Relations with the European Union are, more than ever, crucial for Taiwan at a time when ties with Washington appear unsettled by Trump’s tariffs.
In today’s era of industrial and technological cooperation, the Carbon Border Adjustment Mechanism presents a significant challenge for any external partner seeking to engage with the EU on equal terms.
The CBAM is an EU policy designed to tackle climate change by putting a price on the carbon emissions embedded in certain imported goods. Its main purpose is to ensure that imports are subject to the same environmental standards as products manufactured within the EU, thereby preventing “carbon leakage.”
Carbon leakage occurs when companies shift production to countries with looser regulations to avoid the costs of cutting emissions. Under the CBAM, importers of goods such as steel, cement, and electricity must pay a fee based on the carbon emissions associated with those products, similar to the costs faced by EU companies under the bloc’s carbon trading system.
In doing so, the CBAM seeks to encourage cleaner production methods worldwide and reinforce the EU’s climate objectives by making high-emission imports more costly. Since its introduction, the EU Emissions Trading System has been a source of tension for many industrial sectors, as it has pushed energy-intensive industries to undertake profound ecological transitions.
Level playing field
The CBAM, instead, is designed to level the playing field for imports and prevent carbon leakage. At the same time, it is reshaping the EU’s relations with partner countries.
Many of them are now accelerating the design or strengthening of their own carbon-pricing systems (such as ETS), sometimes considering border adjustment tools to stay aligned on emissions. In this sense, the CBAM acts as an external incentive and a protective complement for jurisdictions that already price carbon.
Taiwan is no exception. Yet, it can also be argued that the CBAM holds potential as a bridge between Taiwan and the EU, fostering closer cooperation under shared climate and trade objectives.
Taiwan appears to be already underway to make sure that CBAM implementation (from 2026 onward) will be as smooth as possible. Taiwan’s steel and cement companies have been asked to give transparent emission reports to make sure that they are aligned with CBAM standards.
Taiwan’s government is working hard to create an internal energy market based on renewable energy by rolling out its own ETS/carbon pricing system. Even local governments in Kaohsiung and New Taipei are supporting businesses with carbon assessments, strategy development, energy-saving and carbon-reduction guidance.
Climate goals
On the other hand, China’s domestic carbon pricing/ETS coverage and enforcement remain limited compared to the EU. Scholars have pointed out how the most effective way for Beijing to meet global climate goals would be to seek out dissemination of innovative technologies through Chinese-European climate partnerships.
In other words, to negotiate more with Brussels, adding another thorny chapter in the already complex bilateral relations between China and the European Commission.
This means that Taiwan could be potentially favored in future trade talks with Brussels. Robust domestic carbon pricing and alignment with CBAM import requirements would further solidify its status as a like-minded partner.
Another important factor to consider is the international landscape. The tariffs imposed by US President Donald Trump target rivals and allies, ultimately reinforcing ties among US-aligned states.
Japan and the EU deepened their cooperation in the wake of these measures. Taiwan now has a similar opportunity to strengthen its relationship with Brussels — not only because it is more closely aligned with EU values than China, but also because it can provide something the EU urgently needs: semiconductors.
This sector has become even more strategic since the Russian invasion of Ukraine exposed vulnerabilities in Europe’s supply chains. In simpler terms, while China struggles to keep pace, Taiwan is well-positioned to move ahead, or at least to compensate for the absence of formal agreements that have so far defined EU–Taiwan relations.
