Taiwan plans to channel more than half of its first carbon fee revenue into subsidies for local governments and businesses to accelerate emissions cuts, with priority given to improving building efficiency, low-carbon transport and industrial decarbonisation, according to the island’s environment ministry.
Taiwan collected T$4.97 billion (US$169 million) in carbon fees in May, the first month of the scheme, marking the launch of one of the island’s key climate financing mechanisms under its Climate Change Response Act, the country’s main climate law targetting net zero greenhouse gas emissions by 2050.
Unlike emissions trading systems that allow companies to buy and sell emissions allowances, Taiwan’s scheme is based on a carbon fee levied on large emitters, with revenue earmarked to finance emissions reduction, climate adaptation and industrial transition. Authorities plan to pilot an emissions trading system alongside the carbon fee in 2026 as part of a longer-term transition toward market-based carbon pricing.
The Ministry of Environment held consultations last week on draft regulations governing subsidies for greenhouse gas reduction and climate adaptation projects, as well as rules covering loan guarantees and interest subsidies funded by carbon fee revenue.
Climate Administration director-general Tsai Ling-yi, who has been spearheading Taiwan’s net zero transition and the implementation of its first-ever carbon fee system, said the Greenhouse Gas Management Fund, overseen by a committee chaired by the environment minister, would be responsible for allocating and reviewing spending from the carbon fee. The Climate Administration is Taiwan’s climate policy agency under the Ministry of Environment that is responsible for managing emissions reduction, carbon pricing and climate adaptation policies.
Under the proposed budget, NT$1.71 billion will be allocated to subsidies for businesses and local governments, while NT$500 million will support credit guarantees and interest subsidies for net-zero transition loans. Another NT$200 million has been earmarked to encourage the development of advanced emissions reduction technologies.
Together, these programmes account for more than 80 per cent of the fund’s planned NT$2.9 billion expenditure. The remaining budget will support climate adaptation research, just transition initiatives and incentives for investment in emissions reduction technologies.
Tsai said local governments will receive funding once they submit their third-phase greenhouse gas reduction implementation plans in October, outlining measures such as building energy‑efficiency upgrades and transport emissions cuts to meet 2026 to 2030 targets.
Consultations have identified commercial and residential buildings and the transport sector as the main priorities for emissions reductions, with plans to improve building efficiency and expand low‑carbon transport infrastructure.
However, she said local governments should continue to prioritise their own climate budgets rather than relying solely on carbon fee subsidies. For businesses, the proposed subsidies would be available to entities covered by Taiwan’s Climate Change Response Act, as well as universities and research institutions.
Wen Yu-yung, a division director at the Climate Administration, said eligible projects would focus on voluntary industrial transition and innovation, including low-carbon fuels, manufacturing process upgrades, energy efficiency improvements and carbon capture, utilisation and storage (CCUS).
Other priorities include technologies to help industries respond to international carbon border adjustment measures, as well as climate adaptation research and green infrastructure such as urban forests, although detailed funding allocations have yet to be determined.
Taiwan’s move comes as governments across Asia increasingly use carbon pricing to finance decarbonisation while maintaining industrial competitiveness. Economies including Singapore, Japan, South Korea and China have already introduced carbon pricing through taxes, emissions trading systems or both, while several Southeast Asian countries are developing similar mechanisms.
