Open access peer-reviewed chapter

# Electric Vehicle Promotion Policy in Taiwan

By Li-Min Cheng

Submitted: October 8th 2017Reviewed: January 15th 2018Published: February 15th 2018

DOI: 10.5772/intechopen.74019

## Abstract

The developmental patterns of automotive industries in developing countries differ from those in developed countries. Nations should actively and effectively develop an electric vehicle (EV) industry to reduce carbon dioxide emissions and energy consumption, especially during this period of increasing fuel prices and emphasis on saving energy and reducing carbon emissions. From interdisciplinary perspectives, this study analyzed the promotion methods of the EV industry in Taiwan. In addition, we suggest that the Taiwan government should use its advantages in Central Taiwan to assemble mature suppliers of precision machinery in this area to facilitate long-term research and development for the EV industry. This study provides an empirical experience for emerging cities in developing countries regarding the development of the EV industry and is an appropriate reference for the creation of EV industry clusters.

### Keywords

• EV
• electric vehicle
• EV industry
• carbon-reducing policy
• green transportation

## 1. Introduction

Because China’s economy and other developing countries are experiencing rapid development, the automotive industry has become one of the most quickly developing industries and is a major source of air pollution. To improve air quality, numerous governments of developed countries have established relevant laws and policies [1] to decrease the number of active old vehicles and actively develop the low-pollution or low-emission automotive industry through subsidization. McElroy [2] argued that subsidies are a constructive option for the development of relevant industries and for reducing our dependence on traditional energy sources.

Traditional studies regarding gaseous pollutants from automobile emissions have focused on microcosmic or technical discussions, such as the improvement of internal combustion engine efficiency (e.g., see [3]). Macroscopic perspectives on industrial development are scant, as are comprehensive studies on the EV industry. However, because they are constrained by financial and market factors, developing countries should identify a novel pattern for developing automotive industries that differs from those of developed countries and should actively and efficiently develop EV industries to reduce carbon dioxide emissions and energy consumption. These are particularly pressing issues because of increasing fuel prices and the current emphasis on saving energy and reducing carbon emissions.

Taiwan government eagerly promotes the low-carbon policy in recent years. Since being selected by the Environmental Protection Administration (Executive Yuan) of Taiwan as a low-carbon model city, the Taichung city government issued the “Regulations of task force for the promotion of low-carbon city, Taichung city government” on October 24, 2011. This study uses that experience to explain the EV promotion policy in Taiwan.

To foster and initiate low-carbon industries, the city government founded the “economic development and agriculture team” within the promotion task force to evaluate related carbon-reducing policies and plans for the development of Taichung industries. The results of these measures led to Taichung’s emergence as the best city in Taiwan. Regarding the experience pattern or model of Taichung’s development, this study examined Taichung’s efforts in assisting the EV industry and in transforming local industries into low-carbon industries from interdisciplinary perspectives. In addition, this study also evaluated and analyzed the feasibility of future plans. The developmental patterns that we examined can be used as a reference for industrial planning by similar cities in developing countries and can contribute to creating a low-carbon and green industry environment.

## 2. Literature review

Regarding the policies adopted by governments for industrial development, Rothwell and Zegveld [4] suggested that innovation in emerging technologies and industries can facilitate national economic growth. From the perspective of industry, policies are a practical means for governments to become involved in the technological development system. Governmental innovation policies should include technological and industrial policies, and, according to their influence or effects on technological activities, policies are categorized as bellow:

• Supply policies: manpower, finance, public services, and technical support are the determinants of a government’s direct involvement in technology supply.

• Demand policies: governments establish market-centered policies that provide demands for technology and, thereby, affect technology development, such as purchases and contracts regarding technological products by central or local governments.

• Environmental policies: governments draw up related laws, including industry districts or parks, taxes, and patents, that regulate the economy and indirectly affect the technology development environment. To achieve their various goals, governments should adopt different methods and means to execute their policies.

