In October this year, the European Union’s Carbon Border Adjustment Mechanism (CBAM) began trial implementation, imposing carbon dioxide emission tariffs on imported products. The first wave of affected industries included cement, steel, and downstream screws and nuts, etc. What impact will this have on Taiwan’s industries? Influence?
In August 2023, the worst wildfire in history broke out in Hawaii, killing more than 100 people; in September, heavy rains occurred in New York, breaking the 140-year rainfall record, and New York City entered a state of emergency; in Taiwan, the south faced a severe drought in the first half of 2023. The Jianan Plain fell fallow for the second time in three years. Because the environmental costs caused by man-made carbon emissions are being borne by everyone and the next generation.
Zhao Jiawei, director of the Taiwan Climate Action Network Research Center, quoted research from the U.S. Environmental Protection Agency that the environmental cost of emitting one ton of carbon dioxide is as high as US$190 (approximately NT$5,800).
On the basis that polluters pay, there should also be a price to pay for carbon emissions. In 2005, the European Union launched the world’s largest carbon pricing system, implementing cap control and carbon trading on domestic emission sources. In 2015, the Paris Climate Agreement was passed, and reaching net-zero carbon emissions by 2050 became an international consensus. The EU further launched a Green New Deal, one of which was to extend the carbon pricing system from within the country to abroad.
In October this year, the European Union began to trial the Carbon Border Adjustment Mechanism (CBAM). The first wave of affected industries includes cement, steel, aluminum, fertilizers, and downstream screws and nuts. During the two-year trial period, manufacturers do not need to pay carbon tariffs. , but the carbon emissions of the product must be declared.
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As the world’s third largest exporter of screws and nuts, how do Taiwanese manufacturers respond?
Taiwan is the third largest exporter of screws and nuts in the world. In 2021, its export value will reach more than 160 billion, and its exports to the EU will reach 40 billion. It is the first industry to bear the brunt of the EU CBAM trial period. This nut factory in Qui Nhon, Tainan exports 45% of its products to Europe and is the first fastener factory in Taiwan to pass the ISO14064-1 greenhouse gas inventory. General manager Wang Wenxin said that European customers had already written in September this year asking to prepare carbon emission data for their products. Fortunately, they had already prepared the data, otherwise they might have lost the order.
Corporate carbon reduction is like personal weight loss. Measuring your body weight (carbon inventory) is only the first step. The next step is to propose countermeasures based on the health inspection report (carbon inventory report) and improve processes with higher carbon emissions. This nut factory in Tainan, which employs about 40 people, has set a carbon reduction target of 60% in 2032 and reaching net zero by 2050. How to do it?
Wang Wenxin said that carbon reduction must start from the management level. Good management can improve product yield and is the basic step for carbon reduction. The next step is to improve the manufacturing process. Traditional screw factories are often filled with oil and vapor, so manufacturers install electrostatic oil and vapor recovery systems on each machine. The oil and vapor are recovered and used as lubricating oil.
An investigation by the industry found that the factory’s oil and electricity consumption accounted for only 5% of the nut’s carbon emissions, and up to 95% of the carbon emissions came from raw materials and transportation. To fundamentally reduce carbon emissions, we must start with raw material procurement. However, the carbon emissions of raw materials cannot be controlled by downstream manufacturers. To reduce carbon emissions, we must rely on the efforts of major source manufacturers.
Sinosteel, Taiwan’s third largest carbon emitter, develops technologies such as hydrogen metallurgy and carbon capture.
Sinosteel is the leader in steel production and the third largest carbon emitter in Taiwan, accounting for 8% of Taiwan’s total emissions. Sinosteel plans to reduce emissions by 7% in 2025 compared with 2018, by 25% in 2030, and to achieve carbon neutrality in 2050.
