Taiwan's Energy Security Battle

This an op-ed piece that I recently wrote for The Diplomat. It can be accessed here.

Terms like ‘energy security’ and ‘energy independence’ are frequently bandied around these days. Yet despite governments around the world frequently lamenting the dangers of being dependent on foreign oil, the United States produces 70 percent of its own primary energy supply, while China produces around 80 percent. In Taiwan, however, the story is very different.

Last year, the island produced a record low 0.6 percent of its primary energy supply, prompting one former Defence Ministry official to comment: ‘Energy security, what energy security?’ Taiwan’s 99 percent dependence on energy imports is complicated further by dual vulnerabilities to Middle East instability and fragile cross-strait relations.

As recently as 1978, the island was able to produce 20 percent of its primary energy. So why the dramatic deterioration over the past 30 years? It's in large part because Taiwan has exhausted its small reserves of domestic petroleum, natural gas, and coal. Now, about half of Taiwan’s primary energy comes from oil, the majority of which is shipped from the Persian Gulf and Western Africa.

This shift should be of concern to Taiwan’s policymakers, especially as China upgrades its naval fleet with the goal of obtaining blue-water capabilities -- Taiwan should be increasingly worried about the likelihood of continued unfettered ocean supply routes around both the Taiwan and Malacca Straits. Were China to choke off Taiwan’s oil supply, the island would only have about one month’s worth of strategic reserves to keep its economy functioning.

In addition to oil, another third of Taiwan’s energy supply comes from coal. However, over the past decade, coal imports from China have risen significantly and Taiwan now relies on the mainland for about a quarter of its total coal imports.

Against this backdrop of greater susceptibility to energy-related threats from China, there has also been increasing cross-strait energy cooperation. The mainland’s China National Offshore Oil Corporation (CNOOC) and CPC Corporation of Taiwan have been collaborating since 1994. In 2008, the two oil conglomerates agreed to joint-exploration of oil fields in the Taiwan Strait and CNOOC transferred a portion of its African oil assets to CPC. In the wake of Japan’s nuclear crisis, Taiwan and China have also bolstered engagement in nuclear safety and crisis management.

Still, although China-Taiwan energy cooperation has come at a time of warmer cross-strait relations, it remains contingent on continued strong economic ties. Under the current Ma Ying-Jeou administration, China-Taiwan economic links have reached new highs, including the signing of the landmark Economic Cooperation Framework Agreement (ECFA). However, Ma’s recent approval ratings have lurched from mediocre to just awful, and he’ll face a strong challenge during the 2012 presidential election. If the opposition is able to exploit Ma’s unpopularity, the recent momentum toward closer ties could go into reverse and the island’s energy security could be jeopardised.

With it political future so uncertain, Taiwan has moved to improve its tenuous energy situation. The Ministry of Economic Affairs published the ‘Framework of Taiwan’s Sustainable Energy Policy’ in 2008. Under the plan, one key goal is to reduce Taiwan’s energy intensity 50 percent from 2005 levels by 2025, while increasing the share of low carbon electricity generation to 55 percent. Under the Renewable Energy Development Act, meanwhile, Taiwan has targeted a doubling of its renewable energy installed capacity from eight percent to 16 percent by 2025.

Obviously, policies promoting electric vehicles, green buildings, and low-carbon cities will also gradually reduce fossil fuel dependence. But for the near future at least, Taiwan must accept that a comfortable degree of energy security is simply out of reach.

Electric Vehicles in Taiwan

This is an article I wrote for The City Fix. It can be found in its original form here.

Due to its high rates of urbanization and population density, Taiwan is an ideal nation for electric vehicles (EV). In a country with nearly one vehicle per person, a reformation of the private transportation sector is essential to meaningfully reduce dependence on imported oil and carbon dioxide emissions. However, domestic EV market penetration has been slow and previous initiatives have demonstrated limited results.

In Taiwan, a key component of a successful EV strategy must revolve around electric scooters. Scooters comprise 68 percent of Taiwan’s nearly 22 million registered motor vehicles. Taiwan is already a leading manufacturer of electric scooters, but domestic adoption has lagged far behind production. Between 1998 and 2002, Taiwan’s EPA spent NT $1.8 billion (US $60 million) on electric scooter subsidies, reducing costs to a level comparable to gasoline-powered bikes. However, the program inefficiently stimulated demand because of a lack of consumer confidence in battery reliability and insufficient charging infrastructure. After the subsidies ended, adoption rates have remained low. As of 2009, there were only an estimated 12,000 electric scooters in use.

