Non-Annex I nation signatories of the Kyoto Protocol will one day be required to join Annex I nations in adopting specific targets for reducing emissions. Since Taiwan is not a member of the United Nations, it isn't currently subject to Kyoto's requirements. Yet Taiwan, which produces carbon emissions at over four times the global average, is nonetheless working to overcome the great challenges involved in reducing its carbon footprint, for fear of its exports being targeted by "carbon tariffs." Toward that end, the Environmental Protection Administration in September announced the "Principles Governing Preliminary Implementation of Greenhouse Gas Emission Credits and Offsets." These are aimed at creating concrete incentives to encourage various industries to start voluntarily reducing emissions. They provide a warm-up for the future, when Taiwan will almost surely face international pressures to reduce its production of greenhouse gases.

From now on, so long as companies meet these regulations, they will be given carbon credits," says Zhou Shuwan, head of the carbon audit and trading section at the Greenhouse Gas Reduction Office of the Environmental Protection Administration (EPA). Industrial emission baselines have been announced for various industries; companies producing at below those levels will be able to obtain carbon credits.

The baselines were created from industrial emissions figures collected by the Ministry of Economic Affairs, as well as estimates taking into account the special features of individual industrial sectors. Take, for instance, the cement industry. Since it creates only one product, the emissions baseline is calculated simply by the amount of greenhouse gas emissions typically produced to create a metric ton of cement. Yet since the steel industry produces numerous products, separate emissions baselines are being established for each of them.

If a cement company has invested in energy-saving equipment that allows it to produce 200,000 fewer tons of CO2 than it would have at the industry baseline, then it will qualify for 200,000 tons of carbon credits after obtaining certification from the EPA.

The offsets will function much like those under the Kyoto Protocol's Clean Development Mechanism. For instance, say Tai-power invests in a wind farm. After first submitting its proposal to the EPA for review, and then constructing the facility and bringing it into operation, Taipower will acquire credits every year based on the difference between the emissions that the wind farm creates and the amount that the average power plant in Taiwan would have created in generating the same amount of electricity. In the future, after the controls of the proposed Greenhouse Gas Emission Reduction Act go into effect, those credits will be able to be used to offset the emissions created by power plants burning fossil fuels.

For the sake of transparency, the EPA plans to establish a "carbon credit management platform," through which companies approved to hold trading accounts can buy and sell credits. For instance, when a development project applies for an environmental review, the review committee will typically request a reduction of carbon emissions by a certain amount. One way the developer can accomplish that task is to purchase emissions credits from a company with an account on this platform.

Zhou explains that those preliminary measures formally went into effect in September. They are providing incentives before the adoption of the Greenhouse Gas Emission Reduction Act, which has so far only passed its first reading. To the carrots of those preliminary measures, the act will add sticks.