17-3 Special Reports Taiwan's Promotion and Development Strategies of Green Finance in Coping with the Paris Agreement Dr. Han-Pang Su ─Director of Third Research Division, Taiwan Research Institute Dr. Guan-Jhang Chen ─Associate Researcher of Third Research Division, Taiwan Research Institute Global warming and hence climate change Paris Agreement, it has been altered as the have led to the more frequent occurrence of Nationally Determined Contribution, replac- extreme weather conditions. Countries around ing the original low-carbon sustainable strate- the world have been relentless in taking active gies which were practiced from the bottom of measures to respond to this problem. The society to the top. The race to transform econ- Paris Agreement, which was passed during omies has commenced quietly when every COP21 in 2015, has changed the previous country tried its best to achieve the target pattern of international climate agreements. of the Paris Agreement. In the Paris Agree- It brings the world together to cope with cli- ment, developed countries are obliged to lead mate change in a stronger, more transpar- the rest of the world in reducing carbon emis- ent and flexible way. It even targets the ambi- sion. Furthermore, they should reinforce their tious goal of “holding the increase in the global support in terms of finance, technologies and average temperature to well below 2 oC above building capacities for developing countries. the pre-industrial levels”. Before COP21, each Therefore, one of the main challenges after country had tendered their Intended Nation- the Paris Agreement is how to acquire the col- ally Determined Contribution (INDC). After the lective qualified goal of USD 100 billion per 2 Special Reports year throughout 2020. According to the Paris is a fixed income tool, which financially sup- Agreement, Green Climate Fund will provide a ports environmental protection projects. In the new possibility while balancing between econ- first place, it is proposed by the trans-nations omy and environment. organizations, like the World Bank, European Investment Bank and African Development The Paris Agreement drives the global Bank. Green Bonds have been growing tre- corresponsive development of climate change mendously ever since (Figure 1). through a proper sequence and at the same time, pushes world economy towards green The value of Green Bonds plummeted finance. It makes every country in the world in 2009 due to the crisis of European Bonds. tackling climate change not only as an impact After that, Green Bonds have been growing in or an obligation but also as an opportu- value since 2011. In comparison, the growth nity to create economic values and business of general bonds is more moderate. It shows chances. Take green bonds as an example. It that the issues of climate change have gained Exploseve growth in green bonds market 45 120 40 100 35 30 80 25 60 20 Amount issued($bn) 15 40 10 20 Cumulative amount issued ($bn) 5 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 (Source: The Climate Bonds Initiative) Figure 1. The growth trend of the market of green bonds 3 The Development Trend of the Paris Agreement and the Corresponding Strategies for Industries 17-3 global awareness. Banks around the world tinize the implementation of its domestic poli- have also offered Green Credits. Many coun- cies on climate change and the current situa- tries have formed a Green Financial Market, tion of economic transformation. It is advised including the European Union, United States to look for opportunities for industrial devel- and Australia. The foundations of green devel- opment while keeping in line with the interna- opment finance at a global scale have been tional trend of developing green finance. By established. practicing energy conservation and carbon reduction, it will become the driving force From an economic analysis, it needs an to trigger green growth and push Taiwan additional capital outlay of about USD 40 thou- towards the transformation of green finance. sand billions to transform the global energy Taiwan actively tendered the INDC based on system to a low carbon one (it is expected the results of the United Nations Framework to invest USD 318 thousand billions if based Convention on Climate Change, the domes- on the 6 °C scenario that is developed by the tic Basic Environment Law and The Green- model). The amount is not even 1% of the total house Gas Reduction and Management Act global GDP from 2016 to 2050. By saving on (Figure 2), where the target is to reduce its fuel costs, the additional capital cost, which greenhouse gas emissions by 50% from the is nearly USD 40 thousand billions, can be business-as-usual (BAU) level by 2030. It is offset. Furthermore, it is expected to save fuel equivalent to a further 20% reduction when costs by USD 115 thousand billions, which is compared to the emission in 2005. In order to three times of the additional capital cost. This reach the target of INDC, which is the commit- is solid proof