Advances and challenges of implementing carbon offset mechanism for a low carbon economy: The Taiwanese experience

Journal of Cleaner Production 239 (2019) 117860

Contents lists available at ScienceDirect

Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro

Advances and challenges of implementing carbon offset mechanism for a low carbon economy: The Taiwanese experience Tse-Lun Chen a, b, Hui-Min Hsu c, Shu-Yuan Pan d, Pen-Chi Chiang a, b, * a

Graduate Institute of Environmental Engineering, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei City, 10617, Taiwan Carbon Cycle Research Center, National Taiwan University, No. 71, Fang-Lan Road, Taipei City, 10672, Taiwan c Environmental Science Technology Consultants Corporation, 8F., No. 280, Sec. 4, Zhongxiao E. Rd., Da-an District, Taipei City, 10694, Taiwan d Department of Bioenvironmental Systems Engineering, National Taiwan University, 1, Sec. 4, Roosevelt Road, Taipei City, 10617, Taiwan b

a r t i c l e i n f o

a b s t r a c t

Article history: Received 18 January 2019 Received in revised form 23 July 2019 Accepted 31 July 2019 Available online 1 August 2019

In Taiwan, a significant amount of greenhouse gas emissions occur as a result of anthropogenic activities and rapid urbanization. In order to comply with the ‘Greenhouse Gas Reduction and Management Act’ and the “Nationally Determined Contribution” to abide by Paris Agreement, the Taiwanese Environmental Protection Administration has devised a framework for a carbon offset mechanism before a cap and trade scheme is introduced. This paper gives a snapshot of the Taiwanese context in implementing offset projects using a combination of a strengths-weaknesses-opportunities-threats (SWOT) analysis and multi-criteria decision making (MCDM) for the development of domestic carbon offset projects. An analytical hierarchy process (AHP) and a technique for order preference by similarity to ideal solution (TOPSIS) are used for quantitative analysis to identify the most feasible strategic alternatives in the SWOT matrix. A comparison analysis is conducted to compare the framework and governance of the Taiwanese carbon offset mechanism to a clean development mechanism (CDM). The results show that the weaknesses identify a potential alternative and the strengths and opportunities significantly overcome the threat. Therefore, the priority strategies include the establishment of an integrated authority, the development of more governmental agencies and an improvement in the economy. Finally, a sound cap and trade scheme, stakeholder involvement, public-private-people partnerships and goals that allow sustainable development are proposed. © 2019 Published by Elsevier Ltd.

^ as de Handling editor: Cecilia Maria Villas Bo Almeida Keywords: Carbon offset mechanism Clean development mechanism SWOT analysis Multi-criteria decision analysis Policy implication

1. Introduction The United Nations Framework Convention on Climate Change (UNFCCC) states that climate change is increased by human activities such as agriculture, industrialization, transportation, deforestation and manufacturing (UNFCCC, 1992). The UNFCCC introduced the Kyoto Protocol to alleviate the effect of greenhouse gas (GHG) emissions on the environment. The Kyoto Protocol details three mechanisms to achieve a reduction in GHG emissions: a clean development mechanism (CDM), joint implementation (JI) and emission trading (ET) . In particular, a CDM is recommended as the best achievable mitigation method and the most flexible mechanism to control GHG emissions for UNFCCC Annex 1 countries (Li

* Corresponding author. Graduate Institute of Environmental Engineering, National Taiwan University, No. 1, Sec. 4, Roosevelt Road, Taipei, Taiwan. E-mail address: [email protected] (P.-C. Chiang). https://doi.org/10.1016/j.jclepro.2019.117860 0959-6526/© 2019 Published by Elsevier Ltd.

et al., 2015; Lim and Lam, 2014; Zhang and Wang, 2011). CDM has enabled a reduction in GHGs emission in developing countries, which obtain certified emission reduction (CER) credits. These are generally known as carbon credits: one unit of CER is equivalent to a reduction of one ton of CO2. This allows a reduction in emissions by transferring techniques from developed countries to developing countries with effective cost, environmental and ecological benefits. CDM projects are mainly technology-based and target energy efficiency (e.g. renewable or non-renewable), waste reduction and the manufacturing sectors in developing countries. By the end of May 2019, a total of 7,806 CDM projects had been registered worldwide. Approximately 40% of these have been issued a CER, corresponding to approximately 197 million t-CO2-eq (UNFCCC, 2018). To register as a CDM activity, a proposed project must go through a validation process with a designated operational entity to determine compliance with the requirements of paragraph 37 of the CDM modalities and procedures (UNFCCC, 2006). The CDM guidelines propose reasonable methods to demonstrate

2

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

Nomenclature AHP CDM CER CH4 COM CO2 EB ET GHG-EPS GHG GRMA HFCs JI MCDM MRV

Analytical Hierarchy Process Clean Development Mechanism certified emission reduction methane carbon offset mechanism carbon dioxide executive board emission trading emission performance standard greenhouse gas GHGs Reduction and Management Act hydrofluorocarbons joint implementation Multi-criteria decision making measureable, reportable and verifiable

additionality in conducting an investment analysis, a technical barrier analysis and a common practice analysis (Amatayakul and Berndes, 2012; Schneider, 2007; UNFCCC, 2002b). To commit to the Paris Agreement, the Taiwanese government has declared that it aims to reduce GHG emissions to 20% less than 2005 levels by 2030. The major GHG emissions in Taiwan in 2015 included carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and fluorinated GHGs (i.e., hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur Hexafluoride (SF6) and nitrogen trifluoride (NF3)) (TEPA, 2017). From 1990 to 2015, the energy sectors (e.g., the energy Industry, the manufacturing industry and the construction, transportation and commercial or residential institutions) produced 93.7% of the total CO2 emissions, followed by industrial processes and product use (e.g., the mining industry, the chemical industry and metal processes) with 6.3%, waste with 0.04% and the agriculture sector with0.01%. It is worthy of note that CH4 emission distribution accounts for 66.9% of emissions by the waste sector, 23.3% by the agricultural sector, 9.1% by the energy sector and 0.7% by the industrial processes and product use sector. The industrial processes and product use sector accounts for 33.5% N2O emissions, followed by the agriculture sector with 33%, the energy sector with 27.5%, and the waste sector with 8.1%. In order to decrease sectoral GHG emissions, the Industrial Development Bureau has proposed a voluntary reduction in GHG emissions reduction for industrial sectors, such as the cement, iron/ steelmaking, paper/pulp and oil refining industries, since 2005. The voluntary GHG emission reduction programs are: (i) completely voluntary, (ii) use the threat of future regulations or GHG emission taxes as a motivation and (iii) are implemented in conjunction with an existing energy/GHG emission tax or with strict regulations, followed by incentives and penalties (Chen and Hu, 2012). The Taiwanese Environmental Protection Administration (TEPA) established a voluntary emission reduction mechanism in 2010, which includes: (i) early action projects and (ii) offset projects that award carbon credits for voluntary reductions in GHG emissions. For an early action project, the difference between emission sources’ actual emission intensity and designated emission intensity is measured. This includes the cement, semiconductor, power generation, iron/steel and thin-film transistor liquid-crystal display industries. Carbon credits are issued for a future carbon offset project if it is sustainable (Simsek et al., 2018). Apart from the traditional energy industries, the building and road sectors are being encouraged to reduce energy consumption and environmental impact by moving towards sustainable development

N 2O NF3 PDD PFCs SDGs SF6 SDM SO ST SWOT TEPA TOPSIS UNFCCC WO WT

nitrous oxide nitrogen trifluoride projects design documents perfluorocarbons sustainable development goals sulfur Hexafluoride sustainable development mechanism strengths-opportunities strengths-threats strength, weakness, opportunity and threat Taiwan Environmental Protection Administration Technique for Order Preference by Similarity to Ideal Solution United Nations Framework Convention on Climate Change weakness-opportunities weakness-threats

strategies. Sustainable building projects are evaluated using a system dynamic model to determine the successful criteria and the procurement system variables (Tang et al., 2019). Green building and building materials play an important role in sustainable development in terms of the number of investigations and modeling assessments (Kono et al., 2018; Sharma, 2018). The sustainable development of pavement materials has been comprehensively evaluated using a life cycle assessment to identify the diverse benefits for the road sector (AzariJafari et al., 2016; Wang et al., 2018). In order to realize comprehensive decision making and priority strategies, a multi-criteria decision making (MCDM) method has been applied to policy implementation problems in several fields, including energy or the environment (Wang et al., 2009). Of the various MCDM methods, an analytical hierarchy process (AHP) is widely used to assess strategies and rank priorities for development. The prioritized options for renewable technologies are evaluated by establishing 20 criteria in terms of technical, economic, social, environmental and political aspects using an AHP (Amer and Daim, 2011). The technique for order preference by similarity to ideal solution (TOPSIS) is used to determine the best decision making process (Gwo-Hshiung Tzeng and Huang, 1981). To determine alternative strategies for different fields, a strength, weakness, opportunity and threat (SWOT) analysis is used to analyze the policy analysis for different fields, such as an evaluation  ski et al., 2016; Qin and of g energy conservation in buildings (Iglin Zhang, 2012; S¸ahin, 2016), investment behavior on biogas sector (Gottfried et al., 2018), and performance of carbon capture and storage technology (Aich and Ghosh, 2016; Ming et al., 2014). Therefore, the MCDM method can integrated into strength, weakness, opportunity and threat (SWOT) analysis to determine a priority alternative strategies. Sudabe et al. (2017) combined AHP and TOPSIS to identify the SWOT matrix and strategies for waste management, and provided a quantitative result to determine the alternatives ranking (Shahba et al., 2017). Khan also applied SWOT analysis couple with MCDM to prioritize the strategies for the growth of Iranian natural gas market (Khan, 2018). To determine the level of development of carbon offset mechanisms (COM) in Taiwan, this study determines the current status of policy implementation for GHG management in Taiwan in terms of policies, and regulations aspects. The promotion of COM to create a low carbon economy is evaluated using a SWOT analysis. MCDM using an AHP and TOPSIS are used to prioritize alternative strategies from the results of the SWOT analysis. The frameworks and

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

governance for COM and CDM are compared in terms of institutional, regulatory, technical and financial factors. Finally, this study presents the perspectives and prospects for the development of a COM to create a low carbon economy.

