In August last year, the Taiwan Carbon Exchange officially launched, paving the way for Taiwan to align with global net-zero ambitions. By December, an international carbon trading platform went live, achieving over $800,000 and 80,000 tons of carbon credits traded on its first day. On October 2nd of this year, Taiwan’s domestic carbon trading market officially opened, enabling companies to trade emissions allowances, creating a positive cycle toward national carbon reduction.
As the “carbon economy” is still emerging, many may find this topic unfamiliar. Below we will introduce what carbon credits are, and how they differ from carbon fees and carbon taxes.
What is Carbon Credit?
A carbon credit (also known as a carbon offset or reduction quota) essentially represents the “right to emit carbon.” One carbon credit unit equals one metric ton of CO₂ emissions, issued and verified by international bodies to ensure quality and authenticity. Carbon credits typically come from two sources: cap-and-trade systems and reduction projects. The former allows companies to transfer emission quotas under capped emissions limits, while the latter involves companies investing in carbon reduction projects, such as reforestation, to earn carbon credits.
Differences Between Carbon Credits, Carbon Fees, and Carbon Taxes
Carbon credits, carbon fees, and carbon taxes are all carbon pricing tools. Carbon credits are quota-based, allowing for trading of emission limits, with prices adjusting to market demand. Carbon taxes are levied by government finance departments based on emissions, while carbon fees are a Taiwan-specific measure, similar to carbon taxes but differing in collection bodies and fund allocations.
| Carbon Credit | Carbon Tax | Carbon Fee | |
|---|---|---|---|
| Core | Quantity-based pricing | Price-based emission control | Price-based emission control |
| Definition | Trade of emission quotas under cap-and-trade | Tax on emissions by volume | Fee on emissions by volume |
| Implementation | Price determined by credit quality and demand, traded domestically and internationally | Collected by financial authorities, added to government revenue | Administrative fee, earmarked for emission reduction efforts, led by Taiwan’s Ministry of Environment |
| Regions in Use | EU, China, other developed countries | UK, Canada, Japan, Singapore | Taiwan |
Taiwan Carbon Exchange
To achieve Taiwan’s 2050 net-zero goal, the Taiwan Carbon Exchange was inaugurated in Kaohsiung in August 2023. It offers services in domestic and international carbon credit trading and consulting, supporting companies’ carbon reduction and neutrality goals.
Voluntary Carbon Market
Globally, carbon trading is divided into mandatory and voluntary markets. In the mandatory market, governments set emission caps, allocating quotas to different industries. Companies that reduce emissions beyond their quotas can sell their excess allowances. Taiwan’s approach is the voluntary carbon market, which serves as a supplemental mechanism to mandatory carbon credits. Companies voluntarily apply to join carbon reduction projects, and once reductions are verified, they can trade their credits. Taiwan’s voluntary market operates under regulations set by Ministry of Environment (Taiwan).
Trading Rules and Methods
How can a buyer purchase carbon credits? The Carbon Exchange offers a “Domestic Reduction Quota Trading Platform” to match buyers and sellers. Currently, only registered corporations can open accounts, and trading is limited to the primary market. Trading and auction times align with financial institution hours, from 9 AM to 3:30 PM. The platform supports fixed-price trading, negotiated trading, and competitive bidding, disclosing transaction information, including buyer and seller identities, quantity, and price.
For more information, please visit Taiwan Carbon Solution Exchange
Impacts and Controversies
International Influence of Taiwan’s Carbon Credits
The EU launched its Carbon Border Adjustment Mechanism (CBAM) last year, set for full implementation in 2026. CBAM imposes carbon tariffs on imported goods unless importers can prove a carbon price was paid during production. The U.S. is expected to pass a similar “Clean Competition Act” (CCA) this year. However, CBAM’s approach is a mandatory market, while Taiwan’s carbon credits operate in a voluntary market. Due to differences in market types and certification standards, Taiwan’s carbon credits cannot currently offset CBAM requirements, offering limited economic incentives for companies. However, with Taiwan’s status as a major exporter—where the U.S. and EU are key markets—the transition to low-carbon practices is inevitable. Purchasing carbon credits could help companies increase transparency in emissions, enhance corporate image, and boost competitiveness.