ENCOURAGING EVs

In “Launching strategy for electric vehicles: Lessons from China and Taiwan,” Dr. Chi-Jen Yang argues that subsidies in Taiwan must be accompanied by policies discouraging the use of gasoline-powered vehicles. An example of such a policy is found in China, where electric scooter use has increased rapidly. Dr. Yang hypothesizes that Chinese electric scooter growth is primarily a result of a policy loophole. Nearly every major Chinese city has banned gasoline-powered motorbikes but electric bicycles (e-bikes) and scooters are frequently classified as non-motorized transportation and thus exempt from the motorcycle prohibition. As a result, China’s electric motorcycle market is expected to grow at an annual rate of 11 percent (nearly three times the rate of gasoline-powered motorbikes), reaching 31.6 million vehicles by 2014.

Undeterred by previous failures, the Taiwanese government unleashed a new program of subsidies for electric scooter consumers and producers in November 2009. A complementary initiative with potential to raise electric scooter adoption rates is the use of battery-swap stations. E-scooter riders can switch out their electric battery for a fully charged replacement, circumventing the dual issues of long charging times and a lack of charging infrastructure. City Power Co. aims to establish 3,000 such stations by 2014 and the Yulon Group has recently signed an agreement with Better Place to install its own stations. Electric scooters are also being utilized to promote eco-tourism and low-carbon development on Taiwan’s outlying islands. Taiwan’s Ministry of Transportation and Communications (MOTC) aims to replace all gasoline-powered scooters on Green Island and Xiaoliuqiu Island with electric scooters in the next four years.

MARKET ADVANTAGE

Although they are outnumbered by scooters by a 2:1 ratio, there are still more than 6 million cars and trucks in Taiwan. Recognizing the strategic importance of both electric car manufacturing and domestic use, the government has initiated a NT $9.7 billion (US $309.2 million) investment package in the domestic EV sector. The investment plan will first set up EV pilot projects and subsidize the purchase of municipal EV fleets through 2013. After 2013, the subsidies will be expanded to all EV consumers in a push to simultaneously raise domestic EV share and boost manufacturing. Taiwanese motor vehicle companies, such as Yulon Motors, are poised to expand their EV manufacturing capabilities. Taiwanese companies are already experienced in the production of high-quality electric components and batteries, supplying Tesla Motors and BMW. It has also been suggested that a lack of large-scale automobile manufacturing in Taiwan may be a strategic advantage as ramping up EV production will not cut into any pre-existing sales of gas-powered autos. Furthering the push for electric vehicles, two Taiwanese government-funded institutes recently announced their formal collaboration with U.S.-based Underwriter Laboratories (UL) to establish improved national standards for Taiwan’s burgeoning electric vehicle market.

In terms of legislative and financial support, the Taiwanese EV market is gaining momentum. However, Taiwan still faces similar problems as it did 10 years prior in regards to a non-existant charging infrastructure and consumer distrust. Given an equally priced electric scooter or car, many Taiwanese will continue to opt for the added convenience and familiarity of gasoline-powered vehicles. Improved battery technology, EV pilot programs and battery swaps are all positive steps. But to significantly raise adoption rates of electric scooters and cars, the government may have to implement disincentives to leverage the strength of their EV policies. At the same time, the government will also need to carefully consider how to power its growing EV infrastructure in a sustainable way, since the environmental impact of EVs depends on the carbon intensity of the source of electricity.

Asian Cities as low carbon catalysts

This post is an op-ed article I recently wrote for East Asia Forum. It can be accessed here.

As the effects of climate change in Asia become more obvious every year, carbon emission reduction policy in the region remains largely inadequate.

During the signing of the Kyoto Protocol in 1997, most of Asia’s largest greenhouse gas (GHG) emitting nations were considered developing countries and therefore not held to internationally binding agreements to reduce emissions. In the years since, several countries have considered voluntary GHG reduction targets but progress on the concrete mechanisms needed to achieve these goals has stalled in national legislatures. In lieu of national and international leadership, Asia’s cities are poised to be the catalysts driving regional and national climate change action.