2. Materials and methods 2.1. Current status of policy implementation on GHG management To comprehensively analyze and assess the GHG management in Taiwan, the understanding of current status were addressed in advanced. The GHGs Reduction and Management Act (GRMA) was promulgated on July 2015. Four targets relying on scientific and technological innovation, law and system improvement among six chapters on GRMA were proposed. As shown in Fig. S1, GRMA is consisted of 6 chapters and 34 articles, including general principles (articles 1e7), authority and responsibility of government agencies (articles 8e15), emission reduction measures (articles 16e23), education and grants (articles 24e27), penalty provisions (articles 28e32) and supplementary provisions (articles 33e34). Fig. 1 describes the progressive approach for GHG management and COM prior to establishing the cap and trade scheme: Stage I: To encourage the voluntary GHG program contribution and online GHG emission amounts registration, six types GHG as air pollutants including CO2, CH4, N2O, HFCs, PFCs and SF6 was announced. Then, the designated emission sources shall conduct an annual emission inventory by submitting a mandatory report and periodically on-lining register the GHG emission amounts on the information platform. The registered emission data shall be validated by certified organizations (e.g., Industrial Development Bureau). Stage II: Prior to the cap and trade scheme, economic incentives such as benefits from emission trading have been developed to reward the GHG emissions reduction efforts from industrial sectors. The annual GHG emission reduction implementation could be rewarded as carbon credit from the offset project, GHG

3

mitigation measures followed by emission performance standard, allowance and 10% of international carbon offset. Stage III: Emission trading scheme will be comprehensively established, covering seven types of GHG and emission sources in Taiwan (Huang and Lee, 2009). GHG emissions follow by UNFCCC requirements and the international trends relating to the GHG reduction measures could be regulated. The stage-wise regulatory goals have a terms of five years and the assigned emission allowance for relevant departments is established. The allocated emission allowances are allocated to designated industrial emission sources in each stage to avoid carbon leakage. These reward regulations are terminated on the starting date of the cap and trade scheme. Table S1 shows related regulations and directive for a COM. The “Directive for GHG Early Action and Offset Projects” was a planned official procedure for earning carbon credit from an early action project and offset project implementation. This directive was transferred into GHG Offset Projects regulation under the GRMA framework. The purpose of an offset project is to promote the voluntary reduction of GHG emissions from industrial sources by issuing carbon credits as an economic incentive. The institutional framework for the offset project has two stages: procedures, i.e., project registration, and the award of carbon credits. The GHG Offset Project Regulation stipulates the applicant qualifications, the project procedure, validation and verification rules, the examination rule, the submission for approval methodologies and the use of carbon credits. The legislative offset project represents the completed mechanism and valuable incentives for the reduction of GHG emissions in the regional management of GHG emissions. To ensure that project is measureable, reportable and verifiable (MRV), the GHG Accreditation and Verification Bodies Management Regulation stipulates the accreditation requirements and certification review procedure and the requirement for GHG verification bodies. The Taiwanese Accreditation Foundation, as the only certificated accreditation entity, is regulated to assess the qualification and performance of verification bodies, which are censored

Fig. 1. Framework for the management of Taiwan’s GHG emissions.

4

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

and certificated by the TEPA. These certificated verification bodies validate and verify the GHG inventory, including both organizational and project-based approaches, via ISO 14064 certification (ISO, 2007). Currently, eight verification bodies are approved to execute validation and verification for offset projects. To develop a COM, GHG emission performance standards (GHG-EPS) are used as a national benchmark for facilities, products or input/output units for specific sectors or emission sources. The GHG-EPS allows a single industry to incentivize designated emission sources and reduce GHG emissions prior to a cap and trade scheme and is developed by a central industrial authority. The GHG Emission Source Compliance with Performance Standard Reward Regulation is a reward mechanism for organizations that use the best available technology to reduce or mitigate GHG emissions. The action to reduce GHG emissions reduction action must be a greenfield plan the significantly decreases the annual average intensity of GHG emissions (i.e., emission per unit products/output by using raw material, fuel, heat, area or electricity) more than the official performance standard. The estimation of GHG emissions from the business sectors is included in the benchmark. This establishes a top-down and bottom-up communication and a collaboration platform between government, business sectors and the industrial sectors. 2.2. Combined SWOT and AHP analysis Using the four SWOT four factors, a SWOT matrix is developed to further classify four types of strategies: strengths-opportunities (SO), weakness-opportunities (WO), strengths-threats (ST) and weakness-threats (WT). The SWOT factors and strategies are generated using expertise, theoretical data and experiences via data gathering from expert suggestions or public information. However, the qualitative examination is the major limitation of SWOT analysis (Amin et al., 2011). The prioritization of alternative strategies is unsystematic so. MCDM is integrated into SWOT matrix to prioritize the alternative strategies by ranking the overall performance. MCDM has been successfully applied in policy processes in various fields and is the most useful technique for resolving policy issues. AHP is the most common MCDM method for decision-making because problems or criteria are organized in a hierarchy (He et al., 2017; Luthra et al., 2017; Mathivathanan et al., 2017; Tramarico et al., 2017). Each element of hierarchy levels are compared with a pair-wise comparison to acquire the relative weights. This study uses a combined SWOT and AHP analysis to determine the priority for alternative strategies in a decision matrix. The steps include (i) establishment of a hierarchy: 3 levels of hierarchy are used (development of the COM to allow a low carbon economy in Taiwan), criteria (strengths, weaknesses, opportunities and threats) and sub-criteria (alternative strategies); (ii) the selection of the weighting scale: this study uses 9 scale numbers, consisting of main scores (1-3-5-7-9) and intermediate scores (2-4-6-8), Table S2 shows the definition of each score; (iii) development of a decision matrix: the criteria and sub-criteria are represented in the paired comparison matrix and this is assessed by experts; (iv) determination of the total scores: the scores for each criteria and sub-criteria are summarized in each row, and (v) the scores for each criteria and sub-criteria are further classified in terms of the total scores, in order to calculate the final weight for the criteria (Saaty and Vargas, 1991). 2.3. Evaluation of the prioritized strategy using TOPSIS The most appropriate alternative solution, which have the shortest distance from the positive ideal solution and the farthest

distance from the negative ideal solution, can be calculated in TOPSIS analysis (Kelemenis and Askounis, 2010). The positive ideal solution represents a minimum cost criteria and a maximal benefit criteria while the negative ideal solution represents an opposite value. To simultaneously evaluate the consideration of the ideal and the anti-ideal solutions, TOPSIS is one common MCDM method (Shariat et al., 2013). The procedure of the TOPSIS calculation can be illustrated as follows: Step 1: Calculating the normalized matrix:

Xi;j Xi;j ¼ qffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi Pn 2 i¼1 X i;j

(1)

where Xi;j is the normalized value, and i ¼ 1, 2, 3 …, n; j ¼ 1, 2, 3 …, n (whereas i is line and j is row). Step 2: Calculating the weighted normalized matrix

Vi;j ¼ Xi;j  Wj

(2)

where Wj is the weight of the jth criterion. Step 3: Calculating the ideal best and ideal worst value:

  Vþ j ¼ minVi;j

(3)

  V j ¼ maxVi;j

(4)

th  where V þ j and V j are the ideal best and ideal worst values in the j row.

Step 4: Calculating the Euclidean distance from the ideal best and worst

vffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi u m  2 uX þ Vi;j  V þ Si ¼ t j

(5)

j¼1

vffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi u m  2 uX t Vi;j  V  S i ¼ j

(6)

j¼1  where Sþ i and Si are the respective Euclidean distance from the ideal best and worst.

