1.What is Taiwan’s CBAM, and Why Has It Become a Corporate Focus?
The Carbon Border Adjustment Mechanism (CBAM) was first introduced by the European Union in 2021 to impose carbon tariffs on high-emission imports, aiming to prevent carbon leakage and safeguard fair competition for domestic industries. While Taiwan’s version of CBAM has yet to be officially named, joint announcements and policy planning by the Ministry of Finance, the Ministry of Environment, and other agencies in 2024 have outlined its framework. It is now taking shape as a key carbon-cost mechanism scheduled to roll out between 2026 and 2027.
1.1 International Pressure and Policy Evolution
As an export-oriented economy, Taiwan is highly dependent on markets such as the EU, the U.S., and Japan. With the EU’s CBAM entering its transitional phase in October 2023 (to be fully enforced in 2026), Taiwanese exporters are being compelled to develop carbon accounting and disclosure capabilities. At the same time, the U.S. Clean Competition Act and Japan’s move toward a carbon pricing market are further squeezing Taiwan’s international competitiveness.
Against this backdrop, Taiwan must establish a domestic carbon pricing system—both to avoid potential “double taxation” in the future and to help businesses adapt early and manage carbon costs effectively.
Against this backdrop, Taiwan must establish a domestic carbon pricing system—both to avoid potential “double taxation” in the future and to help businesses adapt early and manage carbon costs effectively.
1.2 Draft Framework of Taiwan’s CBAM
According to public hearings and policy planning documents released in 2024, the current design considerations for Taiwan’s CBAM include:
- Scope of Coverage: High-carbon industries such as steel, cement, aluminum, and chemicals will be prioritized, with gradual expansion to other sectors.
- Carbon Fee Benchmark: Fees will be determined using parameters such as carbon intensity, industry averages, and product categories, with phased-in rates.
- Collection Mechanism: The Ministry of Environment will oversee carbon fee collection and the review process. Companies must regularly submit carbon inventories and supporting evidence.
- Related Mechanisms: Integration with carbon fees, emission allowances, and an Emissions Trading System (ETS).
Image source: FREEPIK
2. Practical Challenges of Taiwan’s CBAM for Businesses
With the system set to take effect, companies will face multiple challenges in areas such as accounting treatment, data management, and risk control.
2.1 Responsibilities and Challenges for Accounting Departments
- Carbon Fee Recognition: Should carbon fees be treated as direct operating costs? Can they be capitalized? How should they be estimated and accrued? At present, there is no unified practice.
- Disclosure Standards: How should carbon emission data be reported in financial statements? Which standards should be followed (e.g., ISSB, IFRS S2)?
- Verification of Supply Chain Carbon Footprint Data: When raw materials are sourced from different suppliers, the reliability of carbon data may vary. Accounting teams must help determine acceptable sources and establish disclosure standards.
2.2 Cross-Departmental Collaboration and Data Governance Needs
The calculation of CBAM involves multiple departments, including environmental management, procurement, production, and finance. A cross-departmental data communication mechanism must be established to ensure:
- Consistent use of carbon calculation methodologies (e.g., GHG Protocol, ISO 14064)
- Availability of audit trails for verification to avoid future disputes over carbon taxes
- Integration among ERP, carbon management, and financial accounting systems (e.g., SAP, Oracle, and ESG modules)
3. How Should Businesses Prepare in Advance?
3.1 Prioritize Mapping of Carbon Risk Structure
- Identify carbon-intensive hotspots, particularly export-oriented products and high-carbon raw materials
- Assess whether each stage of the supply chain has the capacity for carbon accounting
- Establish an internal carbon price to simulate future carbon fee expenditures and their impact
3.2 Implement Internal Carbon Governance and Reporting Mechanisms
Companies should not wait until the system is enforced to react hastily. Instead, they can begin with the following three steps:
- Establish Carbon Accounting Policies: Clearly define the collection, verification, and disclosure methods for carbon data
- Leverage External Support: Engage ESG accounting advisors and audit firms to help design data processes and validation logic
- Develop Carbon Fee Simulation Models: Translate carbon data into financial decision-making inputs, integrating them into profit forecasts and capital expenditure evaluations
3.3 Integrating Carbon Strategy with Financial Planning
Sustainability is not just about reputation—it is about reshaping financial structures and competitive advantage. Companies are advised to:
- Establish a “carbon cost reserve account” and include related targets in business KPIs, serving as a funding pool for future obligations
- Utilize sustainability-linked loans (SLLs) or green financing instruments to ease transition pressures
- Incorporate carbon reduction achievements into performance evaluation and resource allocation
Image source: FREEPIK
4. Conclusion: Taiwan’s CBAM as Both Pressure and Opportunity
For most companies, the rollout of Taiwan’s CBAM represents more than regulatory pressure—it is a watershed moment for testing the true capacity of corporate sustainability governance. As carbon costs become externalized, every product export may carry implicit financial and tax risks. This is no longer the sole responsibility of the environmental department, but a strategic issue that demands collaboration among CFOs, CSOs, CPOs, and other senior executives.
Initially, many firms will focus on “avoiding penalties” and “staying compliant,” but such a mindset risks overlooking opportunities to turn carbon management into a source of competitive advantage. Leading companies already treat carbon emissions as a strategic asset, leveraging carbon inventories, carbon credit investments, green power procurement, and technological upgrades to optimize product footprints, enhance brand value, and strengthen bargaining power with international clients.
Practically, companies must not only comply with government-mandated carbon inventories and carbon fee systems but also return to the core of internal governance—building cross-departmental and cross-supply-chain capabilities to integrate and track carbon information. Only then can they truly “deliver and disclose with credibility.” If carbon fees can eventually be recognized as costs—or even capitalized—the adjustments in accounting standards and data verification will become a foundation of competitiveness.
Carbon policy should not be seen as a barrier to growth, but as a catalyst for reshaping financial logic and accelerating global alignment.
Initially, many firms will focus on “avoiding penalties” and “staying compliant,” but such a mindset risks overlooking opportunities to turn carbon management into a source of competitive advantage. Leading companies already treat carbon emissions as a strategic asset, leveraging carbon inventories, carbon credit investments, green power procurement, and technological upgrades to optimize product footprints, enhance brand value, and strengthen bargaining power with international clients.
Practically, companies must not only comply with government-mandated carbon inventories and carbon fee systems but also return to the core of internal governance—building cross-departmental and cross-supply-chain capabilities to integrate and track carbon information. Only then can they truly “deliver and disclose with credibility.” If carbon fees can eventually be recognized as costs—or even capitalized—the adjustments in accounting standards and data verification will become a foundation of competitiveness.
Carbon policy should not be seen as a barrier to growth, but as a catalyst for reshaping financial logic and accelerating global alignment.
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