1. 1 Greenhouse effect and CO 2 emission Chi-Yuan Liang Institute of Economics, Academic Sinica November 1, 2006

2. 2 1. Introduction

3. 3 2. The impact of Kyoto protocol on Taiwan

4. 4 2.1 Investment and trade risk before 2012 (1/2) Three EU environmental directives: (1)WEEE (Waste Electrical and Electronic Equipment) Effective since August 2005 (2)ROHS (Restriction of Hazardous Substance) Effective since July, 2006 (3)EUP (Eco-design Requirement for Energy Using Producers) might be effective after 2008

5. 5 2.1 Investment and trade risk before 2012 (2/2) Energy productivity of Taiwan was 47% lower than the EU. EU accounted for 13 percent of the exports of Taiwan in 2004. In the meanwhile, exports accounted for 60 percent of GDP of Taiwan. The trade and economic growth of Taiwan will be significantly affected once EU implement the directive of EUP.

6. 6 An International Comparison of Energy Productivity

7. 7 2.2 Investment risk after 2012 An International Comparison on CO 2 Emission

8. 8 2.3 Causes of acceleration in CO 2 emission since 1999 YearThe growth rate of CO 2 The growth rate of GDP (%) CO 2 %/GDP% 1996-994.685.400.87 2000-035.072.551.99 1996-034.913.771.30 The growths of CO2 and GDP in Taiwan, 1996-2003

9. 9 Energy Structural Changes in Taiwan (1996-2003)

10. 10 The changes in energy efficiency in Taiwan (1996-2003) YearThe growth rate of energy productivity ($NT/l) The growth rate of energy intensity (l/$NT) 1996-99-0.22%0.21% 2000-03-8.85%9.76%

11. 11 An international comparison of oil prices CountryDiesel92 gasoline95 gasoline Korea42.2652.1754.87 Singapore27.8036.5737.22 Japan32.2338.80-- The average price of adjacent countries 34.1042.5146.05 Taiwan24.5027.9028.60 Differences in oil prices between Taiwan and the average price of adjacent countries (%) -28.15%-34.37%-37.89% Unit: NT dollars/litre

12. 12 An international comparison of electricity prices for lighting Taiwan: $2.49 Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad, 2004.

13. 13 An international comparison of electricity prices for industry Taiwan: $1.76 Sources: The Energy Information Administration (EIA) and Tenaga Nasional Berhad (TNB), 2004.

14. 14 The ratio of consumptive industries to total energy between 1980-2004

15. 15 2.4 The impact of CO 2 reduction on Taiwan ItemOne StepProgressive Reduction of CO 2 (%)-25.77-25.31 The growth rates of GDP deflator (%)2.261.01 The economic growth rate (%)-1.57-1.19 Annual average marginal social costs of CO 2 reduction 17341186 Notes: 1. Levying carbon taxes for attaining the objective of CO 2 reduction 2. The progressive method is levied annually for twenty years. The effects of different CO2 abatement approaches on Taiwan

16. 16 3. Rethinking on energy policy (1/3) 3.1 Energy pricing policy Energy price should fully reflect its internal and external cost. Oil price Floating oil price mechanism is a right direction but should be modified.

17. 17 3. Rethinking on energy policy (2/3) Electricity price Price adjustment formula and mechanism is needed. Automobile fuel fee (Road-maintenance fee) AFF should levy on oil products instead of car.

18. 18 3. Rethinking on energy policy (3/3) Carbon tax (energy tax) and green tax reform (i) Tax on CO 2 emission (ii) Progressive approach

19. 19 Carbon tax (energy tax) and green tax reform (Cont.) (iii) Green tax reform The tax revenue should be used (a)To reduce the personal and business income tax rate (b)To lower the burden of social welfare (retirement fund and Medicare) of the employers (c)Subsidies of energy expenses to the low income families (d)To purchase CO 2 emission quota from abroad (e)Energy R&D

20. 20 3. Rethinking on energy policy (2/2) 3.2 Industrial restructuring 3.3 Energy restructuring The limit of renewable energy Reevaluation on Nuclear Free Homeland policy

21. 21 Comparison on the costs of generation in Taiwan

22. 22 The CO 2 abatement plan of the 2nd Energy Conference

23. 23 Chart of Total Scores of Monitoring Indicators

24. 24 The international development of nuclear power in 2004 (1/2) CountryOperatingage under construction Scheme Argentina226119%3% Armemia1240036% 23% Belgium7240056% 19% Brazil213014% 2% Bulgaria4190038% 20% Canada17200213% 6% China104142% 1% Czech6130031% 13% Finland4251027% 19% France59200178% 38% Germany18230028% 11% Hungary4190033% 10% India1417803% 1% Iran00210% Japan542021225% 10%

25. 25 The international development of nuclear power in 2004 (2/2) CountryOperatingAgeUnder ConstructionScheme North korea00110% South korea19121840%14% Lithuania2190080%38% Mexico213005%2% Netherlands131005%1% Pakistan219012%1% Romania18109%3% Russia30233017%5% Slovakia6170057%21% Slovenia1230040%21% South Africa220006%2% Spain9230024%10% Sweden11260050%33% Switzerland5290040%21% Taiwan6232022%9% Ukraine14173046%14% UK23260024%9% USA104250020%8%

26. 26 Conclusion Remark To cope with the oil price surge and Kyoto protocol is tough. However, the truth is that there is no free lunch in the world. Government should be responsible and takes the right actions. The entrepreneurs and consumers should also react now.