Taipei: Taiwan should create a market for low-carbon fuels through mandates and time-limited incentives to encourage companies to invest in domestic production, an economic researcher said Friday. Chen Jong-shun, an associate research fellow at the Green Economy Center of the Chung-Hua Institution for Economic Research (CIER), highlighted the challenges and potential strategies for developing such a market during the 2026 Taiwan New Energy Development Forum, organized by Taiwan's state-run oil company CPC Corp.

According to Focus Taiwan, Chen emphasized that the fundamental obstacle in building markets for low-carbon fuels was not a lack of feedstock, demand, or technology, but rather the absence of the market itself. Chen pointed out that sustainable aviation fuel (SAF), biodiesel, bioethanol/E10 for road vehicles, and low-carbon alternatives to marine fuel oil could serve as short-term solutions, while hydrogen-based synthetic fuels could be explored as a longer-term option.

Chen proposed that government intervention is necessary to establish a market, using economic incentives to allow the first company to enter, survive, and demonstrate profitability, thus encouraging others to follow. He referred to the economic concept of the "first penguin," suggesting that initial market entrants should receive subsidies with sunset clauses to encourage competition and prevent indefinite government spending.

During his presentation, Chen highlighted SAF as a prime example, noting that a commercially viable domestic plant would need an annual production capacity of 100,000 to 150,000 metric tons. On the demand side, Chen advocated for mandates requiring aviation fuel to contain 3 percent to 5 percent SAF to generate sufficient demand, making production economically viable. He also mentioned that technology companies, committed to reducing carbon emissions, could support SAF to mitigate Scope 3 emissions from business-related travel.

Energy Administration Director-General Wu Chih-wei, also present at the forum, discussed CPC Corp.'s role in Taiwan's energy transition, which includes expanding renewable energy, using natural gas as a bridge fuel, and improving energy conservation and storage. Wu emphasized that while CPC Corp. plays an integral role in the transition, Taiwan should not rely solely on a "national team" approach for every energy initiative but should leverage individual companies' comparative advantages.

Wu agreed that CPC Corp. needed to transform its operations and highlighted the company's capabilities in natural gas procurement and supply, as well as its expertise in geological exploration and chemical engineering, which could aid in developing geothermal energy, hydrogen, biofuels, and carbon storage. He concluded by stressing the importance of recognizing the unique strengths of individual companies in achieving Taiwan's energy goals.