Step 5: Calculating the performance score (Pi ) and ranking:

Pi ¼

Sþ i

S i þ S i

(7)

3. Results and discussion 3.1. SWOT analysis This study uses a SWOT to determine the strengths, weaknesses, opportunities and threats for the development of a COM that allows a low carbon economy in Taiwan. The SWOT matrix in Table 1 includes six internal factors (three strengths and three weaknesses) and six external factors (three opportunities and three threats), which gives a total of 12 strategies for development of a COM. The analysis uses annual reports and consultations with government

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

5

Table 1 SWOT analysis for developing national strategies for a carbon offset mechanism. Exterior factors

Opportunities (O1) Providing incentives for GHG voluntary reduction (O2) Creating green jobs on GHG mitigation (O3) Enhancing the international cooperation Threats (T1) Imperfect policy and supporting measures (T2) Lack of crossdepartmental collaboration (T3) Low public acceptance and awareness

Internal capabilities Strengths (S1) Sound structures and frameworks on law and regulation. (S2) Huge GHG emission reduction potential energy sector. (S3) National mandatory GHG reporting process. SO strategies (S1O1) The necessary on implementing GHG emission control management and action plans by government.

Weakness (W1) Lack of knowledge on carbon offset and CDM. (W2) Fewer benefits of carbon credit. (W3) Longer project review time WO strategies (W1O2) The R&D capacity, financial subsides, international partnership and public awareness for GHG reduction should be enhanced to robust carbon credit management market. (W2O1) Enhancing the financial attractive and policy support for offset projects or other carbon offset mechanism.

(S2O2) Enhancing the demands for alternative energy, innovative technologies investment, industrial structure transfer, and GHG reduction. (S3O3) Establishment of economic incentives for international carbon (W3O2,3) Developing more governmental agencies for GHG offset projects under GRMA framework. management practice. ST strategies (S1T3) Improving the connection between government and public, supporting measures such as outreach activities in regulation and education of carbon offset market. (S2T2) Establishment of cross-departmental platform for sound GHG management.

WT strategies (W1T3) Introducing policy and technical support, increasing public acceptance and promoting international cooperation are required in advanced, in order to consummate the carbon offset mechanism. (W2T1) Increasing more financial resources on improving the comprehensive benefits for carbon credit.

(S3T1) Strengthening the practical GHG management such as financial (W3T2) Development of integrated authorities to manage the review and incentives and emissions trading system under policy framework. issued of carbon credit.

and related companies to provide accurate data and evidence for a GHG reduction management plan. Sound structures and frameworks on law and regulation (S1): The Taiwanese legislative structure promotes the development of a carbon offset market and supports programs. The revised the Electricity Act, Energy the Management Act and the Renewable Development Act to increase the liberalization of the electricity market and the development of renewable energy (Liou, 2011). Those regulations can not only support offset project and emission trading system but build the technologies development in different areas. For example, Australian and Swiss governments has created their carbon farming and offset program, whereby offsets are used for compliance by entities by establishing a carbon pricing mechanism, in terms of a Clean Energy Act in Australia (Murray, 2012) and Swiss CO2 law in Switzerland, respectively (Narassimhan et al., 2018). The establishment of domestic carbon offset program can guarantee the national reduction targets are fullfilled and increases the public awareness (WorldBank, 2015). A COM is used to develop an emission trading system to establish a national level GHG management policy (CAR, 2015). There is significant potential for the reduction of GHG emissions in the energy sectors (S2): Table S3 shows the source and sink for GHG emissions for different sectors from 2001 to 2015. The net GHG emissions slightly increase from 208,549 kilotons CO2-eq in 2001 to 249,509 kilotons CO2-eq in 2015. Energy and industry sectors are the major sources of GHG emissions and account for 50 % of all emissions. Appropriate land use and forestry create carbon sinks, which have negative GHG emissions. As well as CO2, other GHG’s such as CH4, N2O, HFCs, PFCs and SF6 account for a minor portion of domestic GHG emissions. GHG emissions of methane, nitrous oxide and fluorinated are made up of 5,636 kilotons CO2-eq from the agricultural and waste sectors, 4,503 kilotons CO2-eq for the industrial processes and product use sectors and 4,834 kilotons CO2-eq from critical industries (e.g., semiconductors, optoelectronics, power facilities and magnesium alloys) in 2015 (TEPA, 2017). The major source of GHG emissions is the energy sector, which shows the greatest increase in emission between 2001 and 2015, so government must promote the reduction of GHG emissions by changing the energy consumption of different sectors.

National mandatory GHG reporting process (S3): To identify the correct actions and interventions for GHG management, the MRV system plays an important role for establishment of transparent and reliable national database (UNFCCC, 2014a, 2016b). The MRV system is a tracking procedure for policy targets and implementation and observes five essential principles: relevance, completeness, consistency, accuracy and transparency. A mandatory GHG reporting scheme was announced in 2012 in Taiwan. The “GHG Emissions Reporting and Inventory Rule” and the “GHG Emissions Inventory e1st Group of Designated Sources” stipulate that designated emission sources must submit annual activity data for direct and indirect emissions, GHG inventory verification and GHG inventory reporting. The standard process and achievable MRV principles ensure that a GHG annual inventory and a GHG information platform for a national emission database can be established and the potential for reductions in GHG emissions reduction can be determined. Lack of knowledge on carbon offset and CDM (W1): The challenges are facing that lower public awareness and industrial knowledge in participating COM due to complicated requirement and procedures. The rules for a carbon offset project mainly refer to a CDM, which creates a barrier for entrepreneurs in terms of understanding CDM methodologies, tools or guidelines. A translated version of the rules is necessary to allow a project owner to persuade the stakeholders to support a project. There are official methodologies and regulations, there is a lack of clarity about the determination of additionality so willingness to participate in an offset project is low. Fewer benefits of carbon credit (W2): The carbon credits from the registered offset project are only allowed offset the domestic carbon neutrality action or the GHG reduction commitment for environmental impact assessment. In this case, power generation and steelmaking plants that earn carbon credits for an early action project can offset a commitment to reduce GHG’s in any greenfield plant. However, the government will prohibit the construction of new power plant in the future so the demand for carbon credits commitments to reduce GHG’s will decrease. Carbon credits that offset a domestic carbon neutrality action, such as a low-carbon meeting or activities and announcements, only account for less

6

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

than 100 CO2-eq per month. Table S4 shows the potential carbon credits that are issued for a registered offset project, including renewable energy, energy demand, fossil fuel switch, equipment replacement and transportation, with expected carbon credits of 5,018 kilotons of CO2-eq. 18 projects use CDM methodologies, including AMS-I.D., ACM0002, AMS-II.L., AMS-III.B, AMS-II.B. and AM0090 and others use approved methodologies (TMS-III.001 and TMS-II.004 are methodologies that are approved by the TEPA). Renewable energy projects account for around 40% of potential carbon credits projects that involve a switch from fossil fuel account for 30% and projects that involve the replacement of equipment account for 30%. If carbon credits are not used properly, the number of offset projects will decrease if there are no economic benefits or incentives. The China CER could be used with a cap-andtrade system so these carbon offsets could allow entities to fulfill their voluntary commitments and regulatory requirements (Lo and Cong, 2017; Lo and Howes, 2015; Shen, 2014). Longer project review time (W3): The review time of offset project is defined as a period between the registration date and the date that a project would be approved. The project review time and the documents correction time are up to one year and 90 days, respectively. The longer review time could be attributed the lack offset mechanism experts, inadequate administration staffs longer legislative process and insufficient technical standard. In some cases, the longest review works for carbon offset projects can be procrastinated over 400 days. Providing incentives for GHG voluntary reduction (O1): The economic incentives of carbon offset project play an important role in GHG reduction and social benefits. To enhance the industrial willingness for carbon offset project, peer pressure could be a driving force to contribute to invest more GHG reduction technologies. Before cap and trade scheme, industries should also consider the benefits via carbon offset project which is a GHG reduction tool to achieve the national target. Government must provide technical assistances and economic subsidies along with other relevant supports including well-documented database, information system and relevant potential laws about offset project registration and carbon credits issuance. Furthermore, COM could be implemented in conjunction with other GHG management measures, policies or regulation including GHG voluntary reduction agreements, tax reduction and exemption, subsidies, investment support and cap and trade system. For example, provision of appropriate economic incentives is an efficient method to achieve significant GHG reduction (Lo and Cong, 2017). Supporting measures such as providing the tax reduction/exemption and lower interest loan for retrofitting or replacing existing equipment with higher energy efficiency could be considered (Zhang et al., 2018). Creating green jobs on GHG mitigation (O2): The registration procedure of carbon offset project includes approval methodologies applicability, standard baseline accuracy, project boundary establishment, additionality determination, credit period regulation and plausible monitoring plan. The aforementioned criteria should be validated and verified by the third-party entity based on the MRV concept. This increases the demand for professional technicians and employees from verification bodies (third-party) to provide CDM knowledge, training, practical experience and technical review. In other words, the development and deployment of a completed validation and verification management is crucial to a COM. Currently, eight authorized verification bodies have permission to use 22 designated methodologies for offset projects across five fields. A mature validation and verification management system will create new posts, mainly in the energy and manufacturing sectors. Increasing pressure for environmental protection will mean that government will need to reduce anthropogenic GHG emissions via carbon offset projects and promote a regulation and

