“These are all tree species with high carbon fixation,” explains Lee You-ping, the director of the Fourth River Management Office of the Water Resources Agency as he points at tree saplings in the ecological park around the Mululiao detention basin of the Dongpuna River in Nantou County.

Normally hydraulic engineers plant trees to prevent soil erosion and for landscaping purposes but now “carbon fixation capacity” has become an important factor in afforestation.

After President Tsai Ing-wen announced that Taiwan aims to reach net zero by 2050, - meaning that absolute emissions are reduced to support the target of the Paris climate summit to limit global temperature increases to 1.5 degrees Celsius - government agencies sprang into action. The Water Resources Agency concluded that its three-year carbon emission average stands at 58,700 tons. The target is a 50 percent reduction by 2050.

As much as 1008 metric tons of carbon dioxide can be sequestered with the tree saplings at Mululiao in the coming 30 years. While this amounts to just 0.2 percent of the Water Resources Agency’s annual carbon emissions, not planting trees is not an option.

The Water Resources Agency does not plan to trade the carbon credits that it earns from afforestation. “We will keep them to use for our own offsets,” says Deputy Director-General Wang Yi-feng.

On August 7, Taiwan’s carbon exchange opened to great fanfare in the southern port city of Kaohsiung. However, there is still a long way to go before any locally generated carbon credits can be traded there since Taiwan must first generate these credits.

Based on the Regulations on Greenhouse Gas Offset Projects, the Water Resources Agency has announced 256 domestic and foreign greenhouse gas reduction methods. Companies or government agencies can use these to apply for certified emission reductions, popularly called carbon credits.

Since 2010 when the Environmental Protection Agency began to promote carbon offsets, only 93 applications were filed, of which just 25 were awarded carbon credits.

All approved projects achieved carbon reductions through a transition to green electricity or facility upgrades. The tree planting and afforestation methodology that the Water Resources Agency adopts is a first for Taiwan and constitutes a completely different approach.

Trees and other plants absorb carbon dioxide from the atmosphere through photosynthesis. If forests absorb more carbon dioxide than they release, they function as carbon sinks. The amount of carbon dioxide that they absorb per year can be converted into carbon credits.

Carbon fixation is more complex than planting lots of trees

Carbon sequestration methods vary, categorizing the stored carbon as green (forest), blue (ocean), or yellow (soil). Presently, the green carbon methodology has been developed the furthest, and, so far, remains the only approach recognized by the Environmental Protection Agency.

The Water Resources Agency, whose job is to regulate rivers and waterways, has planted forests for flood and drought prevention. Over the past two years, 329 hectares of forests were planted to prevent run-offs and flooding, reduce dust or conserve water. But now agency planners are forced to rethink their approach, taking new factors into account such as efficient carbon capturing tree species, carbon fixation amounts, and spacing between trees.

The afforestation area is located in Zhushan township in Nantou County where flooding and mudslides caused by a typhoon 22 years ago destroyed an entire village. After the disaster, the Fourth River Management Office built a retention basin and established an ecological park to restore the habitat of the golden birdwing, a large tropical butterfly.

In March last year, 5500 tree saplings from indigenous tree species that are efficient carbon storers such as Formosan ash, Taiwan acacia, camphor tree and Formosan sweet gum were harvested. Regardless of whether afforestation projects using these trees can earn the agency carbon credits, these man-made forests can help improve soil conservation and increase biodiversity.

While afforestation has many benefits, such projects are “too costly” to serve as carbon offsets in densely populated Taiwan, where land is scarce and expensive, says Liou Je-liang, head of The Center for Energy and Environmental Research at Chung-Hua Institution for Economic Research. As Liou sees it planting forests to gain carbon credits is not really a scalable endeavor.

At the Mululiao ecological park, for instance, the Water Resources Agency is planning to invest NT$3.6 million over the coming 30 years which translates into a cost of NT$3571 per metric ton of carbon dioxide that can be expected to be stored there. Yet at carbon exchanges in the European Union the price of one metric ton currently trades at less than NT$3500, which means that making a profit from carbon credit sales seems improbable.

“Theoretically, the carbon credits produced through afforestation amount to three percent of total cost at most,” explains Liou. Therefore, making a profit from trading carbon credits is not realistic unless credits are produced at a large scale.

