Taiwan’s Energy Issue: The Battle Between the Self and the Neighbor

The year 2022 gave international attention to two relatively less-known political entities: Ukraine and Taiwan. Xi Jinping’s claim that it will not shy away to use force against Taiwan has sent jitters in the international arena. For Taiwan, the situation, despite being dangerous is exceptional because for a long time it was waiting for a platform to mark its international presence. The world is now lip-syncing to sympathize with Taiwan and the young David is being praised for standing up to the mighty Goliath. 

However, in spite of all the political rhetoric and economic resilience, Taiwan has to first set its own house in order, especially in areas of core national interest. One such issue for Taiwan is its energy insecurity. Taiwan imports more than 95 percent of its fuel which has driven Taiwan’s economic growth. It has two major imports: petroleum (50 percent) and coal (31 percent) and has two major suppliers for the same: the Middle East and China. The supply chains from the Middle East are often fraught with international turbulence and Taiwan’s relations with China are tumultuous, to say the least. Unfortunately, Taiwan has no domestic reserves to find a replacement. The only option, in this case, is for Taiwan to be assisted out by a country that is both energy-rich and has the guts to stand up to China for its excesses in Taiwan. The case in point here is the US which not only has its own reserves but also has friendly suppliers who can redirect their produce to Taiwan. Russia too could have fitted into that role, however, it is amply clear that Russia will not and cannot run the risk of standing against China. Being pressed hard against the wall, in the fossil fuel category, the logical explanation for Taiwan is to shift its focus toward renewable energy. 

Taiwan is most suited for renewable energy; however, domestic politics does not support it. President Tsai wants a nuclear-free Taiwan despite a promise of an increase in renewable energy investment by up to 25 percent by 2025. Tsai wants a greener Taiwan and aims to reduce 2005 levels of greenhouse gas emissions to half by 2050. This clause was passed in the Greenhouse Gas Reduction and Management Act which was initiated and got passed in 2015.

Like in China where national oil companies like CNOOC, Sinopec, CNPC, etc. play a pivotal role in influencing government decisions, the same is true with the industrial sector of Taiwan. Taiwan’s industries are a benchmark of its prosperity and the Government cannot choose to ignore them. However, unlike China where the lobbyists are the energy providers, Taiwan’s lobbyists are its biggest energy consumers. Taiwan’s power woes are not unknown and Taiwan is trying its best to give impetus to its power-saving technology and its service sector to become more energy efficient. Yet nothing seems to help. Taiwan’s biggest exports are its semiconductors and advanced chips. These exports require huge amounts of electricity which is provided at a subsidized rate by the Taiwanese government. This adversely affects the power companies which are incurring heavy losses and slight inflation could affect the export prices. Taiwan is plagued by China’s ‘One China’ policy due to which it is not able to establish bilateral trade relations with most of the countries. Being a trade-based economy Taiwan cannot afford to lose the comparative cost advantage on the products that make it viable for the world. 

The solution for Taiwan lies in areas beyond power. Taiwan is aggressively encouraging a reduction in the consumption of all other energy resources except electricity over which it has no control. This coupled with financial incentives for renewable energy may make Taiwan the role model that it always wanted to be in the international arena. 

[Photo by 曾 成訓, CC BY 2.0, via Wikimedia Commons]

*Dr. Prachi Aggarwal is the author of the book “China’s Energy Security: the Journey from Self-Sufficiency to Global Investor” by Springer, Singapore.

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