Sustainability & CSR

The politics of climate change

13 November, 2020

Rhetoric in support of action to address climate change sends a positive signal but has no teeth unless it is backed up by a comprehensive policy framework and effective implementation

By Duncan Levine

With the election in 2020 of Joe Biden as the next US president, we can expect a 180-degree change in tone from the next US administration on the issue of climate change. In so doing, the US will re-join countries of Europe, China, Japan, and most of the world in putting climate action at (or least near) the top of the policy agenda. While this will mark an important reversal from the Trump era, there are still questions as to whether US federal government policies will go far enough, if policies will be sufficient or if they will be implemented effectively enough to have a real impact in reducing or at least slowing down the ravages of climate change. Here in Taiwan, while the government has never questioned the science of climate change and is moving in the right direction in terms of its policy agenda and implementation, progress risks being hampered by other policy priorities as well as a lack of ambition.

Joe Biden has pledged to re-join the Paris Agreement on Climate Change, which the Trump administration withdrew the US from recently. Biden also plans to integrate climate change targets across every aspect of US foreign policy, national security, and trade. He has set a target of net-zero emissions by 2050 for the US and vowed to rely entirely on and even export clean energy. He has also said he would lead a global effort to ensure every significant carbon-emitting country raises its own ambitions for domestic climate targets, with transparent, enforceable goals, a stance clearly aimed at China. 

European countries will welcome the US back into the global coalition to fight climate change. We can therefore expect much more global solidarity on the issue, especially since China, Japan and South Korea recently set new targets for their countries to be carbon neutral, by 2060 (in China’s case) and by 2050 for Japan and South Korea. Taiwan’s current goals of meeting 20% of energy needs from renewables by 2025 and reducing emissions to 2000 levels by 2050 now look rather unambitious by comparison.

Climate change activists like Greta Thunberg are already saying that these national pledges do not go nearly far enough as they postpone real action by decades, by which time it will be too late to prevent catastrophic damage as a result of climate change.  

But even taking the first steps will be difficult. Biden faces challenges on several fronts. If the US Senate remains in the hands of the Republican party (at the time of writing, Republicans were on track to win a majority of 50 seats out of 100 seats with another two up for grabs), he may not be able to pass ambitious carbon-cutting legislation at the federal level. Moreover, since US federal spending has to be approved by both houses of congress, Biden’s campaign goals, which included supporting a massive US$2 trillion of spending on green energy and related programmes may be stymied by the US Senate. The other factor is that so much policy planning and implementation in the US is done at the state rather than the federal level. Biden’s policy agenda may therefore find enthusiastic supporters in states controlled by the Democratic party but opposition in states controlled by Republicans. Add to this likely stiff opposition to green initiatives by the powerful fossil fuel industry, which maintains strong public support in several states, and Biden’s green agenda faces an uphill battle.

In Taiwan, where both the executive and legislative branches are controlled by the ruling Democratic Progressive Party, there are no such political constraints, at least until the next election in 2024. Nevertheless, there are other challenges. With regards to green energy, with a few exceptions, like semiconductor giant TSMC (which has committed to meeting all its energy needs from renewable energy sources) some local industry groups have been lukewarm towards the energy transition. For example, one of Taiwan’s largest industry groups, the Chinese National Association of Industry and Commerce (CNAIC), has called on the government to postpone the implementation of rules starting next year that would require heavy industrial electricity users to generate or buy green energy. Another factor is that consumers in Taiwan tend to be motivated more by pocketbook issues than environmental ones. They may gripe about air pollution but would not support higher electricity prices to pay for clean energy. Another example of how environmental concerns are trumped by cost concerns has been seen in the electric vehicle market. Sales of electric scooters were initially boosted by government subsidies that reduced the prices paid by consumers to similar levels as traditional internal combustion engine (ICE) vehicles. However, they dropped off when subsidies were reduced or phased out.