that we must invest and make ment Taiwan has made to international soci- the global energy system move towards a low ety, it is estimated to lower the average annual carbon system. growth of energy consumption from 2016 to 2030 from the originally predicted 1.8% to In light of this trend, Taiwan should scru- 0.3%. At the same time, electric consumption 4 Special Reports must be cut to 1.1%, from 2.4%. Therefore, the pivotal point in the revolution. In terms of it needs to make a great modification on the energy structure, fossil-fuel power stands at energy structure. The development of green 76% while renewable energy and hydropower technologies and green industries is certainly are at 2% each in 2014. Other than increasing Taiwan' Paris Agreement s Greenhouse Gas Reduction and To hold the increase in the global average Management Act temperature to well below 2˚C (or 1.5˚C) To reduce its greenhouse gas emissions below 50% of the emissions in 2005 by 2050 ● Setting up the National Action Guidelines for Adapting to Climate Ch- ● To achieve a balance ange. between anthropogenic ● Establishing the action emissions by sources plan for greenhouse gas Mitigation and removals by sinks Mitigation emission control of each of greenhouse gases in department. the second half of this ● Reporting the perform- century. ance of regulation and pr- oposing the improvement plan. ● To support developing countries for the effec- tive implementation of this Agreement. ● To submit and update ● National Adaptation Po- Adaption periodically an adap- Adaption licy Framework tation communication, which may include its priorities, implementa- tion and support needs, plans and actions. ● The assessment of im- ● Parties should enhance pact to overall economy understanding, action by greenhouse gas re- Loss and and support on a coo- Loss and duction and the corres- Damage perative and facilitative Damage ponding plans basis with respect to ● National Climate Change loss and damage. Adaption Plan Figure 2. Taiwan's Greenhouse Gas Reduction and Management Act is in line with the Paris Agreement 5 The Development Trend of the Paris Agreement and the Corresponding Strategies for Industries 17-3 Taiwan' Paris Agreement s Greenhouse Gas Reduction and To hold the increase in the global average Management Act temperature to well below 2˚C (or 1.5˚C) To reduce its greenhouse gas emissions below 50% of the emissions in 2005 by 2050 ● Carbon transaction sys- tem ● Establishing and pro- moting the subordinate law of the Greenhouse Gas Reduction and Ma- ● Set up Paris Committee nagement Act on Capacity Building ● Report of national green- Capacity (PCCB) to handle with Capacity house gas and the em- Building the needs of capacity Building ission data building for developing ● Registration regulations countries. of national greenhouse gas scrutiny and mana- gement of inspection or- ganizations ● Performance report and improvement plan control ● Raising $100 billion per year by 2020. ● Setting new target for fu- ● Setting up Greenhouse Finance Finance nd raising according to Gas Managed Fund. the needs of developing countries by 2025. ● Studying related interna- tional greenhouse gas ● A technology framework law and regulations, and is hereby established attending related confer- by scientific technology ences. consulting organizations. ● Researching and pro- Technology Periodic reviews of the Technology moting the reduction tec- Transfer performance and ada- Transfer hnologies of greenhouse ption of technology de- gas emi-ssions. velopment are provided ● Promoting the concept of to set up the range and conserving energy, redu- model of assessment. cing carbon emission and green procurement. Figure 2. Taiwan's Greenhouse Gas Reduction and Management Act is in line with the Paris Agreement 6 Special Reports solar power, Taiwan has also advantages in out the adaption policies, and to reduce and developing wind power because we have the manage the emission of greenhouse gas. The No. 8 highest offshore wind resource in the capital of the fund can be used in administra- world due to our geographic location. The gov- tive works like practicing reduction and adap- ernment should provide incentives and sup- tion, auction, placement and trades. It is also portive policies more enthusiastically. In terms used in items like: of the development of green industries, it is 1. General public education to follow green necessary for the government to review exist- trends and raise awareness for environ- ing policies thoroughly and propose construc- mental protection. tive policies for increasing the global competi- 2. Counsel and assistance for corporations in tiveness of local green industries. The govern- the development of reduction. ment could improve processes like fund-rais- 3. Reinforcement of certification related to ing, investment mechanism, and the encour- environmental protection, like green labels, agement of local industries to move to the environmental labels and Carbon Footprint international market.