VZCZCXYZ0004
RR RUEHWEB

DE RUEHIN #4069 3410249
ZNR UUUUU ZZH
R 070249Z DEC 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 3368
INFO RUEHBJ/AMEMBASSY BEIJING 6060
RUEHUL/AMEMBASSY SEOUL 8312
RUEHKO/AMEMBASSY TOKYO 8284
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS AIT TAIPEI 004069 
 
SIPDIS 
 
SIPDIS 
 
OES/ENV FOR J. LUNSTEAD; 
DEPARTMENT OF ENERGY FOR DOE/PI R. PRICE 
 
E.O. 12958: N/A 
TAGS: ENRG SENV EPET ECON TW
SUBJECT: ENERGY TAX, GOOD IDEA SEARCHING FOR A GOOD PLAN 
 
REF: TAIPEI 3487 
 
¶1.  SUMMARY.  Concern over rising energy use and carbon 
dioxide emissions have led Taiwan authorities to devise new 
strategies for increased energy efficiency and conservation. 
A proposed new tax targeting hydrocarbon fuels was sent to 
the Executive Yuan in September.  It targets eight fuel 
types, with the highest tax on gasoline.  With elections 
looming, chances of the proposal becoming law soon are slim 
but the issue is likely to reemerge in 2007.  END SUMMARY 
 
INCREASING ENERGY USE AND CO2 EMISSIONS 
--------------------------------------- 
 
¶2.  Taiwan authorities have long sought an energy policy that 
encourages energy conservation, keeps a lid on CO2 emissions, 
but does not stifle industrial growth.  At the Conference on 
Sustainable Economic Development in July, authorities 
proposed an energy tax to promote energy efficiency and 
conservation.  Low fuel costs have contributed to low energy 
efficiency in Taiwan.  In September the Ministry of Finance 
designed an energy tax proposal to promote energy 
conservation and efficiency.  The  tax would be imposed in 
rising annual increments on gasoline, diesel, fuel oil, 
natural gas and liquefied petroleum gas, coal, aviation fuel 
and kerosene until 2016, after which the tax rate would 
remain fixed.  The proposed tax for gasoline is 
NT$1.00/liter/year (about US$.03).  The energy tax proposal 
is being reviewed by the Executive Yuan for subsequent 
transmittal to the Legislative Yuan. 
 
WILL A NON-COMPREHENSIVE ENERGY TAX MEAN ANYTHING? 
--------------------------------------------- ----- 
 
¶3.  Taiwan agencies currently impose their own vehicle taxes 
in an effort to capture the costs of pollution.  The Ministry 
of Transportation and Communications  (MOTC) collects a 
vehicle fuel surcharge while Taiwan's Environmental 
Protection Agency (TEPA) collects both air and ground 
pollution surcharges.  Critics of the MOF energy tax proposal 
complain it does not include the surcharge now collected by 
the MOTC and TEPA.  Without these, they say producers will 
not be paying for the pollution they generate.  Opponents of 
the tax also say that its implementation will cost households 
NT$3,000 per month in additional expenses.  MOEA Bureau of 
Energy analysts believe, however, that the gradual 
implementation of this tax would balance a planned 
cancellation of part of the commodity tax and vehicle fuel 
surcharge.  Both EPA and MOT object to a comprehensive tax 
scheme since they will stand to lose control over the revenue 
currently collected by those agencies under the surcharges. 
Dr. Liang Chi-Yuan of Academia Sinica notes that the energy 
tax will affect both consumers and producers of fuels, since 
fuel production requires energy. 
 
GREENHOUSE GASES AND ENERGY TAX 
------------------------------- 
 
¶4.  Taiwan ranks 22nd in the world for CO2 emissions and 
contributes about one percent of 
global carbon emissions.  Its energy efficiency figures for 
2004 lag behind Japan and the EU, with every kilo of oil 
generating $4.55 in value versus $6.44 for Japan and $7.11 
for the UK and $6.21 for Germany.  Although not part of the 
Kyoto Protocol because it is not a UN member, Taiwan has 
pledged to reduce CO2 emissions.  In June 2005, MOEA 
announced plans to cut carbon dioxide emissions.  Currently 
there is an air pollution surcharge that is levied on 
industry.  However of all energy sources, coal, the most 
polluting, has the biggest potential for growth.  The Bureau 
of Energy estimates that coal use will increase from the 
current 34 percent to almost 50 percent by 2025.  In 
addition, Taiwan plans to build a large new steel plant, a 
new naptha cracker, and new coal fired power plants. 
 
COMMENT 
------- 
 
¶5.  While experts debate the pros and cons of the energy tax, 
legislators will sit this one out until after the elections. 
Taiwan still enjoys relatively low energy prices in East 
Asia.  Academics and policy makers believe an energy tax can 
be useful to encourage conservation, but finding the correct 
formula for implementation and ensuring that the economy is 
not adversely affected will be a big challenge.  END COMMENT 
YOUNG