Therefore, governments should implement the establishment of EV industry clusters using the above policy facets. Porter [5] provides the following definition of the “clustering effect”: If the upstream and downstream of a specific industry tend to correlate in terms of regions, they will progressively evolve into a structure of economic benefit that elevates mutual efficiency and professionalism. Consequently, a cluster of enterprises dramatically enhances the overall competiveness of industries through self-development and flexible adjustment using internal forces. Kotval and Mullin [6] indicated that clusters have become planning behaviors conducted and adopted by nations, governments, and local authorities. Many nations include industry clusters as a national policy to enhance their international competitiveness. For example, the U.K. promotes the information and technology industry in the Thames Valley, develops engineering-related clusters in the Northeast, promotes aviation industry clusters in Bristol, and develops biochemical technology near Cambridge [7]. In addition, numerous other areas have had similar success in the establishment of clusters [8, 9], such as the most acclaimed example of a successful cluster: Silicon Valley in California.

Furthermore, in terms of law and technology law, legislation regarding energy laws and regulations has gained increasing attention from developed countries. Specifically, during the energy crisis in the 1970s, governments in developed countries exercised peak control of energy-based commercial activities [10]. Elliott [11] cited the UK as an example, which amended its Building Regulations in 2004 because of carbon trading concepts. Bührke [12] approved of the German federal government’s action of reducing 40% of Germany’s carbon dioxide emissions by enacting the Renewable Energy Sources Act (EEG). In 1992, the United States passed the Energy Policy Act (EP Act 92), which has played a critical role in the restructuring of the power and electricity industry. The act was amended in 2005 (EP Act 2005) to reinforce the influence of the Federal Energy Regulatory Commission (FERC) in the power and electricity industry. The American Recovery and Reinvestment Act (ARRA) of 2009 perpetuated the strength of the federal government in energy and power policies and regulations. Therefore, powerful interventions from the government and legislative support are necessary for energy and power policies and regulations [10].

Preparations for developing EVs, such as regulatory administration that can limit traditional vehicles, or supply administration that rewards and subsidizes the EV industry, cannot be ignored. Relevant departments must conduct a regulatory impact analysis (RIA) [13, 14, 15] to judiciously plan the comprehensiveness of legislation for regulatory and supply administration. Similar to business impact analysis (BIA), RIA requires that administrative sections or agencies clearly specify regulative backgrounds (e.g., the overall economic environment and market structure of industries), controversies regarding acts and laws caused by social demands and conflicts relevant to existing laws, expected efficacy or function of acts, and the relationships among issues during the legislative operations process. These sections and agencies should also propose and draft plausible measures (including concrete regulative contents for all possible legal and non-legal alternatives, and clarification of their necessity) and analyze and evaluate the related efficiency and costs influenced by people, enterprises, and governments for the implementation of these measures, which provides a reference standard for governmental legislation. Staroňová et al. [16] proposed that the quality of legislative drafts could be enhanced using RIA, and Hertin et al. [17] maintained that RIA ensures appropriate policy deliberations and provides for effective problem-solving within policy design.

In addition, because the regulatory administration that limits traditional vehicles is a violation of people’s freedom and rights, according to Articles 102 and 164 of the Administrative Procedure Act, Taiwan’s government is responsible for holding hearings in which public opinions and feedback are consulted. Noland [18] argued that proper assessment procedures are a means to keep the rhetoric surrounding decision-making honest, both by providing the best information and analysis to the public and by establishing a framework for examining this information.

Based on evaluation information regarding industrial environments and external markets, this study provides a guide for market strategy positioning and an analysis of industrial innovation requirements and industrial portfolios. Furthermore, we provide advices regarding the developmental strategy of the EV industry in Taichung, Taiwan, and these suggestions can be expanded as reference standards for industrial development in similar cities in developing countries.

## 3. The practical EV experience in Taiwan

### 3.1. The current status and operations of EV in Taichung, Taiwan

Being the second large city in Taiwan, Taichung city government takes lots of measures to promote innovations. In recent years, numerous innovations and advancements, such as the development of broadband infrastructure and the construction of an intelligent city, were implemented by the Taichung city government. As a first-time applicant, Taichung was named one of the top seven intelligent cities in the World in 2012 by the Intelligent Community Forum (ICF). Furthermore, Taichung city was nominated Smarter City in “Smarter Cities Challenge” plan by IBM in 2015, the only city in Taiwan. The Taichung city government is enthusiastically constructing a “carbon free, trouble free” world-class city, and establishes low-carbon city promotion task force to implement the related policies, especially the EV policy.