Asia, the world’s most populous continent, is in the midst of a monumental rural-to-urban migration shift. By 2030, the percentage of Chinese, Indian and Indonesian citizens (three of the world’s four largest countries and 40 per cent of humanity) living in cities will reach 60 per cent, 40 per cent, and 69 per cent respectively. In wealthier nations such as Japan and South Korea, the proportion of urban dwellers will approach 90 per cent.

Given this massive demographic shift, individual Asian cities are positioned to exert increasing influence on policies affecting carbon emissions. Sub-national governments can fill leadership voids by setting more aggressive targets, implementing concrete GHG reduction mechanisms, and engaging other cities worldwide to promote capacity building and meaningful collaboration.

A prominent example of local action preceding national policy can be found in Japan. Over the past few decades, Japan has experimented with capping carbon emissions but its national strategy for emission reduction has relied largely on voluntary measures. The DPJ government recently called for a 25 per cent reduction in GHG emissions from 1990 levels by 2020 but no firm structure such as a carbon tax or emissions trading system has emerged to actualise such an ambitious goal.

Rather than wait for direction from the Diet, Tokyo city assumed leadership by pushing forth its own cap-and-trade program. Tokyo’s cap-and-trade initiative holds the distinction of being Asia’s first. It is also the world’s first and only urban cap-and-trade system. By targeting its industrial and commercial sectors, which are responsible for half of total emissions, Tokyo’s policy will be the key instrument used to achieve the city’s climate change goals of a 25 per cent reduction in GHG emissions from 2000 levels by 2020.

The impact of Tokyo’s policy will be substantial. Greater Tokyo is the world’s largest metropolitan area. Home to 35 million residents and a US$1.5 trillion economy, the Greater Tokyo Area more closely resembles a medium-sized European nation. In 2007, Tokyo’s CO2 emissions totaled 56 million tons, slightly less than that produced by Portugal. In addition to reducing its own carbon footprint, Tokyo’s pioneering cap-and-trade system retains potential to be scaled up to manage all of Japan, and even neighbouring Asian countries.

One country that could take cues from Tokyo is China. During its 11^thFive Year Plan (2006-2010), China took serious steps to improve energy efficiency and reduce carbon intensity. Issues persist regarding China’s measurable, reportable, verifiable (MRV) emission data and the lack of an overall GHG emission reduction target. China has addressed these problems with a framework for domestic carbon trading during in its most recent Five Year Plan.

Unlike Japan, China’s cities will lead the way on carbon trading and GHG reduction as a matter of deliberate design. Beijing will favour city-wide and regional carbon trading schemes that precede any national cap-and-trade regime. The central government has designated eight cities and five provinces as low carbon pilot zones. Each of the 13 cities and regions is responsible for crafting individual approaches to meet its low carbon goals by 2015. Tianjin, one of the low carbon cities, inaugurated China’s domestic carbon trading market with the first sales of carbon emission credits in 2010.

Just as China’s Special Economic Zones (SEZ) of the 1980s pushed forward national adoption of free market reforms, today’s low carbon pioneering cities and regions will stimulate future low carbon reforms in the world’s largest emitter.

Another factor enhancing the leadership role of Asia’s cities is international city-to-city engagement. Organisations such as the World Mayor’s Council on Climate Change, C40 Cities, and ICLEI (Local Governments for Sustainability) provide a framework for developing MRV emission standards, capacity building and idea exchange. These inter-city collaborations can work in parallel to activities channeled through the United Nations. For example, the Mexico City Pact, signed by 138 mayors in 2010, will establish an international climate change registry to share emission data and improve transparency. City leaders may achieve success where national leaders fail because they are less hindered by political, economic, or geostrategic competition.

The trend of cities exceeding their national carbon targets in Asia is increasingly widespread. Jakarta has announced its plan to cut emissions 30 per cent from 2009 levels by 2020. Taiwan’s three largest cities have all agreed to reduce emissions 60 per cent from 1990 levels by 2050. In India, where the national government has provided minimal leadership on carbon reduction, New Delhi has pledged to become a carbon neutral city by 2030. There is no question that Asia’s cities have assumed a leading role in shaping national climate change targets and policies. Ultimately, there must be a union of sub-national and national leadership in order to effectively transition to low carbon societies. The degree to which Asia’s metropolitan areas are able to impact regional and national climate change action will be a major factor in determining the success of the continent’s carbon emission future.