management plan for verification bodies. Enhancing the international cooperation (O3): As an excellent performance on developing a successful COM could contribute to energy efficiency, emissions reduction, economic benefits and effective regulation. To aid the management of GHG emissions, policymakers must promote international and cross-regional cooperation and social learning processes. The Taiwanese government must also identify opportunities to learn from other countries’ experience with a COM, such as the Joint Crediting Mechanism (JCM, 2015) in Japan, the Chinese voluntary reduction programme (Lo and Cong, 2017) and the Korean Voluntary Emission Reduction Program (KVER, 2012). The social learning process is another key element in creating international partnership and a cooperation mechanism. To build a cross-disciplinary technical platform that allows an international strategic alliance to reduce GHG’s, previous studies have proposeda bottom-up process that includes the following three independent levels: (i) the micro-level for individual group interaction, (ii) the meso-level for interorganizational learning and (iii) the micro-level for governance and societal networks (Pahl-Wostl et al., 2007; Vinke-de Kruijf and Pahl-Wostl, 2016). Imperfect policy and supporting measures (T1): A feasible policy, legal framework and supporting measures from government to implement carbon offset projects that clearly defines policy will increase investment in technology to reduce GHG’s because the return on the investment will increase. The challenges and barriers for the promotion of carbon offset projects include s high investment risk and uncertainty in the carbon credits market. The policy supporting measures and related regulations are unclear and complicated, so if there are no rules for an emission trading system, users are not motivated to implement technology to reduce GHG’s. Therefore, the benefits of offset projects must be precisely quantified by a policy framework in terms of environmental, economic, technical, institutional and social factors. The government supports voluntary reduction of GHG emissions for the industrial sectors (Chen and Hu, 2012), but any introduction of policy for the commercial and transportation sectors must involve comprehensive cross-departmental collaboration. Lack of cross-departmental collaboration (T2): Although the promotion of GHG emission reduction management in Taiwan was initiated before the promulgation of the GRMA, there is no crossdepartmental cooperation platform. The TEPA publicizes the GHG emission inventory for specific entities in the emissions report and regulates the accreditation requirements and certification review processes for verification bodies. A voluntary energy conservation and GHG reduction agreement was developed by the Industrial Development Bureau of the Ministry of Economic Affairs in 2005. A total of 245 industrial factories signed an agreement from 2005 to 2016 and the 9,379 voluntary reduction projects achieved a reduction in GHG’s that corresponds to 12,535 kilotons CO2-eq. However, the reduction in GHG’s due to voluntary reduction agreements cannot be transferred into carbon credits, like early action or offset projects. Policy communication platforms between the environmental and industrial departments are not adequate so there is a decrease in the initiative to reduce GHG emissions. A cross-departmental collaboration scheme and an effective cooperation group must be developed in policy framework to consolidate the effort to reduce GHG’s for different fields. Mandatory crossdepartmental collaboration will ensure a reduction in GHG’s and will increase investment in technology and finance in Taiwan. Low public acceptance and awareness (T3): The feasibility of an effective GHG emission trading market on a domestic scale is determined by the social public acceptance of the need for a COM. The Chinese government allocates a domestic carbon offset and allowance to fulfill the obligation for industrial reduction and has

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

7

built seven pilot emission trading markets involving thousands of Chinese enterprises. The emission caps, trading rules and emissions allowances for enterprises have also been established (Lo, 2015a, b; Lo and Cong, 2017). To establish a conservative and fair emission trading system, public acceptance must increase so the benefits of carbon offsetting and trading, such as a reduction in GHG emissions and more efficient GHG management, must be communicated. However, some environmental organizations that are opposed to carbon offsetting and trading counter that there must be a substantial reduction in GHG’s and that trading is not an effective policy. This creates uncertainty that a declared reduction in GHG emissions will result in less use of fossil fuels. 3.2. Combined SWOT-AHP-TOPSIS analysis Strategic criteria are identified and the strategies represented in a SWOT matrix. An AHP is used to determine the weight of internal and external factors: the strength, weakness, opportunity and threat are compared. Table 2 shows the pair-wise comparison table for criteria using the AHP method. The weight of the strengths is 0.388 that for the opportunities is 0.245, that for the weakness is 0.172 and that for the threats is 0.075. The quantitative result shows that the strength has the highest value, which is in agreement with expert opinion from the Environmental Science Technology Consultants Corporation. This allows a fundamental framework for promoting a COM in Taiwan to reduce GHG emissions. Even through the weight value for the threats is significantly lower than the others, the effect of threat criteria cannot be ignored. When the weight values for the four criteria are calculated, the weight of sub-criteria are determined using the same procedure. The final priority for 12 strategic factors is calculated by multiplying the weight of the criteria and sub-criteria, to give the final weight for the SWOT matrix factors, as shown in Fig. 2. It is seen that the weight of S1 is greatest, with a score of 0.146, followed by that for O1 (0.119) and S2 (0.113). T3 (0.08) is the least plausible alternative. From a policy perspective, the strengths and opportunities of developing a COM in Taiwan are important and the weaknesses are more important than the threats. The final weights for the SWOT matrix factors are used for the TOPSIS analysis. Table 3 the weighted normalized matrix using TOPSIS. It shows the relationship between the sub-criteria and the alternative strategies. The decision making matrix for each strategy is normalized to produce a weighted normalized matrix. This matrix shows the effect of sub-criteria on different alternatives. A higher value for sub-criteria represents a greater effect. The values for S1 range from 0.001 to 0.0041 and those for T3 range from 0.0186 to 0.0558 so S1 is a more significant criterion for prioritization than T3. 3.3. Prioritization of alternative strategies via TOPSIS analysis To determine the final ranking of strategies, the TOPSIS method is used. Fig. 3 shows the final ranking for the prioritized strategic alternatives using the TOPSIS method. The overall ranking for the strategies is in the order: W3T2 > W3O2,3 > S3O3 > S2O2 > W2T1 > W2O1 > S2T2 > W1T3 > S3T1 > W1O2 > S1T3 > S1O1. The Table 2 Pair-wise comparison table for criteria for the AHP methods. Criteria

Strength

Weakness

Opportunity

Threat

weight

Strength Weakness Opportunity Threat Sum

1 0.25 0.67 0.25 2.17

4 1 0.5 0.4 5.9

1.5 2 1 0.2 4.7

4 2.5 5 1 12.5

0.388 0.172 0.245 0.075

Fig. 2. Final weights for the SWOT matrix factors using AHP.

weaknesses-threat, weaknesses-opportunities and strengthopportunities are the top three strategies for the development of a COM, taking into account the establishment of an integrated authority, the development of more governmental agencies and the improvement of the economy instrument. The weaknesses and threats are alleviated and opportunities and strengths predominate. Although a regulation framework for GHG management in Taiwan has been comprehensively deployed, the most important and effective strategy for promoting the growth of COM in Taiwan is an increase governmental efficiency by improving the existing policy, increased economic restraints and increasing crossdepartmental communication. To establish a conservative, fair and completion COM that creates a low carbon economy, investment, research and technological help for domestic and foreign enterprises must involve collaborative financing, technology transfer, and the use of international resources. (i.e., S2O2, W2T1 and W2O1 strategies). 3.4. Framework and governance of Taiwan carbon offset mechanism in the Post-CDM’ context To verify the differences between CDM and a Taiwanese COM, CDM and the Taiwanese COM are confirmed in terms of five factors: (i) the development of a MRV system, (ii) the project cycle procedures and approval methodologies, (iii) the determination of a baseline and a credit period, (iv) the determination of additionality, redundancy and permanence and (v) a cost and benefits assessment for carbon credit. 3.4.1. Development of a MRV system In terms of the MRV concept that was proposed in the Bali Action Plan in 2007, transparency and documentary of a project cycle procedure in CDM involve environmental integrity and a conservative estimation of any reduction in GHG emissions. The industrialized Annex 1 countries under the Kyoto Protocol by implement CDM projects to meet national targets and the MRV system creates job opportunities for validation and verification entities (Pang et al., 2016). As shown in Fig. S2 (a), the CERs can be traded on the

8

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

Table 3 The determination of the weighted normalized matrix using TOPSIS. Criteria

S1

S2

S3

W1

W2

W3

O1

O2

O3

T1

T2

T3

Weight Strategies S1O1 S2O2 S3O3 W1O2 W2O1 W3O2,3 S1T3 S2T2 S3T1 W1T3 W2T1 W3T2

0.146

0.113

0.071

0.100

0.054

0.013

0.119

0.084

0.026

0.035

0.033

0.008

0.0434 0.0248 0.0496 0.0372 0.0496 0.0434 0.0496 0.0434 0.0558 0.0186 0.0310 0.0434

0.0449 0.0393 0.0168 0.0224 0.0280 0.0168 0.0224 0.0224 0.0449 0.0449 0.0393 0.0280

0.0260 0.0112 0.0074 0.0223 0.0260 0.0298 0.0112 0.0335 0.0186 0.0112 0.0074 0.0186

0.0244 0.0183 0.0183 0.0427 0.0122 0.0183 0.0488 0.0366 0.0122 0.0488 0.0122 0.0061

