Dr. Yen Hui-hsin is currently the Deputy Trade Representative of the Office of Trade Negotiations, Executive Yuan, and the Chairperson of the Taiwan Council for U.S. Affairs.

As the implementation of the European Union's Carbon Border Adjustment Mechanism (CBAM) approaches, many major trading nations are paying close attention. What measures will Taiwan take to respond to international trends? On January 17, 2025, the Taiwan Carbon Solution Exchange, the National Sun Yat-sen University Carbon Rights Research and Service Center, and the Taiwan Stock Exchange jointly held the "2025 Taiwan 'Carbon Border Adjustment Mechanism' Policy Seminar," inviting representatives from academia, industry, and government to share their observations and suggestions. In the government representatives' session, Tsai Ling-yi, Director-General of the Climate Change Administration, Ministry of Environment, Yen Hui-hsin, Deputy Trade Representative of the Office of Trade Negotiations, Executive Yuan, Christoph Saurenbach, Head of the Trade Section of the European Economic and Trade Office, and Liu Che-liang, Director of the Center for Energy and Environmental Economics Research, Chung-Hua Institution for Economic Research, each explained their current plans and perspectives.

If Taiwan implements a Taiwan version of CBAM, what concerns and considerations might foreign businesses raise? What preparations can be prioritized when considering a Taiwan version of CBAM? Yen Hui-hsin offered her observation: "The EU and the UK spent a long time collecting data and preparing during the implementation of their CBAM, proving that it is definitely not for the benefit of their own domestic industries, but for the purpose of global environmental justice, so a transparent mechanism is a very important preliminary preparation procedure."

Assuming Taiwan plans to implement a Taiwan version of CBAM next year, it must announce in advance the things it plans to do in the next 12 months, the direction of implementation, and the possible international trade and investment impacts. At the same time, it must also give stakeholders, including those abroad, an appropriate comment period.

The Devil is in the Details: Practical Considerations That Cannot Be Ignored

The most important aspect of CBAM is the fair treatment between domestic and foreign products. If domestic products are already subject to a carbon fee, the same carbon fee should also be levied on imported products. Are there any international trade law concerns regarding the EU CBAM? Yen Hui-hsin admitted that we will only know after it is officially launched. However, she raised several details that may need attention:

• How is carbon emissions determined? How can the taxes and fees levied by our country achieve equivalence with the taxes and fees on foreign products? The calculation of emissions is crucial.

• The fees levied on imported products are limited to the scope of products subject to fees in Taiwan. Taiwan currently has many transitional measures, and when levying fees on foreign products, free allowances must be deducted in order to calculate the taxes and fees borne relative to domestic products.

• How is the default value of emissions calculated? When a product does not submit emissions data, can the individual average value of the exporting country be used? Should the average value of the worst 10% of facilities in the exporting country be used, or the average value of Taiwan?

• How is the deductible rate for imported products determined? The product must have effectively paid taxes and fees in other countries before it can be deducted from the Taiwan version of the rate, and it should be ensured that there are no export tax rebates, no export subsidies, etc. However, can overseas companies deduct voluntary carbon credits purchased abroad? Are there any necessary verification methods?

• Are our verification agencies recognized by the EU? Is it necessary to find an EU testing agency for verification? This will be a significant cost. Similarly, do products imported into Taiwan also need to submit third-party certification?

"We have many very complex industrial chain structures, and several industries may be the final downstream industries, which must jointly bear the increased related costs of various products or raw material sources." Yen Hui-hsin suggested: "Let's first seek to steadily build up our own experience, and then look at the subsequent needs of the Taiwan version of CBAM."