Assessing Carbon Abatement Costs Considering Forest Carbon Sequestration and Carbon Offset Mechanism: Evidence from Taiwan

Abstract

Based on the Greenhouse Gas Reduction and Management Act passed in 2015 and the carbon neutral target in 2050, Taiwan will most likely follow international trends by imposing carbon taxes and establishing carbon offset markets. The positive and negative effects of carbon taxes and carbon offset markets on the economy and the environment merit further investigation. Accordingly, this study adopted a carbon emission reduction (CER) cost prediction model to assess the carbon abatement costs under three scenarios: (1) a carbon offset market exists, and forest carbon sequestration can be used as carbon offsets; (2) a carbon offset market exists, but forest carbon sequestration cannot be used as carbon offsets; and (3) a carbon offset market does not exist. Forests in Taipei (with low carbon emissions) and Kaohsiung (with high carbon emissions) were selected as research sites to explore the benefits of carbon emissions trading and forest carbon sequestration. The results show that CER costs are the lowest in scenario 1 and are the highest in scenario 3. The CER costs of Kaohsiung are higher than those of Taipei. The higher the carbon price, the greater the difference in CER costs between the two cities. Study Implications: The objective of this study was to identify the optimal policy for Taiwan to effectively slow climate change. This study showed that the opening of carbon offset markets and the use of forest carbon sequestration as carbon offsets may prompt regions to increase their forest stock to lower their emission reduction costs. However, achieving 2050 carbon neutral target by solely using forest carbon sequestration is not sufficient in Taiwan.