0.0142 0.0047 0.0190 0.0190 0.0190 0.0095 0.0071 0.0166 0.0166 0.0190 0.0190 0.0142

0.0045 0.0015 0.0015 0.0022 0.0022 0.0052 0.0045 0.0060 0.0022 0.0030 0.0015 0.0060

0.0325 0.0433 0.0379 0.0271 0.0433 0.0162 0.0271 0.0162 0.0433 0.0379 0.0433 0.0271

0.0328 0.0328 0.0141 0.0281 0.0141 0.0234 0.0281 0.0141 0.0141 0.0188 0.0328 0.0234

0.0077 0.0065 0.0116 0.0090 0.0077 0.0052 0.0052 0.0077 0.0065 0.0065 0.0077 0.0065

0.0142 0.0079 0.0079 0.0126 0.0094 0.0110 0.0110 0.0094 0.0110 0.0094 0.0047 0.0094

0.0130 0.0081 0.0098 0.0098 0.0114 0.0098 0.0081 0.0146 0.0065 0.0049 0.0049 0.0081

0.0026 0.0015 0.0010 0.0036 0.0015 0.0021 0.0036 0.0015 0.0010 0.0041 0.0005 0.0010

signatories to the Kyoto Protocol. As shown in Fig. 4 (b), the TEPA is responsible for the carbon offset project cycle in Taiwan and the review criteria include project boundaries, requirements of methodology, avoidance of double counting, a monitoring plan and environmental impact. The entities that participate in the carbon offset project submit GHGs data and technology or management measures to negotiate a reduction in GHG emissions. The stepwise approach for an offset project is almost identical to that for a CDM project, but some entities are different (see Table 4). The TEPA’s function is similar to that of the CDM EB in terms of censoring proposed projects by establishing a committee, an Ad Hoc group and an assessment team. The validation and verification process for each carbon offset project are implemented by the TEPA approval verification body. The designated operational entities are responsible for the submission of project design documents and for the validation and verification processes for each project under a CDM project cycle. To comply with the offset regulations, the carbon offset project applicant must submit the validated project design documents and related designated documents. This involves extra executive cost and increases the review time for the TEPA.

Fig. 3. Final ranking for prioritized strategic alternatives.

international carbon market and Annex 1 countries can fulfill their commitment to reduce GHGs responsibility. The COM is a domestic GHG management tool that encourages voluntary reduction of GHG emissions by industries before the implementation of a cap and trade scheme. Without a completed ET system, the carbon credits that are generated from a carbon offset project can only be used for domestic carbon neutrality, for a commitment to reduce GHG’s for an environmental impact assessment and as an offset for a cap (see Fig. S2 (b)). As shown in Fig. 4 (a), the registration procedure for a CDM project involves approval from the Designated National Authorities of each host country to ensure that the proposed project contributes to national sustainable development. This is supervised by the UNFCCC CDM Executive Board (EB). The project design documents (PDD) and emission reductions for a CDM project must be validated and verified by designated operational entities that are accredited by the CDM EB. The validated projects design documents entitle the project developer to obtain a certification and validation report that is approved by the designated operational entities. When the CDM project is registered, the designated operational entities verify the emission reduction by submitting a verification report to the CDM EB to allow the award of CERs. These CERs are of financial benefit to

3.4.2. Approval methodologies and procedures The CDM project participants must determine the approved methodologies for additionality, project boundaries, calculating the GHG emissions and a monitoring plan for the proposed CDM project activity (UNFCCC, 2017a). As shown in Fig. S3, the project participant or other stakeholders can propose new methodologies and a revision and clarification of an approved methodology using a bottom-up process. The CDM EB also periodically releases guidelines or tools using a top-down process to inform project participants. The methodologies for 15 CDM sectoral scopes that are used by the CDM Accreditation Panel are for sectors and emission sources within Annex I of the Kyoto Protocol. The approved methodologies are large-scale and small-scale. There are three types of small-scale methodology: (i) Type 1: a maximum output capacity of renewable energy project activities up to 15 MW or an appropriate equivalent, (ii) Type 2: the reduction in energy consumption due to improvements in energy efficiency up to an equivalent of 60 GWh per year for the supply and/or demand side, or (iii) Type 3: the reduction of anthropogenic emissions by sources that directly emit less than 60 ktCO2-e per year for other project activities. The approved methodologies that are not mentioned in these rules are classified as large-scale type (UNFCCC, 2002a). The approved methodologies for carbon offset projects in Taiwan are: (i) CDM EB approval methodologies and (ii) domestic methodologies. These apply to a successful voluntary reduction in GHG emissions for manufacturing industries. The domestic

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

9

Fig. 4. A comparison of (a) a CDM project cycle and (b) a carbon offset project cycle in Taiwan.

Table 4 A stepwise approach to a CDM project and a Taiwanese offset project in terms of the application procedure. Process

Responsible Units of Organizations (CDM/Taiwan)

Documents required to be submitted

Details

1. Project development 2. Validation

Project participants/project developer DOE/Verification body

e

3. Registration

EB/TEPA

4. Monitoring 5. Verification

Project participants/project developer DOE/Verification body

6. Issuance

EB/TEPA

Project participants or developer establish the proposed a CDM or an offset project. The DOE and Verification body inspects the construction, operation and the PDD of the proposed project. The DOE applies for registration with a Validation Report to the UNFCCC Executive Board (EB). In Taiwan, the project developer applies for registration with a validated PDD and validation report to the EPA. Project participants or developer will monitor and identify the actual amount of emission reductions. The DOE and Verification body will confirm the authenticity of reductions in greenhouse gas emissions by a CDM project over a period of time. The completion of verification report and monitoring report will allow the issuance of CERs (CDM) or reduction credit (Taiwan).

PDD draft, Validation reports Baseline alternatives, Monitoring plan Validated PDD, Validation reports

e Monitoring report draft, The calculation of emission reduction Monitoring report, Verification report

methodologies are more suited to business than CDM’s, so new domestic methodologies based on an actual case from various sectors are encouraged. The methodology categories in Taiwan follow the CDM 15 fields. As shown in Fig. 5, the fields of energy industry, energy demand and manufacturing industry respectively account for 72, 31 and 35 methodologies, which shows that greater reductions in GHG emissions are possible for the energy and manufacturing sectors. 3.4.3. Baseline and credit period The credit period and standardized baseline for carbon offset project is determined in compliance with the CDM standard. The project participant must analyze different alternatives before implementing a CDM project. The proposed CDM project activities must use approved methodologies, applicable standardized baselines and CDM guidelines or tools. A baseline scenario involves forecasting the anthropogenic GHG emissions if the proposed CDM project is not enacted. Therefore, the baseline scenario must take into account the conditions for relevant national and/or sectoral policies, regulations and circumstances and information and description of the project boundary. There are two types of credit period: (i) renewable type for seven years and at most twice with a maximum total duration of 21 years and (ii) fixed type for ten years. The project participant selects the type of duration for the proposed project. A true baseline can never be determined with absolute

certainty for a carbon offset project in Taiwan. The simplest way to determine a plausible baseline is to determine what would happen in the absence of a carbon offset project. The general baseline assumes continuous operation with the existing equipment or fuel type with no additional investment. In accordance with the provisions for the use of approved methodologies, a baseline is established in a transparent and conservative manner in terms of the choice of approach, assumptions, methodologies, parameters, additionality and the uncertainty. 3.4.4. Additionality, redundancy and permanence The key elements for successful carbon offsetting include (i) additionality: the reduction of anthropogenic GHG emissions for a CDM project in the absence of the CDM project, (ii) redundancy: the emission reduction is in compliance with all mandatory applicable legal and regulatory requirements, and (iii) permanence: the technology or measure related to the reduction of GHG emissions is implemented during the entire credit period. Specifically, additionality is the fundamental concept of the CDM and the cornerstone of project-based COM. Additionality is the essential evidence that the GHG emissions are lower after implementing a CDM project activity than for the baseline scenario. The registered CDM project must be able to completely demonstrate “Additionality”; i.e., the project cannot be implemented and cannot proceed if a CER is not issued. The rules for “Additionality” are given in the UNFCCC

10

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

Fig. 5. Approved methodologies for a CDM and the Taiwanese EPA.