Greenwashing Risks
Although Taiwan’s domestic carbon credits cannot offset the EU’s CBAM, they can offset the carbon fees Taiwan plans to implement in 2026. However, some critics argue that companies might “greenwash” by purchasing carbon credits rather than taking concrete steps to reduce emissions. To address this, the carbon fee policy stipulates that only 10% of a company’s charged emissions can be offset through voluntary reduction projects, at a 1.2x ratio. This cap ensures that companies will still need to implement real emission-reduction measures. Additionally, Taiwan’s government recently released a Carbon Neutrality Guide, which requires companies to adhere to core principles of emissions auditing, reduction, and offsetting. This guidance emphasizes that purchasing credits alone does not constitute carbon neutrality, protecting consumer interests and maintaining credit credibility.
After introducing carbon credits and Taiwan Carbon Exchange, we will then be focusing on Taiwanese stocks that may benefit from carbon trading policies.
What are Carbon Credit Stocks?
With carbon trading platforms and fee execution detailed discussed, two main groups would be affected. One would be the large carbon emitters: such as petrochemical plants, steelmaker, and semiconductor companies, as they would be paying carbon fees starting in 2026, directly affecting the profits of the company.
The other would be the companies benefiting from the carbon trading: carbon offset forestry, green energy, carbon capture, and carbon auditing. The first three possess technology or resources to reduce emissions, allowing them to secure more credits for trading. Carbon auditing companies benefit from the platform itself by providing diverse and effective carbon measurement methods.
Carbon Offset Forestry
As mentioned earlier, companies can apply for carbon reduction projects to obtain reduction credits. Paper mills and companies with substantial forestry assets can convert their trees into carbon offsets, gaining large volumes of tradeable credits. Related stocks include: Chung Hwa Pulp (1905), YFY (1907), and Taiwan Tea (2913).
Green Energy
Green energy is one of the most well known industry related to carbon emission reduction. Companies such as TSEC (6443), United Renewable Energy (3576), and Formosa Plastics (1301) are actively developing solar, wind, and hydropower. They provide low-carbon energy options and sell their technology to large manufacturers to help them reduce emissions.
Carbon Capture
Carbon capture involves isolating, storing, and utilizing CO₂ from the air or industrial emissions, effectively reducing its release into the atmosphere without impacting production. Companies such as TCC Group Holdings (1101), Oriental Union Chemical (1710), and Everlight Chemical Industrial (1711) are key players in this field. Carbon trading is likely to drive the widespread adoption and advancement of carbon capture technologies.
Carbon Auditing
Carbon auditing refers to systematically assessing and calculating CO₂ and other greenhouse gas emissions over a specific period for a company or activity. It provides a foundation for setting reduction strategies. The establishment of Taiwan’s carbon trading platform will rely on these companies to set transparent standards and fair trading mechanisms. Key companies include: Ares International (2471), Systex (6214), and Information Technology Total Services (6697)
We’ve also organized the information in the following table:
| Category | Carbon Offset Forestry | Green Energy Generation | Carbon Capture | Carbon Auditing |
|---|---|---|---|---|
| Benefits | Requires large-scale forestry for raw materials, which can be directly converted into tradeable carbon offsets | Provides low-carbon energy options | Uses capture technology to directly reduce CO₂ emissions into the atmosphere | Provides essential data for establishing the carbon trading platform |
| Concept Stocks | Chung Hwa Pulp (1905), YFY (1907), and Taiwan Tea (2913) | TSEC (6443), United Renewable Energy (3576), and Formosa Plastics (1301) | TCC Group Holdings (1101), Oriental Union Chemical (1710), and Everlight Chemical Industrial (1711) | Ares International (2471), Systex (6214), and Information Technology Total Services (6697) |
Risks and Concerns: Which Companies Are Truly Carbon Credit Stocks?
The concept stocks mentioned above have seen price increases as the carbon trading platform reflects their fundamentals. However, there are some concerns. For example, popular carbon offset forestry stocks cannot simply convert forestry assets into carbon credits; third-party verification and government project approval are required. Criteria such as planting methods, reduction targets, reduction measures, and monitoring plans must meet standards to qualify for carbon credits. Under the Verified Carbon Standard (VCS)—one of the international carbon certification standards—registration to issuance of carbon credits can take up to 1.5 years.
Although Taiwan’s carbon market is still emerging, the launch of the carbon trading platform and the global trend toward net-zero emissions are expected to create more investment opportunities. Taiwan’s Ministry of Environment has also announced a phased increase in carbon fee rates by 2030, likely boosting interest in the carbon credit market and providing long-term growth momentum for related concept stocks.
To know more about green industry, check out our Industry 101: Introduction to Green Energy
