Taiwan's stagnated transformation has been a long-standing problem. The chronic stagnation of governance, industrial, and social transformation has reached a critical point. The much-needed transformation that has been triggered by the pressures from global climate and energy conventions, the fourth industrial revolution and the accompanying social and economic drivers of innovation, as well as from social demands on Taiwan's industry, labor, environment, and social equity, has been delayed for nearly 20 years. Moreover, the delay in transformation is also pushing our society to the point of systemic collapse. Even without considering external global changes, various events which have happened in recent years in Taiwan have shown signs of systemic collapse.


In reality, under the global system of division of labor, Taiwan has been playing catch-up and only managed to find its place by being a contract manufacturer, relying on low profit margins and by squeezing every ounce of resources in production. Although Taiwan was able to develop a wide range of manufacturing industries which were therefore efficient and flexible, this has resulted in a stalemate where Taiwan's social and economic transformation has been held back. More specifically, this development model is based on a sacrificial system under the brown economy, which encourages a one-dimensional thinking of economic development, thereby resulting in the accumulation of vulnerabilities in the labor, environment, and energy systems in Taiwan.


In the 80s and 90s, the development model that Taiwan adopted was successful and created the so-called "Taiwan Economic Miracle," but after 2000, in the face of shifting global technological and climate changes, this aging model has instead resulted in the opposite effect for Taiwan's economic and social transformation today. The rapid rise of the fourth industrial revolution since the mid-2010s, and its focus on human-centered development therefore places an emphasis on social and environmental responsibility which requires a comprehensive governance system and social consensus. It not only forces Taiwan to confront and challenge our fundamental values and beliefs of development, but to also rethink our ideas in the sustainable economy and social equity, and this has also made Taiwan's transformation more urgent in order to achieve the United Nation's Sustainable Development Goals (SDGs) by 2030 and the deep carbon reduction goals under the Paris Agreement by 2050.


Without a doubt, Taiwan needs to break away from the curse of the contract manufacturing model and transform to an industrial model that emphasizes research and development (R&D) and higher value-add. Even if the contract manufacturing model has enabled Taiwan to become a hidden champion with the flexibility and superiority given under a specialized contractual capitalism, Taiwan would still need to transform in the fourth industrial revolution. Taiwan's past successes have become a stumbling block for its transformation today.


In addition, Taiwan's past development model is closely tied to the brown economy, which has resulted not only in high carbon emissions, high pollution, low wages, low electricity prices, low water prices, the illegal construction of factories on farmlands, and the externalization of environmental and health costs, etc., but it has also resulted in a path dependence that is overly reliant on an outdated development model. When major issues such as on energy and air pollution are being debated in Taiwan's society, the squabbles are still stuck in an outdated modality which is neither progressive nor adopts a framework for social transformation and innovation, and this is not yet mentioning how far behind Taiwan already is in its transformation in low-carbonization, climate, and digital technologies, which global governments, societies, industry, and the economy are today paying very close attention to.


As such, Taiwan needs to urgently reframe its debates away from such outdated models. In order to take a forward-looking approach, Taiwan would therefore need to dramatically transform its overall innovation model and paradigm. However, the question lies in how Taiwan would be able to achieve the overall social conditions that underlie the fourth industrial revolution encompassing social innovation (sustainability and equity) and technological innovation (key breakthroughs, security, and consensus), as well as respond to the issues of social identity, solidarity and trust that will be given rise to, in order to develop a robust social and economic system in the new wave of major transformational changes.