The most notable measure on the part of the Taichung city government was the distribution of 64 intelligent EVs to government departments for official use on February 7, 2012. The government also created 64 charging stations, demonstrating Taichung’s determination to create a leading low-carbon model city in Taiwan. Furthermore, to promote Taichung as an EV model city, the mayor proclaimed an exemption for vehicle license taxes, fuel taxes, parking fees, and charging fees for EVs. One week later, it was announced that free shuttle EVs would be available to citizens and officials for use between three major civic centers in Taichung.

#### 4.2.2. Industries

Following decades of development and transformation, the precision machinery industry has evolved into an essential target for development in Central Taiwan, and the Taichung Precision Machinery Innovation Technology Park is qualified to become a cluster for the EV industry. There are approximately more than 1000 precision machinery manufacturers and tens of thousands of suppliers that comprise an industry population greater than 470,000, accounting for 18% of the employed population, in the central region. The gross output or production value of the precision machinery industry will reach 905.8 billion dollars in 2012 and is an emerging trillion-dollar industry, according to data provided by the Industrial Economics and Knowledge Center of the Industrial Technology Research Institute. Upstream, mid-stream, and downstream industries concentrate in Central Taiwan and the presence of neighboring schools and research institutions encourages the enhancement of research and development for technologies and the frequency of employee and personnel exchange, creating enhanced prospects for industry. The Taichung city government decided to make the Taichung Precision Machinery Innovation Technology Park an intelligent industry cluster (i-Park) after Taichung was named one of the top seven intelligent cities in the beginning of 2012. An intelligent industry service platform for Taichung precision machinery was planned for establishment and will provide companies and the public with a convenient information exchange platform for the promotion of applications such as intelligent energy saving. Based on the above analysis, our suggestions regarding industries are as follows.

• Advanced technologies imports and well-established environmental infrastructure:

The technology in the overall supply chains requires enhancement by providing favorable investment environments to attract investments from foreign hi-tech vendors, and by cultivating local enterprises by strengthening technology transfers through joint ventures. In addition, environmental infrastructure should be strengthened, including the wide-spread establishment of smart meters with bi-directional communication functions, to effectively restrict user loads. Furthermore, no negligence can occur if a smart grid is constructed that incorporates vehicle design, power supply, and electricity grid systems with overall planning. Kim et al. [26] argued that planning and investment for electricity distribution grids and infrastructure should begin as soon as possible. In addition, a well-planned intelligent energy management system (IEMS) is capable of ushering industries into mature and comprehensive stages, increasing opportunities for industry growth.

• Assembling industry clusters and providing rewards and incentives when appropriate:

Based on the aforementioned findings, the Taichung city government should construct an exchange platform for the EV industry and provide necessary technologies and up-to-date information to empower companies. It should also collect and post energy-related knowledge and disseminate information such as relevant websites. Furthermore, for the formation and development of the EV industry, the government should establish industry districts or park and rewards and conveniences such as free transportation and tax subsidies.

#### 4.2.3. Laws and regulations

The RIA indicates that, for the Taichung city government to establish suitable policies and conduct administrative matters in accordance with the law, it should request that its subordinate organizations conduct evaluations on adaptation statements and legislation. These evaluations refer to lists in which affected areas, such as existing plans, activities, traffic or transportation, industrial environments, and land use, are organized based on analyses of various factors, including societal, economic, and industrial environments, from the perspectives of regulatory administration and supply administration. The regulatory administration for restricting traditional vehicles (e.g., restriction on carbon emissions for vehicles of a specific age, fees or taxes on vehicles older than a specific age) is to be regulated by self-government ordinances because, according to Article 28, Paragraph 2 of the Taiwan Local Government Act, “issues that create, deprive, or restrict the rights and duties of residents of local self-governing bodies” should be restricted by self-government ordinances. Comparatively, supply administration regarding rewards or subsidies for the EV industry (e.g., the amount of subsidies, length of subsidies, and benefits or discounts given to EV consumers) should be based on interpretations No. 614 and No. 443 of the Justices of the Constitutional Court for the Judicial Yuan. Supply administration includes less restrictive legislation and does not require regulation by self-government ordinances.

Letcher [27] argued that governments, playing a critical role in traffic planning, should endeavor to solve issues of supply and operation such as externality and fairness. The State of California, for example, has limited the minimum tolerance of the environmental impacts of vehicles through legislation. Furthermore, the California Air Resources Board (CARB) has organized the California zero emissions vehicle (ZEV) program, which, through strict policies and legislation, has a goal of zero carbon emissions and seeks to reduce the level of greenhouse gas emissions to their levels before 1990 by 2050 [28].