The part with the highest carbon emissions in the steel production process is the blast furnace. In order to reduce carbon emissions, Sinosteel is actively developing two technologies. The first is to add hot iron bricks to the blast furnace to replace part of the iron ore. The second is to use hydrogen to replace carbon in the blast furnace. Injection of hydrogen-rich gas. Zheng Jizhao, deputy general manager of China Steel Technology Department, said that the principle of blast furnace operation is to use carbon to reduce iron oxide. This process is exothermic and melts iron ore into molten iron. If hydrogen is injected instead, it will become endothermic and the temperature will increase. Descending requires more caution in control to avoid danger.
Major steel mills around the world are actively researching and developing hydrogen energy steelmaking. A Swedish steel mill has taken the lead in starting production. Sinosteel plans to conduct hydrogen metallurgy testing in at least one blast furnace in 2025. In addition to investing a lot of money and manpower in the research and development of these technologies, hydrogen metallurgy also requires a large amount of green hydrogen. However, Taiwan currently has insufficient green electricity and green hydrogen, which is a major problem faced by the steel industry in reducing carbon emissions in the future.
Zheng Jizhao said that even heating iron bricks in a blast furnace or spraying hydrogen-rich gas can only reduce carbon emissions by about 30%, and the rest needs to rely on carbon capture technology. Sinosteel cooperates with the Industrial Research Institute to develop steel co-production, which captures the carbon monoxide and carbon dioxide produced by steelmaking and provides it to chemical plants as raw materials. Currently, there is a pilot plant that can reduce carbon emissions by 4,900 tons a year, but it will be widely used in the future. , but also to overcome issues such as cost.
According to research by Li Jianming, a professor at the Institute of Natural Resources and Management of National Taipei University, and others, if the carbon emissions of Taiwanese steel cannot be effectively reduced, the carbon border tax that Taiwanese steel products will have to pay for exporting to Europe in 2026 will be as high as 9.8 billion to 19.4 billion, equivalent to Every euro exported costs 7 to 8 euro cents in carbon emissions. Chen Mingyuan, assistant deputy general manager of Sinosteel’s business department, said that whoever has lower carbon emissions will be more competitive in the future, and this is a race of time.
How can SMEs join the race to reduce carbon emissions?Insufficient manpower and resources must be overcome first
Facing the race to reduce carbon emissions, most large companies have begun to respond, but many small and medium-sized enterprises are still waiting and watching. Most small and medium-sized enterprises have not yet completed the carbon inventory, the first step in carbon reduction. The delay in completing the carbon inventory is partly due to a lack of manpower and resources. The Industrial Development Administration of the Ministry of Economic Affairs stated that this year it has begun to assist small and medium-sized enterprises in conducting carbon inventory training.
In addition to carbon inventories, small and medium-sized enterprises often face cost considerations when updating equipment in order to reduce carbon emissions. The Ministry of Economic Affairs has also proposed an equipment subsidy program for small and medium-sized enterprises. Li Jianhong, a professor at the Department of Labor at Culture University, is worried that more than 90% of the 1,800 fastener factories in Taiwan are small or even micro-enterprises, and these subsidies may not be visible. He is worried that in the future, these small and medium-sized enterprises will not be able to meet the carbon reduction requirements of the European Union and other countries. , unemployment problems may arise in the future due to business difficulties.
Industry consultant Huang Yan’e said that small and medium-sized enterprises have no experience in product carbon declaration, which may lead to excessive data gaps and make the European Union question the carbon emission report of Taiwan’s fastener products. She called on the government to establish a unified public version and consultation window to allow industry players to have something to say. Follow.
Steel and screws and nuts are only the first wave of industries to confront CBAM. Plastics, chemicals, etc. may also be included in the future, and the impact will be wider. The move towards net-zero carbon emissions is an irreversible wave, and every industry from upstream to downstream must make commitments to avoid paying a greater and heavier price due to the climate crisis in the future.
This article is reprinted with permission from “Our Island” (Original text: Net Zero Battle: EU CBAM Wave Coming | Carbon Reduction Challenges of Taiwan’s Small and Medium-sized Enterprises)