Basically, Taiwan's internal (social, industrial, and environmental demands) and external (international pressure for carbon reduction, and industrial competition) conditions no longer allow Taiwan to continue on the past outdated model. For one, Taiwan's per capita carbon emissions in recent years are about 10.8 metric tons, ranking eighth in countries with more than 10 million people, which represents an enormous external pressure to reduce carbon emissions. The strident discussion on air pollution issues, the lack of solutions on dealing with nuclear waste, entangled with the preoccupation on resuscitating nuclear energy, coupled with the seventh lowest industrial electricity price and the second lowest residential electricity price in the world, are representative of the internal contradictions and structural realities of Taiwan's climate and energy transition. Fact is, on the one hand, the structural challenges that Taiwan faces in its energy transition are the vertical pressures from international agreements on carbon reduction and green conventions, but on the other, Taiwan also faces horizontal pressures from domestic social demands advocating for the transformation of energy-intensive industries and stricter controls over air pollution.


Faced with these dual pressures, Taiwan's energy transition is therefore ensnared in a triple helix movement, of having to choose between energy-generation types (the first helix), as well as being confronted with the need for industrial transformation (the second helix), and air pollution governance (the third helix). First, the choice of energy-generation types entails discussion on sustainability, clean energy, carbon emissions and carbon reduction, as well as on air pollution and health. Second, industrial transformation involves discussion over the transformation and weeding out of high energy-intensive and high-carbon industries, and is linked to the industrial and technological innovation capacity, and international competitiveness, of Taiwan's industries, of which those lacking in social and environmental sustainability will not be able to survive into the future. Finally, air pollution governance is embedded in the former two helixes, and the challenges and pressures faced in Taiwan's society, environment and health are important factors which would spur Taiwan's transformation. Each of these three helixes are intertwined and affected by one another, under the influence of international vertical pressures and local horizontal pressures, seemingly unable to break through the weak and fragile historical pathway of Taiwan's systemic risks.


Taiwan has therefore reached a critical point, and it is therefore urgent for Taiwan to develop forward-looking and long-term, as well as systematic and dynamic research and policy recommendations, both in terms of its position in Asia as well as in the world. Based on this historical pathway, the research team at the Risk Society and Policy Research Center has therefore published this policy report, "Taiwan in Transformation: Initiating a Long-Term Energy Transition", which has been three years in the making.


This policy report is based on the "World in Transition – A Social Contract for Sustainability" report published by the German Advisory Council on Global Change (Wissenschaftlicher Beirat der Bundesregierung Globale Umweltveränderungen, WBGU) in 2011, which combines data, policy, and social participation to assess and pinpoint the climate and energy pathway for Germany until 2030, in the areas of climate, energy, land use, urban planning and the economy, and these are also the areas in which Taiwan has seriously overlooked in its transformational process in the last one to two decades. For this reason, the RSPRC research team consolidated data and development trends from the international and local arena, to integrate various perspectives on systemic risks, transitional societies, sustainable governance, and policy mixes, and also adopted a cross-disciplinary approach to formulate a future development pathway for Taiwan, by emphasizing that Taiwan's climate and energy transition lies in its social transformation.


This policy report offers a theoretical perspective on the social conflicts and energy choices, as well as on the adoption of specific economic models and the reliance on the high-carbon society, that have become products of Taiwan's long-term transformation process, in addition to perspectives on the serious lack of long-term, systematic and sustainable policy planning and the inadequacy of information which could otherwise have been used as the baseline for decision-making. Additionally, due to politics dominated by short-sighted planning and expert elitism, these two facets have therefore led to a lack of sustainable and in-depth communication of the future of Taiwan's society. As such, the stagnated transformation, hidden risks, and the deficit model of social participation, in addition to interest groups which have locked-in Taiwan onto the high-carbon path, have all led to a brown economic model (of low electricity prices, low water prices, low wages, and the externalization of environmental costs, etc.) which has dominated the direction of Taiwan's development, thereby resulting in Taiwan being severely de-linked from the developmental trend towards a global low-carbon society.


Confronted with the stagnation that Taiwan is facing in the transformation of governance, industry and society, this report is therefore not only focused on advocating for a new global social development, but also integrates the global policy framework adopted after COP21's Paris Agreement, to conduct an in-depth analysis of experiences in climate and energy governance, energy use, carbon emission data collection and analysis, local participation, and the approach towards governance, etc., that have been taken at the global, national, and city levels in various countries. In particular, there is also a special emphasis placed on exploring the strategies in digitalization and the Internet-of-Things (IoT) which could aid in the low-carbon transformation of high energy-intensive industries.


