Experiences from the Evolution of Major Carbon Markets and Their Implications for Carbon Transactions in Taiwan

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With the rapid growth of greenhouse gas (GHG) emissions, impacts of climate change become more serious. To reduce GHG emissions, the Kyoto Protocol was adopted in 1997 and entered into force on 16 February 2005. Various carbon markets have been structured at the domestic or international level, especially since the introduction of three flexible mechanisms under the Kyoto Protocol. To demonstrate Taiwan’s commitment to combating climate change in line with the global trend, the Greenhouse Gas Emission Reduction and Management Act was promulgated by the president on 1 July 2015. It provides a legal basis for establishing a cap and trade system, and a compliance carbon market will be structured in Taiwan. In this paper, we consider the world’s three major carbon markets, the European Union Emissions Trading Scheme (EU ETS), the Chicago Climate Exchange (CCX) and the Chinese seven official ETS pilots. This study seeks to provide some suggestions for future carbon transactions in Taiwan from their evolution experiences. The discussions developed in this study will focus on their historical backgrounds, system designs, allowance transactions, and emission reductions achievement. By comparing their evolution experiences, we find critical success factors behind carbon markets. Finally, suggestions for Taiwan’s government and future researches are presented.