EB 70 report annex 08 (UNFCCC, 2012). In order to determine additionality of a project, the CDM EB requires the project developers to analyze existing barriers, such as financial feasibility and technological readiness or common practice with the evidence that would prevent the project from implementation. A project gain carbon credits for the emission reductions that are achieved when it is proven to be additional. Emission reductions are estimated relative to the baseline emissions, in order to accurately represent the emissions level that would have occurred without the CDM project. Additionality must be demonstrated to define a causal connection between the policy requirement and the project activity by evaluating whether the project activity would not have occurred in the absence of the policy intervention, so it is inherently difficult to demonstrate additionality. As shown in Fig. 6, the emission reduction with additionality represents a further contribution from the reduction measures and the emission reduction without additionality could be natural for the baseline; i.e. the replacement or retrofitting of equipment or the use of low-carbon-fuels and waste energy recovery that would be required in the absence of a CDM project. Based on the demonstration of additionality, a CDM identifies the expected financial value of the CERs or the reputational value of operating projects. To address these inherent uncertainties and challenges, a CDM, as a worldwide COM, has well established tools or guidelines that enable an evaluation of additionality. The “Tool for the demonstration and assessment of additionality” for a CDM is the most crucial factor for a CDM project and a mainly methodology procedure that includes a demonstration of a first-of-its-kind project, identification of laws and regulations, an investment analysis and a barrier analysis. Additionality for Taiwanese offset projects involves CDM tools, guidelines or related approved methodologies. For a small-scale CDM project, which uses a positive list of technologies (e.g., solar technology, off-shore wind technology, marine technology or biomass internal gasification combined cycle) and project activity

sizes (e.g., up to 100 kW of PV-wind hybrid, micro/pico-wind turbine, micro/pico-hydro and biomass gasification/biogas) using a CDM, additionality is defined automatically (UNFCCC, 2017b). Additionality is the essential requirement and offset projects that benefit from a government subsidy or feed-in tariff for renewable energy must involve an investment analysis. 3.4.5. Cost and benefit assessments A reduction in emissions equates to the baseline emissions minus the sum of Project Emissions with CDM and carbon leakage from the project boundary. The project participant must meet obligations or sell the CERs to Annex I countries of the Kyoto Protocol to fulfill national emission targets. Under a CDM, the CERs allow the transfer of techniques and financial incentives to assist underdeveloped countries. As with the fundamental concept of additionality, a true baseline emission can never be determined with absolute accuracy. Therefore, the number of CERs that are issued for any registered project via registration must be less than the ‘actual’ emissions. Since carbon credits are awarded for the additional effort of the reduction of GHG emissions, a higher baseline emission can result in projects gaining too many credits, which could violate the principle of additionality (Lam et al., 2015). Under the Taiwan offset project scheme, the reduction in GHG emissions for any given offset project is awarded a carbon credit. The reduction credit is not similar to the CERs. Currently, the reduction credit is only allowed for domestic carbon neutrality offset action or a commitment to reduce GHG’s to reduce environmental impact. 4. Perspectives and prospects Tis section provides the perspectives and prospects for policy implementation for a COM that produces a low carbon economy. Even if a carbon offset project makes a significant positive contribution to the management of GHG emissions, governmental efficiency means that there is a potential for a degradation in the

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

11

Fig. 6. The estimated GHG emission reduction with and without additionality.

environmental quality and a depletion in natural resources due to the improper management. 4.1. Establishment of a sound cap and trade scheme A cap and trade scheme that is carefully designed is an effective GHG emission management option for market-based mechanisms (Soleille, 2006). The GHG reporting system and MRV guidelines were established to developed an emission trading system and to seek methods to reduce greenhouse gas emissions on a nationwide scale (Usapein and Chavalparit, 2017). As described in Fig. 7, the cap and trade scheme has three levels, based on the GRMA: the national level, the sectoral level and the emission sources level. The national level is the GHG emission cap that is established by the TEPA and the sectoral level and the emission sources level are the emissions allowance that is allocated by the TEPA and various competent authorities in compliance with the grandfathering or benchmark rule that is detailed in a later section. When a cap and trade scheme is initiated, the domestic carbon market operates simultaneously. Under the current planning, the TEPA can allow the carbon credit from offset projects, GHG-EPS and 10% of the international carbon market to enter into the domestic carbon market. The carbon credit for an early action project (a total of 70 million tons CO2-eq) can only be used for a GHG commitment after an environmental impact assessment and domestic carbon neutrality offset action. 4.2. Enhancement of stakeholder involvement and public-privatepeople partnerships To develop a COM, policymakers must use continually promote the advantages, address an insufficiency and establish communication with the public, academia and industry. Depending on the priorities of the government, policy makers must reduce environmental impact, increase financial incentives and create an emission trading system to achieve the national GHG emission target. The government must cultivate professional research consultants to highlight the advantages and increase knowledge of carbon offset rules and the national GHG emission management strategies. To increase stakeholder involvement, Zhang et al. (2017) used empirical evidence for a positive stakeholder value for a CDM project in

China to build a business market using CDM projects. Some stakeholder surveys give quantitative results for the benefits of sustainable development for CDM biomass projects, including generating extra income from biomass products, avoidance of danger from burning biomass residues, creating jobs for local people, transfer of knowledge and technology, reducing GHG emissions and increasing the application of renewable energy (Parnphumeesup and Kerr, 2011). In terms of investment and technology development for stakeholder, domestic enterprises that are GHG emission sources must cooperate in terms of financing, promoting technology transfer and communication and utilizing carbon credit offset as an incentive to promote GHG reduction. Economic benefits are a significant fact in motivating industry to implement offset projects. Enterprises are likely to engage in voluntary environmental activities when the benefits outweigh the cost of a CDM project (Nishitani et al., 2012). Therefore, the UN secretary established the Nairobi Framework Partnership in 2006 to allow developing countries to increase their level of participation in the CDM. The purpose of this Partnership is to implement Nationally Determined Contributions under the Paris Agreement by promoting collaboration between organizations. Financial support for the MRV system meant that CDM projects were initiated in Africa, Asia, Latin America and the Caribbean by different partners and cooperating agencies (UNFCCC, 2016a). Currently, the Taiwanese Industrial Greenhouse and Energy Reduction Services Corps acts as a bridge between government and industry and provides technical training, support and consultation for GHG reduction technologies and demonstrates offset projects.

4.3. Achieving a low carbon economy towards sustainable development goals Cities, energy and materials, food and aquacultures and health and wellbeing are the main business areas that drive business leaders towards a future strategy for sustainable development, according to the report “Better World, Better Business”, which was published by the Business & Sustainable Development Commission in 2017 (BSDC, 2017). A low carbon economy is one type of operational model and the relevant low carbon elements are energy efficiency, sharing design, smart design and rehabilitation. Several

12

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

Fig. 7. Cap and trade scheme diagram in Taiwan. Adapted from Huang and Lee (2009).

studies evaluate the contribution of sustainable development to a low carbon economy due to CDM projects using multi-criteria analysis tools (Hultman N et al., 2012; Subbarao and Lloyd, 2011) and the indicators for sustainable development that impact on air quality, water pollution, energy and the conservation of resources n, socio-economic development, stakeholder involvement, the generation of employment and technology transfer (Uddin et al., 2015). Some stakeholder surveys produce quantitative results for the benefits of sustainable development for CDM biomass projects, such as the generation of extra income from biomass products, avoidance of danger from burning biomass residues, creating jobs for local people, transferring knowledge and technology, reducing GHG emissions and increasing the application of renewable energy (Parnphumeesup and Kerr, 2011). In 2014, the UNFCCC issued a CDM sustainable development tool “Voluntary Tool for Describing Sustainable Development Co-Benefits of CDM Project Activities or Programmes of Activities”, which illustrates a CDM’s contribution to sustainable development and maintains the host countries’ prerogative to define individual criteria for sustainable development (UNFCCC, 2014b). Article 3 of the Paris Agreement establishes a new mitigation mechanism that is similar to a CDM: the sustainable development mechanism (SDM). The SDM promotes the mitigation of GHG’s in developing countries to promote sustainable development. A SDM uses an incentive to y mitigate GHG emissions. The framework and structure of the SDM resemble those of the CDM. Those countries that implement mitigation activities in a host country are granted the resulting reduction in emissions to fulfill their own obligations (Chan et al., 2016). The major difference between SDM and CDM is that carbon offset markets are no longer limited to developed countries. Instead, all entities are permitted to participate in this mechanism and the SDM board will expand the scale of a carbon

market or offset mechanism by allowing all types of organizations to participate in transferring GHG emission reductions. The environmental integrity of the CDM depends on the additionality of each CDM project. Several studies give evidence to suggest that the additionality of CDM projects has a negative impact on their implementation (Haya, 2009). The aggregate reduction in GHG’s is calculated relative to the single sector baseline. The sectoral approach allows a more flexible investment because the mitigation activities in the infrastructure or building sector are supported and the overall transaction cost is reduced. In terms of a Taiwanese COM, strengthening the intrinsic relationship between the management of GHG emissions and a low carbon economy is an inevitable issue so a COM is not a management action. The policymaker must account for the effect of this offsetting mechanism on education and training, costeffectiveness, gender issues, job opportunities, technological change and environmental impact. The key elements connect the sustainable development goals (UN, 2017). Olhoff et, al., concluded that there is a relationship between CDM and the millennium development goals, which reduce poverty and hunger, ensure environmental sustainability and build a global partnership (Olhoff et al., 2004). Therefore, the connection between COM and sustainable development goals could be showed in Table 6, which illustrates the relationship between COM and sustainable development goals (i.e., SDGs 1, 5, 7, 8, 13, 15 and 17). Government must establish mitigation and adaptation plans and substantially develop a low carbon economy that meets the goal of sustainable development. 5. Conclusions Developing a COM increases the opportunities to reduce GHG

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

13

Table 5 Definition of Sustainable Development Mechanism and Clean Development Mechanism. Definition

SDM

CDM

Purpose The contribution of overall emission reductions/net mitigation. Climate The national mitigation targets for all countries under the Paris Agreement. Convention Implementation The promotion of ambition for implementation of climate friendly policies, strategies and action plan using a sectoral approach. Controversy Increased investment to reinforce thedevelopment of low emission technology. Sustainability

The transparent, reportable and measurable long-term mitigation actions that contribute to a decline in the use of fossil fuel.

