Taiwan's Turning Point How Climate Action Can Drive Our Economic Future

Embargoed until August 23 Taiwan’s turning point How climate action can drive our economic future August 2021 Taiwan’s turning point We have a narrow window of time. The choices made today and over the next decade will determine our future. We have the opportunity to create a new engine for sustainable economic prosperity while at the same time preventing the worst consequences of a warming world. Deloitte Economics Institute 2 Contents Contents Foreword 4 Executive summary 6 Leading the world toward a low-emission future 8 The cost of climate inaction 10 Leading the way to a low-emission economy 11 Decarbonization is a new economic engine 12 Taiwan’s turning point 14 The economic costs of climate inaction 16 The new normal: a climate-damaged economy 18 The high costs of inaction 20 The economic cost of climate change 26 The economic gains of rapid decarbonization 28 A new economic climate 30 Taiwan’s turning point 36 The path to decarbonization 37 Endnotes 40 Limitations of our work 42 Related content 42 Contacts 43 Acknowledgments 44 Deloitte Economics Institute 45 3 Taiwan’s turning point Foreword Our planet is our most precious asset, and yet without dramatic efforts to address climate change, Through bold action now and the world as we know it is at risk. in the decades that follow, we No one is immune to the impact of climate change, could avoid the worst effects but for Taiwan and Asia Pacific, this crisis also presents a clear opportunity: to lead the world of climate change. and find the next wave of economic growth by accelerating action to mitigate climate change. This report discusses how this can be achieved and quantifies Taiwan’s potential gains. Our research By taking bold action now, we can create a new challenges one of the main concerns stopping engine for sustainable economic prosperity, governments, businesses, and individuals from while at the same time reducing the impacts acting on climate change: the cost. It reframes of climate change. In doing so, we can leverage the debate to show that what seems like a cost our leadership in the consumer economy and today is actually an investment in a climate-driven advanced manufacturing, to supply the low- transformation for a better future. emission innovations, processes, and know-how the world needs. The choices we make today and over the next decade will determine whether the worst effects of climate change are locked in or avoided. We Addressing the climate crisis are at a turning point, and it is time to discover how Taiwan and Asia Pacific can reshape the arc creates huge opportunities for of economic history. But we can only do it if we economic growth. do it together and act now. 4 Foreword The Greenhouse Gas Reduction and Management Act passed in Taiwan in 2015 demonstrates the strong position of Taiwanese government’s supports and response to climate change. This act is in constant refinement and adjustment to make Taiwan a climate friendly region. At Deloitte, we have set a bold target to reach net zero emissions by 2030. We are also empowering our professionals, connecting with others, and engaging our broader ecosystem to create solutions that facilitate the transformation to a low-emission economy in Asia Pacific and globally. We look forward to working with you to help prevent the worst consequences of a warming world and realize the many opportunities presented by decarbonization. Jason Ke Cindy Hook Chief Executive Officer, Chief Executive Officer, Deloitte Taiwan Deloitte Asia Pacific 5 Taiwan’s turning point Executive summary 6 Executive summary MY 2035 NO O GE C HAN TUR E D C NI TE NG 2045 D A P E IN O Z D IN I R T O N O C O L O B W S R Y - E A A M L P I C S E S E T I O A D N M $1.3T I F L economic gain U C ($US) T D U L R O E B A C T 2021 IO N 1.5ºC 2070 IN 2021 AC 2070 3ºC T IO N D S E E C I R R E T A S S U E D Y D -$1.4T N P economic loss I M R ($US) E O V O I D S U N N C E T T O I V N I C I T E Y N O B D R A E IN C C G RE A AS ES ING TUR M TEMPERA A E D AT CLIM 7 Taiwan’s turning point Leading the world toward a low-emission future If left unchecked, climate change will impose steep At the center of our research is Deloitte’s economic costs on Taiwan. These costs will threaten uniquely calibrated Regional Computable General the progress and prosperity the nation has