job opportunity Balanced development: The development of industry shall consider regional development conditions and the needs of SME’s development Environmental loads: The development of industry shall respond to climate change and environmental resources, consider energy saving and carbon reduction, elevate energy efficiency and environmental protection work, encourage current companies to activate the use of industrial land, increase the effectiveness of land use International participation: The development of industry shall adopt the spirit of market mutual benefit and openness, actively promote international industrial cooperation Public and private partnership: The development of industry shall respond the needs of enterprises, meanwhile lead enterprises to bear social responsibilities Policy stability: The development of industry shall seek for policy integration and coordinate the maximization of efficiency, plus improve long term stability and predictability of policies. Financial self-compensated: The development of industry shall adopt the financial self-compensation effect as the tools to select policies.

  18. Industrial Topics and Planning related with Sustainable Development Topic: Worsening of climate change, taking food safety for account Agriculture Sustainable Operation Lead agriculture developing from production towards living industry, value the multi-function features of the environmental contribution from agriculture, promote industrial adapted policy in responding to climate change, and develop high green energy industry, strive for the co-exist of agriculture and environment. Topic: global industries develop to the integration of low carbon and services. Industry Promote industry green-nized Strive to promote industry green-nized, adopt the measures of innovative R&D, talent training and investing into the best energy saving technology and equipment, to increase the overall industrial energy and resource production efficiency, plus develop green industry in responding to international trend. Topic: Less investment of innovative R&D, limited to adopting IT in services and cross-discipline integration Services Enhance the adoption of high-tech and innovation Assist enterprises to resources to execute R&D and innovation activities, stress IP right protection and the transfer of technology between academic sector and industries; adapt to related regulations, increase R&D personnel to participate R&D and innovation activities. Source: Industrial Development Bureau

  19. 4. Taiwan’s Green Investment and Green Industry Policies

  20. Current R&D Status of Taiwan’s Environmental and Energy Technologies Reviewing the budget allocation of government high-tech R&D, although the percentage of current R&D of energy and environment technologies is still not much from the total central government budget(Taiwan’s total R&D budget), but from the growth of high-tech budget in recent years, it is found that government is steadily increase the development of energy and environmental technologies. Taiwan government’s environment and energy R&D budget shows high growth rate in 10 years, with certain percentage. Taiwan government’s R&D ratio % in 2009 Environment Energy Total Taiwan government ‘s R&D budget *Year 2000=100 Source: indicators of science and technology, calculated by Div. 3 of TIER

  21. Budget & Sequence of Subsidy of Taiwan’s “Energy National Sci-Tech Project” National Science Council approved and initiated “Energy National Sci-Tech Project” on June 10, 2009, in five years up to NTD 30.3 billion will be budgeted to develop low carbon homeland and green energy industry. Among which close to NTD 15 Billion will be invested into the development of energy technologies including solar power, wind power generation, bio-mass energy, marine energy, hydrogen system, new nuclear engineering and geo-energy. The technologies of solar energy industry is at the top in the budgeting.

  22. Greenhouse Gas Reduction and Promotion Measures in Manufacturing Industry(1/2) Source: Taiwan Research Institute

  23. Greenhouse Gas Reduction and Promotion Measures in Manufacturing Industry(2/2) Note: promoting the reduction of fluorine-containing compounds (HFC, PFC, SF6) is expected to reach a total CO2 reduction of 14 million tons

  24. The optimized targets of Taiwan’s industrial structure in the 2020 prospective(1/2) • Analyzing the ratio of intermediate goods to the manufacturing industry in the year 2009, we found that fossil-fuel, basic metal, account for 57.02%, which is relative high, indicating that Taiwan’s industries is rather short in the downstream terminal goods • 2. In terms of the objectives of 2020, we hope the industries can complete the industrial supply chain, increase the ration of highly-added valued terminal good, reducing the total ratio of intermediate goods by 50% • 3. Analyzing in the point view of high-energy consuming industries, we found that fossil-fuel, basic metal industries accounts for 30.36%. But, we expect it would reduce through the guide of policy when we were planning the 2020 perspective • 4. In the future, Taiwan is on the path to green growth and sustainable development. We will keep reducing the ratio of high-energy consuming industries to about 30% of manufacturing industry by 2020

  25. The optimized targets of Taiwan’s industrial structure in the 2020 prospective(2/2)

  26. The objectives of Taiwan’s industrial development by 2020 Note: 1. Korea (2007): 21.86%、the US(2006): 32.6%、Japan(2007): 31.38%. 2. The emerging industries include: smart living, green energy, biotechnology, advanced medical equipment, motor vehicles, motor electronics, intelligent robots, 4G, soft display, etc. 3. Six service industries include: international material flow, digital industry of cultural innovation, exhibition industry, Taiwan gourmet, WiMAX service, e-commerce of Chinese 4. the output of the six service-related industries is summing up from freight transport, business travel, communication, computer and information, individual culture and leisure service of the balance of payments in Central Bank