To resolve the financial and legislative difficulties encountered by local governments, this study further suggests that the central government issue regulations and rewards through legislation. The Executive Yuan should establish and integrate regulations that can be followed by the entire country. To match the speed of technology’s rapid development, related legislation should be more efficient in accommodating these changes than in other fields. Summarizing the above, this study’s suggestions regarding laws and regulations are as follows.

• Establishment of an effective environment for policies and laws:

For newly proposed green industries to be successful, an amenable environment for investment and industry is essential. After communicating with relevant companies to understand their demands, governments should create enhanced environments for assistance and subsidies, increase the rewards for industry transformation, and actively establish relevant laws and regulations to legalize and standardize administrative work.

• Attention to the legality of the adoption of international and central government standards:

Central regulations and international treaties and conventions should always be observed in addition to the mentioned legislative demands for the supply administration regarding rewards and subsidies. Article 30, Paragraphs 1 and 2 of the Taiwan Local Government Act, in particular, should be complied with: “Self-government ordinances shall become invalid if contradictory to the Constitution, laws, regulations promulgated in accordance with law, or self-government ordinances of the superior self-governing bodies”; “Self-government regulations shall become invalid if contradictory to the Constitution, laws, regulations promulgated in accordance with law, self-government ordinances of the superior self-governing bodies, or the self-government ordinance of the self-governing body concerned.” Overall planning for administration should comply with Articles 163 and 164 of the Administrative Procedure Act in accordance with the principle of “law-based administration.”

## 5. Conclusion

In recent years, Taiwan has suffered from air pollution, especially in Central Taiwan. One of the major sources of pollution is the vehicle, causing a lot of PM2.5 pollutant. The monitoring results of the daily average PM2.5 concentration for the Taichung area frequently reaches 80 μg/m3 in 2017 winter, according to the data of the Environmental Protection Administration of Taiwan. The WHO standard for the daily average has been established as less than 25 μg/m3. This type of highly concentrated air pollution has caused damage to the environment and people. Consequently, the Taiwan government is now attempting to reduce the air pollution concentrations in the Taichung area using various methods, and energy consumption is expected to decrease because of the inducement of tax reform incentives and environmental improvements. The development of the utilization of, and subsidies for, electric motorcycles in Taiwan has matured, and Taichung is the most active city in Taiwan striving for EV development. In November 2017, Taiwan’s Transport Minister announced that it will replace gasoline vehicles with electric vehicles by 2040 [29]. In the future, Taichung should appropriately employ its advantageous position in Central Taiwan and assemble mature precision machinery suppliers in the area to plan the construction of energy-saving facilities and to cultivate the EV industry. By doing so, Taichung will benefit its citizens and improve Central Taiwan’s overall development. After development, the theory of paradigm shifts must be employed, allowing the empirical experience of Taichung to serve as a reference for the development of EV industries and the establishment of EV clusters in emerging cities in developing countries with similar environments and conditions.

### 5.1. Research limitations and suggestions for future research

Due to relevant limitations, this study was only able to perform analyses through the perspectives of law, public administration, and management, neglecting analytical models in other disciplines and fields. We believe that interdisciplinary research methods can overcome the limitations of traditional research methods that are based on a single academic discipline. However, this research approach lacks quantitative analyses and cannot provide thorough statistics regarding EV development in Taichung.

Furthermore, as an emerging industry, the EV industry displays insufficiency in its independent developmental potential and requires improvement and expansion in its transitional stage and product positioning (e.g., current hybrid vehicles). Although there is an increasing amount of relevant essays being published, studies on zero-emission EVs, particularly on EVs in Taiwan, are scant. This study succeeded in employing the mentioned research methods and conducting interdisciplinary research, but failed to make parallel comparisons between the background factors of developing cities and countries of a similar scale. Various differences, such as those between local and unique customs and traditions or laws and regulations, can be integrated in future related research.

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Li-Min Cheng (February 15th 2018). Electric Vehicle Promotion Policy in Taiwan, Energy Management for Sustainable Development, Soner Gokten and Guray Kucukkocaoglu, IntechOpen, DOI: 10.5772/intechopen.74019. Available from:

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