The benefits of afforestation go beyond mere monetary terms, as it helps soil conservation, protects biodiversity, and promotes environmental education. An under-forest economy – the cultivation of forest by-products – would have to be developed if forests are to become profitable. This would necessitate further investment. “For companies these are investments that do not comply with financial viewpoints,” notes Liou.

How can enterprises gain carbon credits? The most common method is by improving processes.

BenQ Materials changes incinerators, 7-Eleven switches to LED lights

Materials supplier BenQ Materials Corp. has spent NT$60 million on new equipment under its carbon offset program for recovering waste heat from RTO (regenerative thermal oxidizers), a type of incinerator. The recovered waste heat is stored and used on demand to generate steam for production processes so that less natural gas needs to be burned in boiler incinerators. The reduced carbon emissions can be converted into carbon credits.

BenQ anticipates accruing carbon credits equivalent to a carbon dioxide emissions reduction of 1529 metric tons per year, which would be more than what the Water Resources Agency will produce with the Mululiao afforestation project in 30 years.

On top of that, BenQ can save NT$6.4 million in costs per year for generating 800,000 kilowatt-hours of electricity from natural gas, the equivalent of what 4000 private households consume in a year.

BenQ Materials Corp. President Ray Liu believes spending money on such investments “is worth it in the long run.” If a company buys carbon credits on international exchanges rather than improving its processes to earn them, it will also have to spend more than NT$3 million. Should prices for carbon credits go up, the cost would be even higher.

On the other hand, improved processes help reduce pollution which again can be used to earn carbon credits. “These are necessary investments,” posits Liu.

Liu says that BenQ Material’s target is to reduce carbon dioxide emissions by 30 percent by 2030 compared to ten years ago. The company will keep any carbon credits that it gains to use them for offsets in the future.

7-Eleven in Taiwan. (Source: Pei-Yin Hsieh) 

The service industry can also realize carbon reductions. Convenience store chain 7-Eleven has switched to LED lights at four convenience stores in Taipei under a micro scale offset program which is expected to save 61,000 kilowatt-hours of electricity. The project, which has been approved for registration, must now be certified by a verification body. If the carbon reductions are confirmed, the company can apply for carbon offsets with the Environmental Protection Agency.

SMEs can’t shoulder high costs

There are many approaches to reducing carbon emissions but only few have successfully obtained carbon credits. Why is it so difficult for Taiwanese companies and government agencies to create carbon credits?

“The costs are too high,” notes Shaw Daigee, adjunct research fellow with the Institute of Economics at Academia Sinica, arguing that companies need to spend a lot of money before they can apply for carbon credits.

Taiwan’s Climate Change Response Act distinguishes between “emission allowances”, which are issued by the government in line with industry-specific caps on harmful emissions, and “reduction credits” which are awarded for the voluntary reduction of greenhouse gas emissions. Since Taiwan has not yet implemented an emissions trading system, only reduction credits are currently being used.

The first hurdle that companies need to take when they want to gain carbon credits is forecasting future emissions which serves as a comparison basis. Otherwise, it would not be possible to calculate how much carbon was reduced through the implementation of an emission reduction project.

Companies and government agencies must commission consulting firms with the projection of future emissions which costs them money.

The application process, governed by the Environmental Protection Agency, is stringent, aiming to prevent companies from deliberately overstating future emissions and subsequently falsely claiming reduction credits in what is known as “greenwashing”. Applicants must hire a third-party verification body to “confirm” that the content of the emission reduction plan is correct. This means another expense.

When the project plan has been approved, applicants must commission verification bodies to write a monitoring report. When all these expenses have been paid, the project undergoes a preliminary review followed by a project conference, and a final decision by a review meeting before reduction credits can be awarded.

“The average SME cannot shoulder this burden,” says Shaw. This is the main reason why carbon credits are so hard to get.

If more companies are to participate in carbon reduction projects, the problem of excessive recognition costs must be solved.

But It's imperative for companies to refine their processes, cut carbon dioxide emissions, and lessen environmental harm.

And while afforestation might not be profitable, it deserves to be encouraged for creating more ecological value.

For Taiwan to generate carbon credits while protecting the environment, it calls for collective action, innovation, and continued efforts from all parties.

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Translated by Susanne Ganz
Uploaded by Ian Huang