Taiwan 2050 Net-zero Pathway
Daigee Shaw, Shih-Mo Lin, Wen-Hsiu Huang, Yu-Hsuan Fu
Academia Sinica

Challenges of Decarbonization Polices and TechnologicalInnovations toward Carbon Neutral Societies in East Asia
Pre-Conference of Society for Environmental Economics and Policy Studies 2021
September 24, 2021

Preliminary results, please do not quote1Outline
1. Introduction
2. Methodology
3. Policy Scenarios
4. Modeling Results: Taiwan 2050 Net-zero Pathway
5. Conclusions

2

1. Introduction

3

Climate Crisis and 2050 Netzero Target• Climate change has now become climate crisis• 2018, IPCC indicated in the special report “Global Warmingof 1.5°C”• To avoid irreversible changes in systems, global
warming must not exceed 1.5°C• Therefore, global net anthropogenic CO2 emissions
must reach net-zero around 2050
• On longer time scales, sustained net-negative global
anthropogenic CO2 emissions are required to prevent
further warming Net-negative economy and society
FIGURE SPM.3B, IPCC, 2018, Special report Global Warming of 1.5°C.

4IPCC (2018) Special report Global Warming of 1.5°C

FIGURE SPM.3B, IPCC, 2018, Special report Global Warming of 1.5°C.

5IPCC (2021) AR6
Climate Change 2021: The Physical Science BasisThis new assessment paints
a devastating picture of aworsening global climate
crisis that is now “inevitable,unprecedented, andirreversible.”(Guardian newspaper headline
10 August 2021)

Immediate, rapid and largescale reductions of all
greenhouse gases areneeded to limit global
warming to 1.5 degrees.
(IPCC news release, August 9,2021)

Figure SPM.1: History of global temperature change and causes of recent warming6

Climate Crisis and 2050 Net-zero Target• Net Emissions: GHG emissions released by humans minus GHG removal from theatmosphere within a period of time• Three groups of GHG removal (GGR) methods (UK Royal Society, 2018, Greenhouse GasRemoval)
1. Increased biological uptake
Afforestation, reforestation and forest management; Habitat restorations; Soil
carbon sequestration; Biochar; BECCS; Ocean fertilization; Building with biomass
2. Natural inorganic reactions
Enhanced terrestrial weathering; Mineral carbonation at surface; Ocean alkalinity
3. Engineered removal
DACCS; Low-carbon concrete; and others
7Net-zero GHG or CO2 Emissions TargetDeclarations• At the end of July 2021, over 130 countries have announced net-zero GHG or CO2 emissions
target around 2050
• June 2019, United Kingdom was the first country legislated for 2050 net-zero GHG emissions• December 2019, European Union, as the leader of global GHG reduction, published“European Green Deal”, announced the target to become the first climate-neutral continent
by 2050• September 2020, China announced to reach carbon neutral by 2060
• October 26, 2020, Japanese Prime Minister Yoshihide Suga declared that Japan would reachnet-zero GHG emissions by 2050
• October 28, 2020, President Moon Jae-in of South Korea announced that South Korea would
reach net-zero CO2 emissions by 2050
• April 22-23, 2021, President Joe Biden of US held Leaders Summit on Climate and announced
goal of net-zero GHG emissions by 2050
8

At the end of July 2021,
over 130 countries haveannounced net-zero
GHG or CO2 emissions
target around 2050

Net-zero Emissions Race (by March 2021)

Source: Painted according to the data from Net Zero Tracker, The Energy & Climate
Intelligence Unit (https://eciu.net/netzerotracker)

9Net-zero in Taiwan• Net-zero Pathway Task Force, November 2020- November 2021
• Executive Yuan organizes the net-zero pathway task force• There are five working groups. Each one is joined by various responsible
ministries, agencies, experts, and think tanks• Clean energy• Energy efficiency• Clean transportation• Negative emissions technology• Policies/Economic instruments• Executive Yuan is expected to finalize the net zero pathway by November
202110