Another crucial factor is government-driven industry development policies. Even when the government’s overall goals are aligned with those of investors, their views on how to achieve them are often at odds. A case in point is the green energy industry. While the government and foreign investors both view green industry sectors as having great potential to drive economic growth and create jobs, industry players are concerned that the overall policy goal of developing a thriving local industry will get derailed by the government’s micromanaging of the policy and the development process.

In the ECCT’s 2021 Position Papers, members of the Mobility, Energy & Environment and Wind Energy committees reiterate the importance of a policy framework that encourages and rewards private sector involvement in mobility and green energy development. ECCT members have consistently argued that the right policy framework creates an enabling environment and the financial support which is needed in the early stages of industry development and until economies of scale have been achieved and public financial support is no longer necessary.

Europe’s renewable energy industry development has been boosted from the start by government support, such as high feed-in-tariffs for solar and wind power, which continue to this day. According to a report by the International Renewable Energy Agency (IRENA), the European Union spent an estimated US$90 billion on renewable energy subsidies in 2017 alone.

In terms of electric mobility, Norway is often cited as an example of a successful framework that kick-started the transition to electric vehicles. Despite having to cover relatively large distances (the length of Norway from north to south is 2,500 kilometres), thanks to government support, a comprehensive EV charging infrastructure has been built to cover the whole country. This, coupled with subsidies for purchasing EVs (making the price consumers pay for EVs equivalent to those of traditional ICE vehicles), helped to spur a rapid transition to EVs. In September 2020, sales of plug-in electric vehicles reached a record high 81.6% share of the passenger car market in Norway, of which 62% were pure battery electric and 20% were plug-in hybrid electric vehicles. This continued a rising trend over recent years which is expected to see EVs capture over 75% of Norway’s vehicle market for the full year in 2020.

To mimic the success of countries like Norway, ECCT members have argued that to drive the transition to electric mobility will require a roadmap with annual targets and subsidies for EVs and a nationwide electric vehicle charging system that is aligned with international standards. The ECCT’s Mobility committee has recommended appointing a minister without portfolio to manage the process. In addition, they have recommended that building code regulations be revised to give apartment owners the right to install EV charging facilities as well as non-fiscal incentives to encourage the use of EVs, such as setting aside exclusive parking spaces, offering parking discounts and free public charging for EVs.

In terms of green energy, ECCT members in the wind energy industry support the government’s aim of developing the local industry and turning Taiwan into a regional wind energy hub. However, they argue that Taiwan’s local content requirements and the regulatory framework are too inflexible. In particular, Taiwan’s item-based local content requirements are seen by foreign wind energy players as impractical and counter-productive. Instead they recommend adopting a percentage-based local content requirement to be implemented in a phased manner. Doing so, they argue, would encourage competition and gradual development of local champions without delaying the development of wind farms, which, in the initial stages, will rely on imported components. In addition, they recommend making the regulatory framework and pipeline flexible enough to make repowering (replacing obsolete turbines with new ones) simple and encourage the development and implementation of new technologies, such as larger turbines and floating foundations in future.

Energy storage is another crucial component in energy policy planning given the intermittent nature of renewable energy. ECCT members have therefore urged authorities to develop a policy framework to boost the capacity of energy storage that is technology neutral and flexible enough to encourage the development and utilisation of technology breakthroughs, such as advances in battery technology and the production of hydrogen using renewable energy.

While government support is regarded as crucial in the early stages of development, over time, it become less important. According to another recent IRENA report, more than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants. The report highlighted that new renewable power generation projects now increasingly undercut existing coal-fired plants. On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation and in 2021, up to 1,200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV.

While the cost of offshore wind is still relatively more expensive, industry players are confident that, over time, costs will eventually be competitive with fossil fuels when you consider the potential size of individual wind turbines and the much larger area available for wind farms that can be installed offshore. But at this early stage of development, comprehensive and consistent government policies and effective implementation of these policies that support the initial development are necessary to establish the building blocks needed for the long-term and sustainable development of the industry. Taiwan’s ideal conditions for green industry development, strong political and industry support offer an ideal opportunity to boost economic development and reduce carbon emissions at the same time. It would be a pity if the opportunity is not realised due to missteps in the policy planning and implementation.

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