The establishment of a viable carbon offsetting mechanism. Based on the Kyoto Protocol, developing countries have no responsibility to establish a reduction target Incentives to terminate business as usual practices by implementing a project-based reduction measure. The creation of non-additional projects and the risk of double-claim project activities. A questionable contribution to sustainable development.

Table 6 Connection between a carbon offset mechanism and Sustainable Development Goals toward low carbon economy. SDGs items

Implementation of carbon offset mechanism

SDG1 No Poverty SDG5 Gender Equality SDG7 Affordable and Clean Energy SDG8 Decent Work and Economic Growth SDG13 Climate Action SDG15 Life and Land SDG17 Partnerships for the Goals

Carbon offset mechanism could increase job opportunities for local people by transferring technology and knowledge. Employees of accreditation, verification bodies or technical staffs could be women in Taiwan. The offset projects will be focused on renewable energy, especially increased biogas power generation. Carbon offset mechanism could create more full-time jobs capacities for the entity of developing GHG reduction measures and the professional staffs of GHG emission inventory. Carbon offset mechanism has been proved to be an effective part of GHG management and an incentive to reduce GHG emission. Government and society must be educated about carbon sinks by implementing afforestation and reforestation projects. Carbon offset could result in increased mobilization of domestic resources, build international cooperation by transferring technology and increase domestic revenue.

emissions and produce a low carbon economy. In terms of the current status and future development in Taiwan, the internal and external conditions of a Taiwanese COM are presented, based on a SWOT analysis. A MCDM method that uses an AHP and TOPSIS is applied to the SWOT matrix to prioritize alternative strategies. The SWOT analysis uses 12 criteria and 12 alternative strategies loped to depict the current status of a COM in Taiwan. Four types of strategies are identified: SO strategies, WO strategies, ST strategies and WT strategies. SO strategies feature economic incentives, demands for alternative energy and technologies and comprehensive policy action plans. WO strategies feature the establishment of a carbon credit management market, more governmental agencies and financial incentives. ST strategies feature the construction of an educational program, a cross-departmental platform and an emissions trading system. WT strategies feature policy and technical support, increasing financial resources and the development of integrated authorities. The AHP results show that there is a higher score for a final weight in a SWOT matrix for strengths (i.e., from 0.017 to 0.146) and opportunities (i.e., from 0.026 to 0.119), so these are the significant factors for prioritization of strategies. The TOPSIS results show that the top three prioritized strategies are arranged in the order: W3T2 > W3O2,3 > S3O3. This shows that the integrated authorities must firstly be developed, followed by the establishment of more governmental agencies and economic incentives. The most pertinent policy implication for the development of a COM in Taiwan is incomplete governmental organization so increased capacity building is required for the management of carbon offset. The observations also carried out through comparison analysis between CDM and Taiwan COM. Generally, Taiwan COM has a similar organization structure and regulation with CDM, including MRV system, projects cycle procedures, approval methodologies, determination of baseline and credit period, determination of additionality and cost and benefit assessment of carbon credit. The validation and verification process of each carbon offset project are established and implemented to support the conservative of GHG emission reduction. The GHG emission reduction calculation of carbon offset projects can be referred to CDM approval

methodologies and some domestic approval methodologies also can be undertaken. The additionality plays an important role on COM to identify the conservative and rationality of GHG emission reduction. TEPA has built a stricter determination rule of additionality than CDM's for domestic industries, which could avoid the cheat on carbon credits released. It could be concluded that Taiwan COM provide a good regulatory tool to promote regional GHG management. Based on aforementioned analysis and observations, the critical perspectives and prospects of policy implementation for COM toward a low carbon economy are proposed. These key indexes include: (i) a comprehensive establishment of cap and trade scheme, (ii) a well-success stakeholder involvement among public, private and people sectors, and (iii) a capacity building of low carbon economy by pushing a bridge to sustainable development goals. The COM has been verified as a practical tool for GHG management, the proposed perspectives and prospects could be priority governmental directions for future GHG management plan. Acknowledgements The authors cordially appreciate the Environmental Science Technology Consultants (ESTC) Corporation for their technical support, suggestions and database utilized in this study. The authors gratefully acknowledge the financial support of the Ministry of Science and Technology (MOST) of Taiwan under Grant Number 107-2221-E-002 -009 -MY3 for the financial support. Appendix A. Supplementary data Supplementary data to this article can be found online at https://doi.org/10.1016/j.jclepro.2019.117860. References Aich, A., Ghosh, S.K., 2016. Application of SWOT analysis for the selection of technology for processing and disposal of MSW. Procedia. Environ. Sci. 35, 209e228. Amatayakul, W., Berndes, G., 2012. Determining factor for the development of CDM biomass power projects. Energy. Sustain. Dev. 16, 197e203.

14

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860

Amer, M., Daim, T.U., 2011. Selection of renewable energy technologies for a developing county: a case of Pakistan. Energy. Sustain. Dev. 15, 420e435. Amin, S.H., Razmi, J., Zhang, G., 2011. Supplier selection and order allocation based on fuzzy SWOT analysis and fuzzy linear programming. Expert Syst. Appl. 38, 334e342. AzariJafari, H., Yahia, A., Ben Amor, M., 2016. Life cycle assessment of pavements: reviewing research challenges and opportunities. J. Clean. Prod. 112, 2187e2197. BSDC, 2017. Better Business. Better World Business and Sustainable Development Commission, London. CAR, 2015. Climate Action Reserve Program Manual. Climate Action Reserve Los Angeles, USA. Chan, G.B., Haley, Denk, Brianna, Hillstrom, Alexandra, 2016. Guidelines for a Sectoral Sustainable Development Mechanism in the Post-2020 Climate Regime. University of Minnesota Digital Conservancy. Chen, L.T., Hu, A.H., 2012. Voluntary GHG reduction of industrial sectors in Taiwan. Chemosphere 88, 1074e1082. Gottfried, O., De Clercq, D., Blair, E., Weng, X., Wang, C., 2018. SWOT-AHP-TOWS analysis of private investment behavior in the Chinese biogas sector. J. Clean. Prod. 184, 632e647. Haya, B., 2009. Measuring Emissions against an Alternative Future: Fundamental Flaws in the Structure of the Kyoto Protocol's Clean Development Mechanism. University of California, Berkeley Energy and Resources Group Working. He, F., Gu, L., Wang, T., Zhang, Z., 2017. The synthetic geo-ecological environmental evaluation of a coastal coal-mining city using spatiotemporal big data: a case study in Longkou, China. J. Clean. Prod. 142, 854e866. Huang, W.M., Lee, G.W.M., 2009. GHG legislation: lessons from taiwan. Energy Policy 37, 2696e2707. Hultman, N., Guimaraes, L., Deshmukh, R., Kane, J., 2012. Carbon market risks and rewards: firm perceptions of CDM investment decisions in Brazil and India. Energy Policy 40, 90e102.  ski, B., Iglin  ska, A., Kozin  ski, G., Skrzatek, M., Buczkowski, R., 2016. Wind energy Iglin in Poland e history, current state, surveys, renewable energy sources act, SWOT analysis. Renew. Sustain. Energy Rev. 64, 19e33. ISO, 2007. ISO 14064 & 14065. Greenhouse Gases - Parts 1, 2 and 3 (2006); Requirements for Greenhouse Gas Validation and Verification Bodies for Use in Accreditation or Other Forms of Recognition (2007). ISO Standard. JCM, 2015. Progress of Financing Programme for JCM Model Project and Feasibility Studies for JCM Model Projects by MOEJ. The Joint Crediting Mechanism. JCM, Japan. Kelemenis, A., Askounis, D., 2010. A new TOPSIS-based multi-criteria approach to personnel selection. Expert Syst. Appl. 37, 4999e5008. Khan, M.I., 2018. Evaluating the strategies of compressed natural gas industry using an integrated SWOT and MCDM approach. J. Clean. Prod. 172, 1035e1052. Kono, J., Ostermeyer, Y., Wallbaum, H., 2018. Investigation of regional conditions and sustainability indicators for sustainable product development of building materials. J. Clean. Prod. 196, 1356e1364. KVER, 2012. Korea Voluntary Emission Reduction Program. Korea Energy Agnecy, South Korea. Lam, P.T.I., Chan, E.H.W., Yu, A.T.W., Cam, W.C.N., Yu, J.S., 2015. Applicability of clean development mechanism to the Hong Kong building sector. J. Clean. Prod. 109, 271e283. Li, J., Pan, S.Y., Kim, H., Linn, J.H., Chiang, P.C., 2015. Building green supply chains in eco-industrial parks towards a green economy: barriers and strategies. J. Environ. Manag. 162, 158e170. Lim, X.-L., Lam, W.-H., 2014. Review on clean development mechanism (CDM) implementation in Malaysia. Renew. Sustain. Energy Rev. 29, 276e285. Liou, H.M., 2011. A comparison of the legislative framework and policies in Taiwan's Four GHG reduction acts. Renew. Sustain. Energy Rev. 15, 1723e1747. Lo, A.Y., 2015a. Challenges to the development of carbon markets in China. Clim. Policy 16, 109e124. Lo, A.Y., 2015b. National development and carbon trading: the symbolism of Chinese climate capitalism. Eurasian Geogr. Econ. 56, 111e126. Lo, A.Y., Cong, R., 2017. After CDM: domestic carbon offsetting in China. J. Clean. Prod. 141, 1391e1399. Lo, A.Y., Howes, M., 2015. Power and carbon sovereignty in a non-traditional capitalist state: discourses of carbon trading in China. Glob. Environ. Politics 15, 60e82. Luthra, S., Govindan, K., Kannan, D., Mangla, S.K., Garg, C.P., 2017. An integrated framework for sustainable supplier selection and evaluation in supply chains. J. Clean. Prod. 140, 1686e1698. Mathivathanan, D., Govindan, K., Haq, A.N., 2017. Exploring the impact of dynamic capabilities on sustainable supply chain firm's performance using GreyAnalytical Hierarchy Process. J. Clean. Prod. 147, 637e653. Ming, Z., Shaojie, O., Yingjie, Z., Hui, S., 2014. CCS technology development in China: status, problems and countermeasuresdbased on SWOT analysis. Renew. Sustain. Energy Rev. 39, 604e616. Murray, E., 2012. Building Resilience for Adaptation to Climate Change in the Agriculture Sector. Food and Agriculture Organization of the United Nations. Narassimhan, E., Gallagher, K.S., Koester, S., Alejo, J.R., 2018. Carbon pricing in practice: a review of existing emissions trading systems. Clim. Policy 18, 967e991. Nishitani, K., Kaneko, S., Fujii, H., Komatsu, S., 2012. Are firms' voluntary environmental management activities beneficial for the environment and business? An empirical study focusing on Japanese manufacturing firms. J. Environ. Manag. 105, 121e130.