Net-zero in Taiwan• On April 22, 2021, Earth Day, President Ing-Wen Tsai announced that “The 2050 net-zerotransformation is the goal of the whole world, and it is also the goal of Taiwan!”• Taiwan is under pressure• Over 130 countries have announced net-zero GHG or CO2 emissions target around2050 including our neighbors in East Asia,• A huge gap between the international target and Taiwan’s current target• Current GHG reduction target is written in “Greenhouse Gas Reduction and Management
Act” since 2015

• “Long-term national GHG emission reduction goal shall be to reduce GHG emissions tono more than 50% of 2005 GHG emission by 2050”• Another critical pressure• EU CBAM (carbon border adjustment mechanism) from 2026.
• The government and industries in Taiwan all face serious pressure and incentives.
Start to change their mind gradually11

Net-zero in Taiwan• Aug. 30, 2021, in a meeting of the National Council for
Sustainable Development• Prime ​Minister Su made two important decisions concerning therevision of ​the Greenhouse Gas Reduction and Management Act​• The target​ ​of 2050 net-zero​ should be specified in the ACT• EPA should consult with the Ministry of Economic Affairs about the carbonpricing policy to be adopted in the Act• In addition to the ETS in the Act, a carbon fee system earmarked for
mitigating and adapting climate change is expected• The ETS has not been implemented yet• Interest groups (businesses, environmentalists) are lobbying hard against
each other on the fee rate and the usage of revenue

122. Policy choices for net-zero pathways

13Approaches to mitigate climate crisis• To avoid irreversible changes in systems, global warming must not exceed 1.5°C• Therefore, global net anthropogenic CO2 emissions must reach net-zeroaround 2050
• On longer time scales, sustained net-negative global anthropogenic CO2emissions are required to prevent further warmingNet-negative economy and society• Two major approaches to mitigate the climate crisis
1.To reduce GHG emissions• Emission reduction
2.To remove GHG stocks in the atmosphere, GHG removal (GGR)• Using negative emissions technologies (NETs) to remove GHG from theatmosphere• Natural: forestry, agriculture• Technological: energy, industry• Combined: BECCS
14

All available Strategies and Policies• To reach net zero by 2050, we need all available and correct strategies andpolicies• Proactive GHG reduction and removal policies• R&D of low-carbon and GGR technologies• Transforming to become a net-negative economy and society

15Economic Strategies and Policies• Economic incentives• To reduce GHG emissions• Carbon pricing (carbon tax and ETS) and energy tax based on GHG emissions or fossilfuels• Tax-fund system: Tax revenue to be disbursed to citizens and to form a GGR fund• To remove GHG stocks• Using the interests of the GGR fund• To pay the carbon removal price based on GGR• Reverse auction of GGR• To invest in GGR R&D• Dynamic cap-and-trade system with banking and borrowing• Emission allowances• Carbon removal obligations• See Bednar, et al. "Operationalizing the net-negative carbon economy." Nature (2021)

16

Economic Strategies and Policies• To overcome free-riding in international climate agreements and toencourage other countries to join a climate club, such as EU• Tariff• See Nordhaus. "Climate clubs: Overcoming free-riding in international
climate policy." American Economic Review (2015)• Carbon border adjustment mechanism (CBAM)• Green carbon fund

• See Shaw and Fu. "Climate clubs with tax revenue recycling, tariffs, andtransfers." Climate Change Economics (2020)17

Economic Strategies and Policies• Sustainable consumption and production policies• Huge investments for transforming the system of consumption andproduction are needed• Government investments in infrastructure• Private investments: households and industries• Related policies• Greening government budgeting and procurement• Greening finance• Loans, bonds, investment, financing• Green financing: Green carbon fund
• Systems of green consumption and production• Green value chain• Extended producer responsibility to cover the whole value chain18