With this international backdrop, this study further analyzes the energy development of Taiwan, the structural dilemmas and the pathway for power sector reform, to propose a critical perspective that Taiwan's climate and energy transition pathway would need to be grounded in, in order to undergo the transformation of energy governance. The solution would therefore need to be focused on the costs of the brown economy, energy and the external costs to the environment, and appraise the thinking that a high-carbon lock-in effect would have short-term benefits for Taiwan's society and economy, and to understand the negative impact that it would have on the medium- to long-term. As such, it is necessary for Taiwan to make the prudent decision not to reject the international trends in green capital flows, which is focused on reducing investments in energy-intensive industries, monitoring the carbon disclosure and carbon reduction initiatives of energy-intensive industries, switching to investing in green industries, and in the development of green energy industries. In addition, the international requirements of carbon disclosure, carbon reduction, and green power demands that the financial industry and other industries are facing would even more so now require the government to establish a carbon pricing mechanism, by adopting an emission trading system and carbon (energy) tax.


In addition to the structural analysis conducted at the international and local level, this report also puts a focus on four actors: the state, city, industry, and civil society, to look at how they participate in carrying out transformation projects in six major transformative policy mixes: citizen participation in energy governance, the internalization of external costs, the development of a sustainable electricity market, local energy governance, the prioritization of industrial energy efficiency, and the implementation of green capital markets.


To take advantage of the opportunity for transformation, other than requiring that individual actors should be able to break through the bottleneck of policymaking and policy practice, what is more important is to create a social learning curve at the earliest, in order to develop consensus with regards to transformation and create a role model (Leitbild) that would enable our society to push forward with holistic societal transition. As an example, where the whole-of-society would begin to realize how high-carbon and energy-intensive industries, the externalization of environmental costs, and low electricity prices are linked to the deficit model of the brown economic model, and how it would not be favorable for Taiwan to compete in a global economy based on low-carbonization and industrial R&D, then this would result in greater participation in energy policies (for the individual), and the adoption of bottom-up energy production (citizen power plants), sustainable energy (smart green grids), green financial credit (based on the Equator Principles), investor social environmental responsibility (internalization of external costs), and industrial and household strategies (digital energy conservation and efficiency).


In conclusion, the research team has adopted basic research to take stock of the baseline of various aspects of Taiwan's climate and energy transition, in terms of the lock-in effects, innovation pathways, breakthrough demonstrations, and participatory governance, in an attempt to kick-start and accelerate the overall social transformation in Taiwan. Ultimately, we hope to adopt a theoretical and practical perspective to develop a new sustainable social contract, and transcend the stagnated transformation in East Asia's current high-carbon society.


Last but not the least, we are deeply grateful for the sponsorship given by the Fubon Financial Holdings and the Fubon Cultural & Educational Foundation, and in particular to Ms. Irene Chen (陳藹玲) and Director Daniel Tsai (蔡明忠) for their support, to this long-term and forward-looking research. Ms. Chen and Director Tsai would have deep attachments to the systemic risks and dilemmas that Taiwan is facing in its transformation over the past two decades and the fragility of it, and therefore hope to create a new future vision for Taiwan's future. It is also because of this that from having only three or four researchers, the RSPRC has since expanded to our current team of nearly 30 researchers. Our troop of researchers has therefore adopted the knowledge-action approach to develop and advance the long-term research and vision that Taiwan has been in deficit in, and we have put our sights on not only developing a vision for Taiwan in East Asia, but to also broaden our horizon to expand the knowledge of Taiwan as part of the backdrop of Asia and the world.


Kuei-Tien Chou
Lead Principal Investigator
Risk Society and Policy Research Center
National Taiwan University
July 30th, 2019