Consolidated Climate Markets Mechanism Analysis—Case Studies of China, Japan, and Taiwan

Abstract

The post-Kyoto Protocol era has seen a transition to focus on the development of a renewable energy (RE) market as a primary instrument to reduce greenhouse gas (GHG) emissions worldwide. This paper analyses the development of GHG reduction and RE market in China, Japan, and Taiwan that are geographically proximate but socioeconomically diverse, and each plays a different but significant role in the world’s economy. By deploying a consolidated model incorporating the key components of market drivers underlying the goal of achieving GHG reduction, we threaded through the policy- and market-instruments implemented for each of the case studies over the past 20 years using the model. One commonality is that subsidiary schemes in the form of feed-in tariffs have served as an effective policy tool to boost the growth of renewable energy installations, though the worsening financial burden renders this path unsustainable. Over-reliance on feed-in-tariff schemes may have also impeded the liberation of an energy market pivotal to the success of elevating RE portfolio through trading mechanisms. What followed were the implementations of renewable energy certificate (REC) systems that have experienced various roadblocks leading to failures of the certificate market. By understanding the paths engaged in each of the cases, a conceptualized strategy depicted by the consolidated model is proposed to show the links between a renewable market and a carbon market. The framework would expedite the trading of RECs and carbon credits to accelerate the attainment of GHG emission reduction goals.

Market Mechanisms for Reducing Emissions and the Introduction of a Flexible Consumption Tax

“…The EU market mechanism 13 aiming at containing CO 2eq emissions, after years of attempts and adjustments (Fabbri, 2017 ) 14 such as the market stability reserve (MSR) 15 and back-loading, 16 has reached a desired price per tonne of CO 2eq (Chuang et al, 2019 ). In fact, since 2007, European Commission ( 2003 ), 17 the EU hopes were to reach a CO 2eq level price able to incentivize industries to invest in renewable energy and to carry out those restructuring of plants and production processes for increasing energy efficiency, i.e.…”