3. Methodology

19Cambridge Econometrics• Cambridge Econometrics founded in 1978
• A commercial spin-off from the University of Cambridge• Take forward the pioneering work of Professor Sir Richard Stone• 1984 Nobel Laureate in Economics• Research fields: applied economic analysis• Models: E3ME, MDM-E3, LEFM, CHELMER• Projects• New Climate Economy – unlocking the inclusive growth story of the 21st Century• Modelling global renewables targets• Fueling Europe’s Future: How the transition from oil strengthens the economy
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E3ME: Global Macro-econometric Model• To analyze the short-, medium- and long-term impacts of Energy-Environment-Economy (E3) policies• E3ME is a dynamic, computer-based, global macroeconomic model. The econometric approach, which
provides a strong empirical basis for the model and means it is not reliant on some of the restrictive
assumptions common to CGE models• The first version of the E3ME model was built by an international European team under a succession ofEuropean Commission research projects, which were completed in 1999
• E3ME’s origins lie in post-Keynesian economic theory. E3ME includes a realistic representation of thefinancial system and pays particular attention to unemployment and the labor market• Features• Covers 59 global regions and 43 economic sectors in each region, with additional detail in Europe• Its econometric specification addresses concerns about conventional macroeconomic models andprovides a strong empirical basis for analysis. It can fully assess both short and long-term impacts and is
not limited by many of the restrictive assumptions common to Computable General Equilibrium (CGE)models• Integrated treatment of the world’s economies, energy systems, emissions and material demands.
To capture two-way linkages and feedbacks between these components.
• Timeframe: 1970-2050 on an annual basis. Version 621

Future TechnologyTransformations(FTT)• FTT is a group of sectoral modelsof technological change• power, road transport,
household heating and steel• Dynamic selection and diffusionof innovations• Lotka-Volterra equation

22

4. Policy Scenarios

23• To reach the 2050 net-zero target, need all possible
and correct strategies to induce transformation ofall sectors

CO2emissions
by sectors
in Taiwan• Total CO2 emissions: 283 MtCO2 (2018),
289 MtCO2 (2019)• Removal by LULUCF: 22 MtCO2 CO2• Emissions by sectors in 2018
• Energy sector (94% of total CO2 emissions)• Energy Industry (71% of CO2 emissions
from energy sectors)• Transportation (13% of CO2 emissions
from energy sectors)• Manufacturing Industry and Construction(12% of CO2 emissions from energysectors)• Chemicals• Iron & Steel• Non-metallic mineral products

24

CO2 emissions from Manufacturing
Industry and Construction
18%

1% 2% 1%CO2 emissions from theenergy sector are267 MtCO213%
26%

15%
3%
7%

Taiwan CO2 emissions in 2018 from energy sector

1%

12%

30%
71%

Iron&SteelNon-ferrous metal industry
Chemicals
Pulp, Paper and Printing
Food, Beverage and Tobacco
Non metallic mineral products
OthersEnergy Industry
Manufacturing Industryand Constructionv
Transportation
Service Industry
Residential
Agriculture, Forestry, Fishery, and Husbandry

Note: Total CO2 emissions in 2018 are 283 MtCO2, removal from LULUCF are 22 MtCO225

Four emission intensive industries in Taiwan
GHG Emissions from Manufacturing
Industry in 2019
GHG emissions frommanufacturingindustry are 150
MtCO2eGHG Emissions in 2019
4540

40.2
31.4

3522%

302569%

2063%

31.2

15%

49%
85%

9.4

15
107%

524%

0Chemicals

Emissions from fuel combustion
Emissions from industrial processes
Emissions from electricity consumption

Note: Total GHG emissions in 2019 are 289 MtCO2e

24%

15%
Electronics

27%
Iron&Steel

5%
59%
36%
CementEmissions from fuel combustion
Emissions from industrial processes
Emissions from electricity consumption

26Policy
Scenarios2021

2030

2050

2040

1 Carbon Tax

Carbon tax rate rises yearly. Lump-sum transfer tax revenues to citizens after
paying GGR or investment

