Following the EU's implementation of the Carbon Border Adjustment Mechanism (CBAM), countries including the UK, the US, and Australia are following suit with their own carbon tax plans. CBAM will require Taiwanese SMEs (small-and-medium enterprises) to enhance their carbon emissions reporting. In addition, the UK intends to introduce carbon pricing in 2027, and in the US, the Clean Competition Act (CCA) is going through the legislative process of becoming law, which will have an even more profound impact on Taiwanese companies. Meanwhile, Southeast Asian countries such as Indonesia, Thailand, India, and Vietnam, where Taiwanese businesses are also active, are also beginning to plan carbon pricing, with Thailand planning to implement a carbon tax as soon as next year. Taiwanese businesses will need to prepare quickly. 

Carbon pricing can be divided into mandatory and voluntary mechanisms. Mandatory mechanisms require businesses to purchase carbon credits or pay carbon taxes according to local regulations, while voluntary mechanisms allow businesses to implement reduction projects of their own accord. Currently, 36 countries and regions, including the EU, the US, China, Korea, and Japan, have put in place Emissions Trading Systems (ETS). Another 39 countries, including the UK, Singapore, and Thailand, have implemented carbon taxes. Taiwan has set a carbon fee of NT$300 per ton along with a voluntary mechanism for reduction projects, allowing businesses to acquire carbon credits to offset carbon fees or achieve supply chain carbon neutrality. A dual-track system of carbon fees and ETS is planned for the future.  

The ETS mechanism for emerging markets and carbon taxes are increasingly a focus in Southeast Asia  

Amid the global drive for net-zero, ETS and carbon taxes are becoming a key policy in many countries. 11 countries across the emerging markets in Asia, Latin America, the Middle East and Africa have implemented carbon pricing, while Thailand, India, Vietnam, and Brazil are in the planning stages. Asian countries prefer to adopt the ETS mechanism to ensure emission reduction efficiency, whilst Latin American countries mostly opt for carbon taxes due to the easy implementation. Mexico launched its ETS last year, after having first introduced the levying of carbon taxes in 2014, and became the first Latin American country to establish a dual-track system of ETS and carbon taxes. Brazil is also planning ETS legislation and may become the largest carbon market in Latin America if the law is passed. 

Under Taiwan's New Southbound Policy, Southeast Asia has become a focus for Taiwanese businesses. There exist a diverse range of carbon pricing designs in this region, and as a result, Taiwanese companies must be flexible enough to respond to different market conditions. For example, Singapore and Thailand have chosen carbon taxes, while India and Vietnam have opted for ETS, and Indonesia has adopted a dual-track system. Singapore has gradually increased its carbon tax since 2019, sending a strong signal to industries to pursue low-carbon transformation. India will put into force its ETS in 2026 which will use product emission intensity as a benchmark, as this mechanism can achieve reduction targets without affecting economic growth. Vietnam will launch its ETS in 2028, and Malaysia and the Philippines are still in the consideration phase. All of which indicate ASEAN's heightened emphasis on climate change. 

Singapore, Thailand, Malaysia, and Indonesia have successively established carbon credit exchanges. Among these, Singapore utilizes blockchain technology to prevent double counting of carbon credits. Thailand's carbon trading system is relatively mature, with voluntary carbon credit prices showing a compound annual growth rate of 35% from 2018 to 2024, reflecting a significant increase in market demand. Malaysia's carbon credit exchange adheres to Islamic law, prohibiting speculation, and thus attracting Islamic green finance. Indonesia launched its carbon credit exchange last year, with numerous financial and mining companies participating in trading. As a result, the local green energy industry is attracting significant attention. 

Taiwanese businesses are embracing a new chapter in global carbon pricing

In light of the dynamic development of the global carbon market, Taiwanese businesses expanding overseas will face challenges from different carbon pricing and implementation schedules from one country to another. In Southeast Asia, Singapore demands the highest carbon tax at US$18.5 per ton, while Thailand imposes a carbon tax of US$5.5 per ton on petroleum products. In comparison, Latin American carbon prices are generally lower, with the exception of Uruguay, with Argentina's carbon tax on fossil fuels at less than US$1 per ton. Therefore, it will be necessary for Taiwanese businesses to comprehensively consider the carbon pricing structure in each country and its impact on supply chain costs, energy and green electricity supply, low-carbon subsidies, carbon market development, etc. and adjust their operational strategies accordingly and with flexibility. 

For example, Singapore’s increase of the carbon tax to approximately NT$600 per ton in 2024 has had a direct impact on local Taiwanese businesses in semiconductors, communications, electrical machinery, and petrochemicals. This presents both challenges and opportunities. Companies will have to review their internal carbon costs and promote carbon reduction measures or technological innovation amid this green wave. However, it is also necessary to address challenges such as local legal compliance risks and the local procurement of green electricity.

Looking ahead to 2030, the voluntary carbon market in the Asia-Pacific region is projected to grow by 30% each year, while the mandatory carbon market will grow by 14% annually. Singapore is transforming itself into an Asia-Pacific carbon service center. Thailand's tax exemption incentives for carbon credits are driving significant carbon price increases. Malaysia is investing its national funds in forest development, and Indonesia is developing blue carbon products to meet the international demand. All of these represent opportunities for Taiwanese businesses. A three-phase approach is advised for Taiwanese companies – 1) stay on top of local policies and regulations, 2) develop internal carbon pricing, and 3) establish a roadmap for carbon neutrality enabling them to navigate successfully through the stormy waters of carbon trading.