Olhoff, A., Markandya, A., Halsnaes, K., Taylor, T., 2004. CDM: Sustainable Development Impacts. UNEP, UNEP-Risoe Center, Denmark. Pahl-Wostl, C., Craps, M., Dewulf, A., Mostert, E., Tabara, D., Taillieu, T., 2007. Social learning and water resources management. Ecol. Soc. 12. Pang, Y., Thistlethwaite, G., Watterson, J., Okamura, S., Harries, J., Varma, A., Cornu, E.L., 2016. How to Set up National MRV Systems, Draft 4.0. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Bonn, Germany. Parnphumeesup, P., Kerr, S.A., 2011. Stakeholder preferences towards the sustainable development of CDM projects: lessons from biomass (rice husk) CDM project in Thailand. Energy Policy 39, 3591e3601. Qin, Y., Zhang, L., 2012. SWOT analysis for PCDM development in building energy conservation in China. Energy Procedia 16, 172e177. Saaty, T.L., Vargas, L.G., 1991. Prediction, Projection and Forecasting Springer. Kluwer Academic, Boston. S¸ahin, B., 2016. Social integration of immigrants: a SWOT analysis. procedia. Soc. Behav. Sci. 235, 110e117. Schneider, L., 2007. Is the CDM Fulfilling its Environmental and Sustainable Development Objectives? an Evaluation of the CDM and Options for Improve€ ment. Oko-Institut, Report prepared for WWF. Shahba, S., Arjmandi, R., Monavari, M., Ghodusi, J., 2017. Application of multiattribute decision-making methods in SWOT analysis of mine waste management (case study: sirjan's Golgohar iron mine, Iran). Resour. Policy 51, 67e76. Shariat, S., Yazdani, Chamzini, Abdolreza, Pourghaffari, Behrang, B., 2013. Mining method selection by using an integrated model. Int. Res. J. Appl. Basic Sci. 199e214. Sharma, M., 2018. Development of a ‘Green building sustainability model’ for Green buildings in India. J. Clean. Prod. 190, 538e551. Shen, W., 2014. Chinese business at the dawn of its domestic emissions trading scheme: incentives and barriers to participation in carbon trading. Clim. Policy 15, 339e354. Simsek, Y., Watts, D., Escobar, R., 2018. Sustainability evaluation of concentrated solar power (CSP) projects under clean development mechanism (CDM) by using multi criteria decision method (MCDM). Renew. Sustain. Energy Rev. 93, 421e438. Soleille, S., 2006. Greenhouse gas emission trading schemes: a new tool for the environmental regulator's kit. Energy Policy 34, 1473e1477. Subbarao, S., Lloyd, B., 2011. Can the clean development mechanism (CDM) deliver? Energy Policy 39, 1600e1611. Tang, Z.W., Ng, S.T., Skitmore, M., 2019. Influence of procurement systems to the success of sustainable buildings. J. Clean. Prod. 218, 1007e1030. TEPA (Taiwan Environment Protection Administration), 2017. 2017 taiwan greenhouse gas inventory report summary. Available from: http://unfccc.saveoursky. org.tw/2017nir/tw_nir.php. (Accessed April 2018). Tramarico, C.L., Salomon, V.A.P., Marins, F.A.S., 2017. Multi-criteria assessment of the benefits of a supply chain management training considering green issues. J. Clean. Prod. 142, 249e256. Tzeng, Gwo-Hshiung, Huang, J.J., 1981. Multiple Attributes Decision Making Methods and Applications. Springer, Berlin. Uddin, N., Blommerde, M., Taplin, R., Laurence, D., 2015. Sustainable development outcomes of coal mine methane clean development mechanism Projects in China. Renew. Sustain. Energy Rev. 45, 1e9. UN, 2017. Sustainable Development Knowledge Platform. https:// sustainabledevelopment.un.org/. UNFCCC, 1992. United Nations Framework Convention on Climate Change. UNFCCC, 2002a. Recommendations for the Revision of Definition of Small Scale Project Activities. CDM, SSC WG 07. UNFCCC, 2002b. Report of the Conference of the Parties on its Seventh Session, Held at Marrakesh from 29 October to 10 November 2001. UNFCCC, 2006. Report of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol on its First Session, Held at Montreal from 28 November to 10 December 2005 UNFCCC. UNFCCC, 2012. Methodological Tool’ ‘Tool for the Assessment and Determination of Additionality’. CDM. UNFCCC, 2014a. In: Handbook on Measurement, Reporting and Verification for Developing Country Parties. UNFCCC, 2014b. Voluntary Tool Aims to Appraise the Sustainable Development Impact of the Kyoto Protocol's Clean Development Mechanism (CDM). UNFCCC, 2016a. Nairobi Framework Partnership 2016 Report. United Nations Framework Convention on Climate Change, Bonn. UNFCCC, 2016b. Submission to the SBSTA: General Guidelines for Domestic MRV of Developing Country Nationally Appropriate Mitigation Actions. United Nations Framework Convention on Climate Change. UNFCCC, 2017a. Procedure CDM Project Cycle Procedure for Project Activities (Up to EB 93). UNFCCC, UNFCCC. UNFCCC, 2017b. TOOL21: Demonstration of Additionality of Small-Scale Project Activities Version 11. UNFCCC, 2018. CDM Insights. UNFCCC. Usapein, P., Chavalparit, O., 2017. A start-up MRV system for an emission trading scheme in Thailand: a case study in the petrochemical industry. J. Clean. Prod. 142, 3396e3408. Vinke-de Kruijf, J., Pahl-Wostl, C., 2016. A multi-level perspective on learning about climate change adaptation through international cooperation. Environ. Sci. Policy 66, 242e249. Wang, J.-J., Jing, Y.-Y., Zhang, C.-F., Zhao, J.-H., 2009. Review on multi-criteria decision analysis aid in sustainable energy decision-making. Renew. Sustain. Energy

T.-L. Chen et al. / Journal of Cleaner Production 239 (2019) 117860 Rev. 13, 2263e2278. Wang, T., Xiao, F., Zhu, X., Huang, B., Wang, J., Amirkhanian, S., 2018. Energy consumption and environmental impact of rubberized asphalt pavement. J. Clean. Prod. 180, 139e158. WorldBank, 2015. Partnership for Market Readiness. 2015. Overview of Carbon Offset Programs : Similarities and Differences. World Bank, Washington, DC. PMR Technical Note;No. 6. Zhang, J., Wang, C., 2011. Co-benefits and additionality of the clean development

15

mechanism: an empirical analysis. J. Environ. Econ. Manag. 62, 140e154. Zhang, B., Lai, K.-h., Wang, B., Wang, Z., 2017. Shareholder value effects of corporate carbon trading: empirical evidence from market reaction towards Clean Development Mechanism in China. Energy Policy 110, 410e421. Zhang, Y.-J., Sun, Y.-F., Huang, J., 2018. Energy efficiency, carbon emission performance, and technology gaps: evidence from CDM project investment. Energy Policy 115, 119e130.