enjoyed Equilibrium Climate Integrated Assessment Model, in recent decades. But there is an alternative path. the D.CLIMATE model. This model integrates the economic impacts of physical climate change Rapid reductions in emissions in Taiwan and across into a baseline economic trajectory to overcome the global economy, beginning now and continuing the myopia of many current economic models. through this next critical decade, offer a way forward By factoring the costs of climate change into the to a low-emission future. This potential future not baseline, our framework reveals the tremendous only avoids the worst impacts of climate change, it economic harms of inaction or inadequate action, also creates prosperous long-term economic growth as well as the significant opportunities that present for Asia Pacific and the world. themselves in transforming Taiwan’s economy. Taiwan’s future is particularly bright in a decarbonized world that keeps warming within 1.5°C of pre-industrial levels. The country is already Taiwan’s future is particularly a hub for innovative technology and advanced manufacturing. Now is the time to reorient economic bright in a decarbonized world structures to leverage this complexity and reap the that keeps warming within 1.5ºC economic benefits of a low-emission future. of pre-industrial levels. However, there is a need to pivot from seeing efforts to limit global warming as optional costs, and instead view them as necessary and new areas of economic opportunity. This will require quantifying the value of climate change mitigation and the benefits that can come from decarbonization. This report aims to achieve these goals. 8 Executive summary Figure 1.1: Economic growth in Taiwan is the trend in a 1.5ºC world 2025–2035 2035–2045 Decade of Global warming GE delivery on bold HAN TUR limited to 1.5ºC, D C NI climate plays TE NG worst impacts A P IN O D I of climate R N T change O O avoided C L O W S Y - E A M L P I S E S T I To 2025 O After 2045 A N Rapid and M $1.3T Decarbonized I F L economic gain bold climate U Taiwan and C ($US) T D action U global L R economy O E B A C T 2070 2021 IO N 1.5ºC World maintains 1.5ºC warming limits beyond IN 2021 2070 A 2070 for a modern 3ºC C and prosperous Taiwan has T IO net zero future signiﬁcant loss N due to climate inaction D S E E C I R R E T A S S U E D D -$1.4T N P economic loss I R ($US) E O V I D S U Climate change N Emission damages C E intensive T T I V N economies I industry remains I T dominant Y N O B R A IN C C R EA S SIN RE G TEMPERATU Emissions increase global average temperatures Source: Deloitte Economics Institute D.CLIMATE model. Note: Taiwan’s stylized economic loss pathway reflects global average warming aligned with the RCP 6.0 baseline. The stylized economic growth pathway reflects limiting global average warming to no more than 1.5ºC by 2050, in line with the current ambition of the Paris Agreement. 9 Taiwan’s turning point The cost of climate inaction In the economic future Deloitte has modeled, Taiwan The result over the next half-century would and the rest of the world do not significantly reduce be climate change–induced economic losses emissions relative to current levels. This future has to Taiwan of approximately US$1.4 trillion in an emissions pathway that leads to global average present value terms.a This lost economic potential warming of more than 3°C by 2070. would total 9.5 percent of GDP in 2070 alone. This pathway would lead to economic losses For comparison the Chi-Chi earthquake in 1999, of more than US$468 billion in present value one of Taiwan’s worst natural disasters, cost the terms by 2050—or nearly 5 percent of Taiwan’s economy an estimated US$10 billion.1 The economic gross domestic product (GDP) in 2050 alone. Over cost of unchecked climate change in Taiwan the 30 years to 2050, that is an average annual loss would be equal to an earthquake of this scale of 2.4 percent of GDP each year. occurring almost three times a year between now and 2070. Figure 1.2: Economic loss in Taiwan due to climate inaction -US$1.4 trillion Signiﬁcant losses to Taiwan from climate change inaction and a 3ºC world, by 2070. Source: Deloitte Economics Institute D.CLIMATE model. a. Total net present value (NPV) of deviation loss to GDP in Taiwan over the period to 2070, at a 2 percent discount rate.

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