  27. Strategy of Enhancing Industry Green Growth • Creating low carbon industrial structure as the main axis, promoting industrial energy saving and carbon reduction, plus transformation and upgrading • Simultaneously developing green industry, enhancing industry green-nized, expanding resource re-generation, creating green finance, building Taiwan’s low carbon economic vision. Goal Promoting • Expanding regional energy and resource integration,creating the niche of industry green-nized • Promoting the integration of industrial zone resources and energy • Promoting industrial water saving and water resource reuse • Promoting the reuse of industrial waste • Enhancing green industry development, creating green growth vision • Strengthening the design of eco-product , building industrial clean production value chain • Promoting green factory • Developing green energy equipment industry and environmental protection energy saving industry • Building roadmap of developing low carbon industry and transforming to high-value industry • Short term: ability to construct, voluntary reduction, facilitating energy saving & carbon reduction technology • Mid and long term: adjusting industrial structure, implementing emission control, promoting carbon neutralization, • Creating green finance, activating green business opportunity • Building incentives to green financing • Enhancing green financial market development • Strengthening green financial talents training • Promoting the introduction of green accounting

  28. Conclusion(1/2) • Taiwan is actively involved with “green policy”, a transformation of economic and industrial structure. • Taiwan’s CO2 emission will be back to the level of 2005 by the year of 2020, the mid and long term target is to reach the level of 2000 by 2025. • Currently our government is aggressively realizing “Sustainable Energy Policy Guideline — Energy Saving & Carbon Reduction Action Plan”, planning to promote “Green Energy Industry” as the new Trillion Dollar Industry, in order to capture huge business opportunity in the green new era.。 • In the future, Taiwan ‘s main axis is to create the “low carbon industrial structure”, to promote industrial energy saving and carbon reduction as well as transformation and upgrading. Meanwhile, Taiwan will develop green industry, to drive the green-nization of industries, to enhance industrial green-nized, to expand the resource recycled, to create green finance, and to build Taiwan’s green economic vision. • In the adjustment of industrial structure, Taiwan will lower the percentage of intermediate products, in order to increase the percentage of the final products. In addition, it will develop the key material and components needed by the down-stream products, to phase out the old generation manufacturing processes by steps, meanwhile to slow down the growth of carbon emission, and to reach the goal of creating overall added-value growth.

  29. Conclusion(2/2) • Viewing Taiwan’s current strategy in responding to industrial sustainable development, overall it invests more resources on “product innovation” of the green industry development. • In the future it is necessary to consider the effective allocation of resources, and to change the OEM model largely used in the past, to avoid certain items in the green industry to become bubble in the investment. Manufacturing Process Innovation Product Innovation • Regarding energy saving, carbon reduction , and the introduction of resource recycling technology and equipment the “Manufacturing Process Innovation” aspect, it is possibly necessary in the future to strengthen the facilitation measures after the levy of energy tax, carbon tax, to avoid the impact to Taiwan’s industrial competiveness after the external environmental cost being internalized. • To match the development of green industry simultaneously in order to reach “green economic growth”, so that the four-win benefit can be obtained , that includes resolving economic recession, creating job opportunity, maintaining resource security, and reducing environmental impact.

  30. Annex ─ Budgets of major nation’s green policies─ ─Green Energy International Investment Trend ─

  31. ( Nation Announced Date Program Budget (Currency of the nation/USD) Asia Pacific Region Nation Building and Jobs Plan 2009.02.03 AU$42B/US$26.7B Australia NDRC Stimulus Package 2008.11.09 RMB$4.01T/US$586.1B China 07 India Stimulus Package 2008.12. $6,750/US$13.7B Japan Package to Safeguard People s Daily Lives 2008.12.19 ¥43T/US$485.9B ‘ KRW50T/US$38.1B Green New Deal 2009.01. 06 South Korea Stimulus Package 2009.01. 13 Thailand $115B/US$3.3B Subtotal US$1153.8B Europe € 200B/US$38.8B 2008 .11.23 EU Economic Recovery Plan - Only EU Germany € 81B/US$104.8B Stimulus Plan 2008 .11.05 Revival Plan 200 8.12.10 France € 26B/US$33.7B € 80B/US$103.5B Emergency Package 2008.11.28 Italy Stimulus Package 2008.11. 27 Spain € 11B/US$14.2B Green Stimulus with Loan for cars £22.1B/US$30.4B 2008 .11 UK € 238.5B/US$308.7B Stimulus Package 2009.01 Other EU Nations Subtotal US$325.5B America Economic Action Plan 2009.01.27 CA$4B/US$31.8B Canada Anti Crisis Stimulus Package 2009.01.05 US$4B/US$4B - Chili Emergency Economic Stabilization Act 2008.10.03 USA American Recovery and Reinvestment Plan 2009.01.15 10 ,078 Subtotal 億美元 27 ,960 Total 億美元 Attachment 1 Budgets of major nation’s green policies Source: Taiwan Research Institute US$185B/US$185B US$787B/US$787B

  32. Attachment 2 Green Energy International Investment Trend Financial Crisis Global investment in green energy development in 2010 has recovered to, or even exceeded the level prior to the financial crisis, reaching up to US$243Billion. 30% growth in 2010 comparing to 2009 Source: Bloomberg New Energy Finance, Global Trends in Clean Energy Investment, 2011