Ministry of Environment Proposes Carbon Border Adjustment Mechanism　Initiates with Pilot Declaration System

In response to media reports about domestic manufacturers facing pressure from the introduction of carbon fees and low-priced imports, while Taiwan's Carbon Border Adjustment Mechanism (CBAM) appears to lack progress, the Ministry of Environment (MOENV) clarified that it is currently studying international carbon pricing schemes as a foundation for developing a domestic CBAM framework. In 2025, the MOENV is planning to introduce a trial declaration system and aims to complete the necessary legislative work in 2026 to launch the trial. The MOENV will continue to monitor the legal and implementation developments of CBAMs globally and make necessary adjustments to ensure fair competition for domestic industries and importers.

To prevent carbon leakage and uphold industrial fairness, the MOENV began inter-ministerial discussions in the second half of 2024 and has been in dialogue with industries. As part of the phased implementation of a Taiwan-specific CBAM, the MOENV has planned a trial declaration system for product carbon emissions. An expert advisory meeting was held in April, followed by a consultation session with the cement and steel industries in May. These efforts focus on defining reporting entities, applicable products, calculation methods, and declaration procedures. The system design is expected to be completed by the end of this year, with public awareness campaigns beginning in 2026 and the official launch of the trial declaration in 2027.

This year's priorities include identifying the entities and products subject to declaration, establishing calculation methods and default values for product carbon emissions, developing procedures and timelines for the trial, and creating necessary supporting tools. The cement and steel sectors are the initial focus, and both industry associations have expressed willingness to report domestic product carbon intensity data in parallel, in support of developing a trial system for imported products.

In addition, drawing on international carbon pricing practices and the EU's CBAM experience, the MOENV released the "Regulations for Charging of Carbon Fees" in accordance with Article 28 of the Climate Change Response Act last year. These regulations address potential carbon leakage from industrial relocation to countries or regions with weaker or no carbon pricing. Inspired by the EU, South Korea, and Singapore, the regulations incorporate transitional support mechanisms, including partial free allocation or tax exemptions. For industries identified as high carbon leakage risk, a reduced emissions fee coefficient of 0.2 is applied, effectively charging only 20% of their total emissions, to help maintain Taiwan's industrial competitiveness.

The design of a CBAM system is complex, requiring consideration of international trade, industrial competitiveness, and WTO compliance. Among the 75 countries implementing carbon pricing systems, only the EU has enacted CBAM legislation, with the UK having proposed a draft. Other nations remain in the exploratory phase. Given the evolving global landscape, such as recent EU simplifications, the UK's CBAM draft, and Russia's WTO complaint against the EU CBAM, the MOENV will continue to monitor global CBAM developments and implementation. It will also work closely with relevant ministries to cautiously evaluate and advance Taiwan's CBAM legislation to safeguard fair competition for domestic industries and importers.