Weighing the Policy Options

This article was written by Jim Hwang and published by the Taiwan Review on April 1, 2006. It reports that in recent years, Taiwan has been trying to find a balance between securing energy for its economic growth and strengthening its environmental policies.

The vibrancy of Taiwan's economy relies on a steady supply of energy. As the nation strives to maintain its economic growth, its demand for energy has increased significantly during the past two decades. Statistics show that Taiwan's annual energy consumption grows at a rate of about 6 percent per year. The total amount of energy used in Taiwan climbed from 32 million KLOE (kiloliters of oil equivalent) in 1984, to 1.048 billion KLOE in 2004.

Per capita consumption has increased form 1.73 KLOE in 1984 to 4.63 KLOE in 2004. The growing use of energy in Taiwan reflects the nation's continuing economic growth and rising living standards. However, as a result, securing energy resources is becoming increasingly difficult. The government is also trying to reduce emissions and promote more environmentally friendly energy policies.

Currently, Taiwan's energy mainly comes from four sources - coal, natural gas, oil and electricity. Oil and electricity account for about 90 percent of the nation's energy consumption. Changes in usage habits in recent years have reflected changes in Taiwan's economic activity. For example, during the past two decades, petroleum has dropped from 50 to 40 percent of the nation's total consumption, while electricity has grown from 30 to 50 percent. Meanwhile, Taiwan's industry now accounts for 57 percent of total energy consumption, slightly down from 60 percent in 1984. Agriculture consumes less today because it no longer holds the importance that it did in the past. Indeed, the decrease in the use of energy for agriculture has been offset by the tremendous boom in energy needed for transportation and industry.

The limited hydropower, coal and natural gas resources in Taiwan are far from sufficient to meet the growing demand. For instance, domestic energy production accounted for 10.8 percent of the total energy demand in 1984, but it dropped rapidly to only 1.8 percent in 2004. Because Taiwan relies heavily on imports, in the 1970s and 1980s the government focused primarily on securing a steady supply of energy resources and on accumulating reserves in order to prepare for global price fluctuations and energy crises. However, since the 1990s, environmental factors have featured more prominently in Taiwan's energy policy. Specifically, in 1996, the government announced its determination to establish a clean, efficient and liberalized energy supply and demand system. Taiwan's energy policy has to take into account both the security of energy sources and environmental concerns.

This article introduces Taiwan's efforts in trying to act as a responsible member of the international community and to abide by a wide range of international standards. For example, although Taiwan is excluded from participating in the United Nations - and therefore in the signing of the Kyoto Protocol - Taiwan is attempting to meet the goals of the protocol voluntarily. Although Taiwan's greenhouse gas emissions account for only 1 percent of the global total, it has set a national policy that urges public and private industries to reduce emissions.

Taiwan is also trying to promote the use of renewable energy resources, including biomass, geothermal, solar and wind. The government's target is to reduce Taiwan's carbon dioxide emissions to 2000 levels by 2020. A Renewable Energy Development Plan was adopted in 2002, which aims to replace 10 percent of Taiwan's total energy supply with renewable energy resources by 2010. Specifically, the government is willing to fund up to 50 percent of installation fees for wind and solar energy systems.

Statistics show that more than 320,000 households in Taiwan have installed solar water heaters. At present, the total area covered by solar panels in Taiwan is 1.3 million square meters. These solar water heaters are capable of producing 49,000 KLOE of clean energy, therefore reducing Taiwan's carbon dioxide emissions by 265,000 tons a year. Meanwhile, many industries have also been voluntarily reducing energy usage and searching for cleaner sources. Statistics show that between 1999 and 2003, Taiwan's petrochemical and steel manufacturers managed to save more than 575,000 KLOE of energy. The nation's six top greenhouse-gas-emitting industries are steel, petrochemical, electrical engineering, textile, paper and cement.

It is estimated that production value of solar, wind and other alternative-energy measures (such as the use of biomass) in Taiwan will increase from NT$54 billion (US$1.68 billion) in 2004 to over NT$160 billion (US$5 billion) in 2010. In the mean time, the government encourages the nation's public and private industries to improve energy efficiency, restructure their manufacturing processes and reduce emissions.

Most significantly, Taiwan can benefit from inclusion in international agreements on emissions. For example, the Kyoto Protocol provides mechanisms that help member countries meet their energy goals. The Asian Energy Partnership product launched by the ASEAN countries and China, Japan and South Korea has also united its member countries to work on energy safety, market stability, energy efficiency and the development of renewable energy. Not being able to participate in these international and regional organizations is an important factor that contributes to the rising costs for energy development and emissions reductions in Taiwan in recent years.