Taiwan's opportunities in the US-EU green cold war

In July 2025, U.S. Environmental Protection Agency (EPA) Administrator Lee Zeldin, reappointed under the Trump administration, announced the initiation of procedures to revoke the 2009 “Endangerment Finding”—a move that sent shockwaves through the global climate governance community.

The “Endangerment Finding” serves as the legal foundation of U.S. federal climate policy, granting the EPA authority to regulate carbon dioxide and other greenhouse gas emissions. Once officially revoked, the U.S. would not only loosen its domestic emissions control regime but also risk exiting the institutional community jointly addressing climate change, thereby undermining the legitimacy and credibility of its Nationally Determined Contributions (NDCs).

The case is expected to enter judicial review, with the U.S. Supreme Court likely to serve as the ultimate arbiter. This will leave international markets in a wait-and-see posture regarding the future of U.S. climate policy.

Meanwhile, the EU’s Carbon Border Adjustment Mechanism (CBAM) is set to conclude its transitional phase and fully take effect in 2026. From February 2027, importers will be required to purchase CBAM certificates based on the actual carbon content of their products.

This represents the EU’s institutionalized approach to directly transforming “carbon” into “tariffs,” reshaping the logic of global trade. While the U.S. steps back and the EU doubles down, the geopolitical map of climate governance is fragmenting at an accelerated pace in a new green tariff cold war.

EPA’s Retreat and CBAM’s Enforcement: Intensifying Institutional Clashes

If the US courts ultimately endorse the EPA’s revocation of the “Endangerment Finding”, the country would lose its legal foundation to compel high-emission industries to reduce carbon output. This would exempt the US from fully implementing its Nationally Determined Contributions (NDCs) and from undergoing institutional scrutiny under the Paris Agreement. It would also trigger a deficit of trust in the international arena, disrupting cross-border carbon trading, green investment, and institutional recognition.

The White House Office of National Climate Advisor recently stated that the government would “replace federal mandatory emissions reductions with market-driven energy innovation.” Climate advocacy groups, however, have criticized this as tantamount to “abandoning climate leadership.”

On the EU side, the Directorate-General for Climate Action has reiterated that CBAM will proceed as planned and operate within the WTO framework to “strictly prevent carbon leakage and unfair competition.” The European Parliament’s Environment Committee went further: “If the U.S. withdraws from the institutional race, Europe will actively shape global standards through CBAM.”

The United Nations Framework Convention on Climate Change (UNFCCC) Secretariat has warned that the Global Stocktake (GST) under the Paris Agreement depends on complete NDC submissions and alignment on data standards: “Any country absent or delayed will be excluded from carbon finance and climate investment opportunities.”

CBAM vs. Trump Tariffs: Dual-Track Shocks of Institutions and Protectionism

The reinstated Trump administration has revived its trade war, targeting green technology products and strategic metals in the name of the national interest. This stands in stark contrast to the EU’s CBAM, which prioritizes institutional legitimacy. The former is politically driven trade protectionism; the latter, a rules-based instrument of institutional influence.

European Commission President Ursula von der Leyen has stated: “If the U.S. chooses to return to protectionism, Europe will use institutional power to defend climate justice.” In the coming years, CBAM and Trump’s tariffs are likely to form two mutually incompatible trade frameworks, forcing global companies to make difficult choices between institutional compliance and market access.

For certain Taiwanese exports, this could result in “double tariffs,” posing a significant test to supply chain competitiveness.

While both measures increase import costs, their underlying logic is entirely different. CBAM is a governance tool centered on carbon standards; Trump’s tariffs are a unilateral tactic prioritizing political interest.

For Taiwan, standing with credible institutions is the path to building enduring market trust and institutional recognition.

China’s “Dual Carbon” Policy and Low-Carbon Industrial Parks: Taiwan’s Entry Point

Under its “Carbon Peaking and Carbon Neutrality” policy, China is rapidly expanding its national emissions trading system (ETS), bringing high-emission sectors such as steel, cement, and chemicals into the fold and building a unified national carbon data auditing platform. As of June 2025, more than 120 low-carbon demonstration parks have been established nationwide, incorporating renewable energy ratio assessments, carbon account management, and blockchain tracking technology.

Some parks have even partnered with Singaporean verification agencies to pilot cross-border recognition of carbon data, creating laboratories for institutional innovation.

Although China publicly criticizes CBAM as inconsistent with the “Common but Differentiated Responsibilities” (CBDR) principle, it has engaged the EU in technical dialogues on energy tracking, hydrogen standards, and carbon data exchange. This dual strategy of external opposition with internal cooperation offers Taiwan a narrow but valuable entry point. Taiwan can maintain political distance while seeking alignment in technical and standardization domains.

Taiwan could collaborate with China’s low-carbon parks on data and verification technology, while simultaneously working with EU third-party certification bodies to build a “trusted third-way” model. This would not only diversify geopolitical risk but also strengthen Taiwan’s institutional influence within Asia’s supply chains.

Carbon Finance and Green Investment: Risks and Opportunities

The international carbon finance market is highly sensitive to institutional change. Any policy rollback or standard change is quickly reflected in investment risk premiums and capital flows.