2 Renewables

Increase solar PV and off-shore wind power’s capacity

3 Regulation
on fossil
fuels

4 EVs
5Transformationof Energy
Intensity
Industries
6 NETs

R&D in fossil
fuels + CCS

Increase EV market
share

Phase out oil, coal andgas in power generation

Fossil fuels alone can’t
be usedPhase in CCS

Fossil fuels + CCS

Increase rapidly

Keep increasing

Raise energy efficiency, R&D in CCS and Hydrogen

R&D in NETs

99% by 2047

90% by 2036

Phase out coal or gas
for power. Use green
energy or hydrogen

Phase inBECCS

27

Carbon Tax Rate in Taiwan(NTD/tCO2)
10,000
9,000
8,000
7,000

2. Nominal Carbon Tax Rate rises at a nominalinterest rate of 4.88%(real interest rate 3.8% + inflation rate 1.08%)

6,000
5,000

1. Real Carbon Tax Rate in 2050 is equal tothe unit cost of NETs in 2050
(Royal Society, 2018）

4,000
3,000

• Apply the Hotelling rule (QJE, 1931)• Backstop technology: NETs
• Calculate the shadow price of carbon• Rises at a real interest rate of 3.8%, to reach the unit cost of the backstop technology in 2050

2,000
1,00002050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

real carbon tax rate

nominal carbon tax rate28

5. Taiwan 2050 Net-zero Pathway(Preliminary Results)

29

Unit: GWh
350,000

Baseline
Coal 66.94%
Gas 23.73%
Renewables 4.1%

300,000
250,000

1 Carbon Tax
Coal 1.54%
Gas 45.75%
Renewables 22.0%
Coal + CCS 1.42%
Gas + CCS 24.68%

Power Structure in 2050

1+2 Carbon Tax +Renewables
Coal 6.3%
Gas 5.2%
Renewables 87.8%
Coal + CCS 0.1%
Gas + CCS 0.1%

200,000

1+2+3 Carbon Tax+ Renewables +Regulations on
Fossil Fuels
Coal + CCS 3.8%
Gas + CCS 6.0%
Renewables 90.2%

1+2+3+4+5+6
Coal + CCS 2.0%
Gas + CCS 7.1%
Renewables 71.3%
BECCS 19.6%

Current Policy:
20%-30%-50%
Coal 28.9%
Gas 44.3%
Renewables 23.5%

150,000
100,000
50,0000Gas

Gas+CCS

Biomass

BECCSLarge Hydro

1+2+3+4+5+6
Emissions frompowergeneration-41.73 MtCO2

On-shore Wind

Current policy: 20%-30%-50%

Coal+CCS

1+2+3 Carbon Tax +Renewables +Regulations on Fossil
Fuels
Emissions from power
generation 1.35 MtCO2

1+2+3+4+5+6

Coal

1+2 Carbon Tax +Renewables
Emissions frompower generation
14.30 MtCO2

1+2+3

Oil

1+2

Nuclear1

Baseline
Baseline
Emissions frompower generation
201.52 MtCO2

1 Carbon Tax
Emissions frompower generation
43.68 MtCO2

Current policy:
20%-30%-50%
Emissions frompower generation101.23 MtCO2

Off-Shore Wind

Note: Because EV and Transformation of energy intensive (EI) industries do not make much difference on power mix, we didnot present power mix of those scenarios

Solar PV30

250,000

2030s
Mostly Gas and Renewables
Coal 22.8%
Gas 33.1%
Renewables 40.2%
Coal + CCS 0.2%
Gas + CCS 0.9%

Transformation of Power Structure
2040s
Mostly Renewables, with some Gas + CCS
Renewables 65.4%
Coal + CCS 6.9%
Gas + CCS 27.7%

2050s
Mostly Renewables, with some BECCS
Renewables 71.3%
Coal + CCS 2.0%
Gas + CCS 7.1%
BECCS 19.6%

200,000

150,000
2021~2030
Increase
100,000
Renewables andGas, decrease Coal

2031~2040
Keep increase
Renewables, andlarge-scale CCS

2041~2050
Keep increase
Renewables andCCS, and BECCS

50,00002030
Nuclear

Oil

Coal

Coal+CCS

2040
Gas

Gas+CCs

Biomass

BECCS

2050
Large Hydro

On-shore Wind

Off-shore Wind

Solar PV

31

Net CO2 Emissions (mt CO2)
400
350
300
250
192

200
150

112

152

100
500-5002005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049
11+21+2+3

