TAIPEI (Taiwan News) — Taiwan is stepping up efforts to join international carbon markets by expanding cooperation with its South American ally, Paraguay, Business Today reported.
In October, the two countries signed a memorandum of understanding to collaborate on emissions reduction technologies under the Paris Agreement. Environment Minister Peng Chi-ming (彭啟明) visited Paraguay in November to launch two pilot projects: one on afforestation and another on electric buses.
Peng said Taiwan must develop carbon credits that are internationally recognized. As a non‑UN member, Taiwan cannot directly participate in state-to-state carbon trading under Article 6.2 of the Paris Agreement, which governs internationally transferred mitigation outcomes (ITMOs).
Countries including Japan, Singapore, and South Korea have already entered bilateral arrangements under Article 6.2. ITMOs allow countries to trade verified emission reductions, helping some meet national targets while enabling others to gain economic benefits for exceeding their reduction commitments, according to Allcott Trading and Reccessary.
To overcome this, Taiwan plans to rely on Article 6.4, which allows participation in the global carbon market even for countries excluded from state-to-state trading.
Paraguay’s extensive forest resources form the basis of the first pilot project. The two sides plan afforestation and reforestation efforts covering one to five million square meters, with investments led by companies from Taiwan’s Green Growth Alliance.
Preliminary estimates suggest each hectare could generate about 10 tonnes (10,000 kg) of carbon credits, with prices estimated to range from US$15 to US$40 per tonne. Taiwan and Paraguay are expected to sign their first forest carbon credit demonstration agreement in the first half of next year.
Peng said the aim is to develop credits that can eventually be registered with the UN, rather than remaining limited to voluntary or experimental markets. He added that methodologies and experience gained in Paraguay could later inform Taiwan’s own forest-based carbon initiatives.
The electric bus project will help Paraguay replace diesel buses with electric ones, generating transferable carbon credits under the ITMO framework. Powered by Paraguay’s renewable energy from the Itaipu Dam, the project aims to ensure credible emissions reductions.
Both sides are developing calculation methodologies for the project. However, Peng said it must reach a sufficient scale to be meaningful in international markets.
Carbon credits allow companies to offset emissions by purchasing verified reductions, directing investment into environmental protection and green innovation. Taiwan launched its carbon exchange on Aug. 7, 2023, listing the first batch of international credits later that year, and began domestic carbon credit trading on Oct. 2, 2024.
Looking ahead, Taiwan and Paraguay aim to develop a digital carbon credit registry and explore a bilateral emissions trading platform, tentatively called the TW–PY ETS. Taiwan’s domestic emissions trading system is still under discussion, with further regulatory coordination needed.
