The efforts of Taiwan to achieve NDC target: an integrated assessment on the carbon emission trading system

In this paper, we adopt a computable general equilibrium model to investigate the impacts of achieving Taiwan’s target of nationally determined contributions (NDC). We consider two types of scenarios: one implemented with the emission trading system (ETS) and the other designed under cap without trade. Our findings suggest that Taiwan’s NDC target is achievable in two policies but with different economic costs. On the one hand, ETS reconciles the demand and supply for emission allowances. More participants in the ETS increase the chance that a buyer can match the seller; moreover, the carbon price is lower. On the other hand, in the cap-without-trade scenario, industrial sectors have to pay higher prices for emission allowances if there is no market for emission–allowance exchanges. Furthermore, we find that the initial distribution of free emission allowances affects not only sectoral emissions but also GDP loss. In 2030, the GDP loss ranges from 1.8 to 2.2% in the cap-without-trade scenario and around 1.8% in the ETS. Therefore, the ETS helps achieve Taiwan’s NDC target with a lower economic loss. Taiwan, an independent energy system isolated from other countries or regions, can achieve its NDC target with the launch of ETS.