1+2+3+4

1+2+3+4+5

1+2+3+4+5+6Baseline

IPCC SR1.5 Net Zero

Target in Law

Current policy: 20%-30%-50%

Historical data

Note:
1. We use total CO2 emissions minus CO2 removals to get the historical data from 2005 to 2018
2. Net CO2 emissions after 2019 are the difference between the total CO2 emissions simulated by E3ME and 21 MtCO2 from LULUCF
3. We only present the results of carbon tax with revenue recycling in this graph. The results without revenue recycling are a little bit smaller.
Because the two curves almost coincide, thus we do not present in the graph.
4. We calculate the Target in Law using total GHG emissions reduction percentage as total CO2 emission reduction percentage, and then32
subtract 21 MtCO2 of LULUCF

CO2 emissions from Iron & Steel in 2050 (MtCO2)
1.5
1
0.5
0

5.1+6.1

5.2+6.1

5.3+6.1

CO2 emissions from Chemicals in 2050 (MtCO2)
14.55
14.5
14.45
14.4
14.35
14.3
14.25
14.2

100% investment paid by industry will have theleast emissions

5.1+6.1

5.2+6.1

100% investment subsidized bycarbon tax revenue will have thehighest emissions because ofrebound effect

5.3+6.133

GDP relative to baseline (part.1)
7.00%(1+2+3+4) Invest in EV will have positive impacts on GDP

6.00%
5.00% (1+2) Renewables policy invest more

(1+2+3) Invest in Fossil Fuels + CCS

from 2021 to 2045 than current policy,
4.00% and will have positive impact on GDP

3.00%(1.R) Carbon tax with lump-sum revenue recycling will increase
consumption and investment, and have positive effects on GDP

2.00%
1.00%

(1.0) Without revenue recycling will have negative effects on GDP-2.00%
1.R+2+3+4

1.R+2+3

1.R+2

1.R

1.0

Current policy: 20%-30%-50%

34

2050

2049

2048

2047

2046

2045

2044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2023

2022

-1.00%

2021

0.00%

2024

Current Policy: 20%-30%-50%
will need to invest in Renewables before
2025, and will have positive effects on GDP

GDP relative to baseline (part 2)(5.1 or 5.2 or 5.3 +6.1)
Carbon Removal Price paid by carbon tax revenue is better for GDP

7.00%

Among the scenarios, investments in transforming the EI industry
100% paid by firms will increase GDP the most

6.00%
5.00%
4.00%

(5.1 or 5.2 or 5.3 +6.2)
Carbon Removal Price paid by government has smaller
positive effects on GDP because it will crowd out othergovernment expenditures

3.00%
2.00%
1.00%

1+2+3+4+5.3+6.2

1+2+3+4+5.2+6.2

1+2+3+4+5.1+6.2

1+2+3+4+5.3+6.1

1+2+3+4+5.2+6.1

1+2+3+4+5.1+6.1

35

2050

2049

2048

2047

2046

20452044

2043

2042

2041

2040

2039

2038

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

0.00%

Income Redistribution (2050)
2.00%(5.1 or 5.2 or 5.3 +6.1)
Real disposable income relative to baseline will
decrease if Carbon Removal Price paid by carbon
tax revenue.
Lower income group decreases less than higher
income group.

1.50%
1.00%
0.50%
0.00%
-0.50%-1.00%-1.50%(5.1 or 5.2 or 5.3 +6.2)
Real disposable income will increase relative tobaseline if Carbon Removal Price paid bygovernment budget.
Lower income group increases more than higher
income group.

-2.00%

4 fourth 20%

5 highest 20%

1+2+3+4+5.1+6.1

3 third 20%

1+2+3+4+5.2+6.1

1+2+3+4+5.3+6.1

2 second 20%

1+2+3+4+5.1+6.2

1+2+3+4+5.2+6.2

1+2+3+4+5.3+6.2
1 lowest 20%

all housholds

36

6. Conclusions

37

Taiwan2050 Net
Zero
Pathway• Taiwan can meet the target of 2050 netzero, and result in a win-win solution interms of net-zero emissions, economic
growth, and social equity• Need to adopt all possible andeconomically correct policies andstrategies• Polluter pays principle• And avoid those unsound policies• Subsidize polluters

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Thank you foryour attention!

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