Should the U.S. EPA revoke the “Endangerment Finding”, domestic decarbonization incentives would weaken, undermining the pricing basis of carbon assets.

The European Investment Bank (EIB) warns: “Institutional backsliding will increase investment risk premiums and may redirect green capital to stable, transparent markets with cross-border recognition.” The Asian Development Bank (ADB) also cautions that Asian economies must establish verifiable and shareable carbon data standards, aligned with major markets such as the EU ETS and CORSIA, or risk losing climate finance to more transparent and mutually recognized systems.

Taiwan can position itself as a low-risk investment destination by upgrading its systems and integrating digital technology into compliance. Artificial intelligence (AI) could become a pivotal tool for enhancing institutional credibility by providing the following capabilities:

1. Real-time data verification: Combining AI with blockchain to automatically reconcile declared and actual emissions, preventing fraud or omissions.

2. Cross-border standard conversion: Translating Taiwan’s carbon footprint reports into formats compliant with CBAM, California’s carbon market, or China’s ETS, reducing compliance costs.

3. Tariff impact simulation: Using machine learning to model export risks under varying tariff and carbon price scenarios, guiding corporate and policy adjustments.

If these technologies are integrated into an export industry data platform before COP30, Taiwan could market a globally competitive institutional product. In an era where tariffs and institutional barriers coexist, AI-driven institutional optimization would not only mitigate the impacts of CBAM and Trump tariffs but also boost carbon finance credit ratings and attract long-term ESG investment.

Markets offering real-time verification, cross-border recognition, and controllable risk will emerge as safe havens for capital.

Institutional Resilience and Multilateral Recognition Strategies

Taiwan’s current carbon fee system—priced at roughly NT$300 per ton—remains far below EU ETS levels and lacks both a cap-and-trade mechanism and an internationally recognized certification platform, limiting CBAM acceptance. To break through, we must strengthen transparency, traceability, and international institutional dialogue.

Potential strategies for Taiwan include:

1. Dual-track carbon pricing: Introducing a floating rate alongside a pilot carbon market, modeled after OECD and EU “effective carbon price” frameworks.

2. Export compliance service center: Assisting sectors such as electronics, steel, and petrochemicals with carbon footprint verification, renewable energy certificate (REC) integration, and data disclosure.

3. Multilateral mutual recognition platform: Inviting Japan, South Korea, and the EU to establish an Asia-wide carbon data mutual recognition mechanism, reducing the risk of CBAM exclusion.

4. Soft institutional contact with China: Engaging in transparency-oriented technical cooperation with China’s low-carbon parks without touching sovereignty issues.

Here again, AI could act as Taiwan’s competitive accelerator, enabling automated carbon data verification, real-time monitoring, and cost-efficient compliance. This could position Taiwan as a smart node for institutional exports in the region.

COP30 and Taiwan’s Institutional Voice

COP30, to be held in Belém, Brazil, this November, will be a decisive moment for reshaping global climate institutions. The UN will advance the second phase of the Global Stocktake, requiring countries to submit updated NDCs and negotiate on climate finance, carbon markets, data interoperability, and institutional legitimacy.

These decisions will define the institutional framework and capital flows for the next decade and will have wide-reaching effects on export-driven economies.

The UNFCCC Secretariat has made it clear: economies that fail to align with carbon data standards will be marginalized in the new climate economy, forfeiting access to carbon finance, institutional rule-making, and market entry. In other words, not joining the standards means surrendering your voice.

This presents Taiwan with the opportunity to create institutional influence. I believe Taiwan should pursue a three-pronged approach:

1. Non-governmental mechanisms: Participate in NDC reviews and technical working groups via professional associations and international industry organizations, circumventing diplomatic exclusion.

2. Technology platforms: Build AI-enabled verification and cross-border carbon data recognition systems, positioning Taiwan as a “technical supplier of institutional credibility.”

3. Multilateral networks: Establish regular institutional dialogue platforms with the OECD and Asia-Pacific nations to ensure Taiwanese proposals enter core negotiations rather than being relegated to post-meeting appendices.

Taiwan's ability to build institutional strength depends not only on the precision of its policy proposals, but also on whether those policies can earn international trust, gain adoption, and translate into tangible market access If Taiwan can secure institutional credibility and technological verifiability before COP30, it could shift from being an institutional importer to an institutional exporter, wielding influence beyond mere market share in a multipolar green economy.

Carbon is Tariff, Institution is Sovereignty, Trust is Influence

With the EPA’s retreat and CBAM’s advance, global climate governance is heading toward multipolar and competing standards. Only economies capable of exporting credible systems—backed by negotiation and rule-making capacity—will avoid marginalization in this green cold war.

Taiwan must design its systems as products that can be scrutinized and trusted internationally, thereby reinforcing climate diplomacy and becoming a core node in the global green supply chain. This is not merely a survival choice for Taiwan—it is a strategic opportunity to shape the economic map for decades to come. Taiwan can, and must, make its choice in this era of institutional fragmentation and green geopolitics.