Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Taiwan Environmental Export Market Plan

Chapter 7 - Air Pollution Control Market

Taiwan's air pollution problems are similar to those faced elsewhere in the world. Urban centers are grappling with extremely high levels of air pollution, primarily because of vehicle emissions. Vehicle density in Taipei, Taichung, and Kaohsiung exceeds 5,000 vehicles per square kilometer. High levels of sulfur dioxide emissions from industrial and power generation facilities have also led to serious problems with acid rain. The pH levels for rain around the island tend to average below 5.0 according to statistics by the Taiwan Environmental Protection Administration (TEPA). Recent studies from Japan have also raised public concern regarding dioxin emissions from incinerators.

Existing Regulations and Enforcement Trends
For regulatory purposes, the Air Pollution Control Act passed in 1992 divides air pollution sources into mobile and stationary sources.

TEPA has issued a set of phased standards for mobile sources, breaking vehicles down into cars, scooters, and diesel vehicles for pollution management. To control vehicle-related emissions, TEPA has developed a three-pronged strategy of increasingly rigorous inspection of old vehicles, strict emissions standards for new vehicles, and development of clean fuels.

Stationary sources are controlled by a permitting system similar to the water permitting system. According to TEPA data, the system will eventually track 17,999 facilities (see table 20). Upwards of 70 percent of the applications have been processed, and TEPA expects to complete the approval process within one year. Permitted factories are required to periodically submit evidence of compliance with regulatory standards to local governments. Evidence must come in the form of results from air testing or calculations based on production process and raw material inputs. Initially, enforcement efforts focused primarily on sulfur compounds (SOx) and nitrogen compounds (NOX); however, TEPA is now showing increasing interest in controlling volatile organic compound (VOC) emissions.

In addition to controlling the concentration of emissions, TEPA hopes to implement a total quantity management system to control the total quantity of pollutants in a given region. TEPA has already divided Taiwan into seven zones and is working on calculating maximum allowable pollution loads for each. Eventually, TEPA may move to a system of tradable pollution allotments much like that of the U.S. Environmental Protection Agency. The TEPA plan still has a number of logistical problems, but will most likely be enacted in some form.

TEPA has also begun to aggressively encourage reductions in stationary air emissions below the levels required by standards through a system of air pollution fees. Over $150 million has been collected through the air pollution fee program. The money is designated specifically for funding air pollution control efforts. These efforts have focused primarily on NOx and SOx, but are now expanding to include VOC emissions.

Table 20 - Permitting List by Industry

Industry	Number of Factories
Chemical Material Manufacturing	431
Chemical Product Manufacturing	730
Wooden/Bamboo Product Manufacturing	1,660
Gas Station	1,173
Tanning and Leather Product	154
Oil and Copper-made Product	6
Printing	1,492
Metal Basic	1,141
Metal Product Manufacturing	1,365
Nonmetal Mining Product Manufacturing	1,488
Food Manufacturing	1,007
Textile, Printing & Dyeing	949
Pulp, Paper	394
Plastic Product Manufacturing	1,049
Farm, Forest, Fish	76
Power Supply	11
Rubber Product Manufacturing	239
Machinery Equipment Manufacturing & Assembly	866
Miscellaneous Industry Product Manufacturing	93
Others	3,675
Total	17,999

Source: Air Control Division, TEPA

Upcoming Changes

Mobile Sources
Diesel and gasoline vehicle emissions standards will be tightened in 1999. Standards for scooter emissions were tightened in 1998, and beginning in the year 2000, 2 percent of all scooters sold must be electric. In addition, Administrator Tsai of TEPA also announced plans to push for the banning of two-stroke motorcycles by the year 2000.

Stationary Sources
The first stage of the air pollution fee program was implemented in 1995. It levied fees against fuels based on their sulfur content. TEPA is now preparing to initiate the second stage, in which fees will be collected from stationary sources, in 1999. Proposed fee levels are NT$10 ($.35) per kilogram of SOx, and NT$12 ($.42) per kilogram of NOx. TEPA estimates that fees collected will amount to roughly $164 million per year.

Money collected will be used to support air pollution control programs. Current plans are for 60 percent of the money to be allocated directly to local governments to fund air pollution control programs. Of the remainder, 30 percent will go to supplement funds for counties and cities downwind of heavy pollution sources. The remaining 10 percent will be used for administrative costs.

Another purpose of the fees, in addition to funding air pollution control programs, is to provide an economic incentive for industries to invest in pollution reduction. To sweeten the deal, TEPA is offering up to a 75 percent fee reduction to firms that install pollution control equipment or improve their processes.

Air Control Areas

The Kaohsiung-Pingtung area has been selected as the region for TEPA's pilot total quantity control plan. Over the last two years, the Pollutants Standard Index has exceeded 100 on 17.5 percent of the days measured, compared with the national average of 6 percent.

TEPA has divided Taiwan into seven air pollution zones. Each zone is further broken down into especially sensitive areas, attainment areas, and nonattainment areas, based on air quality testing results. As part of the move toward total quantity management, TEPA is encouraging local governments to provide improvement plans for reducing total emissions in nonattainment zones.

Local governments have reacted by placing limitations on factory expansion and construction of new facilities. For example, the Kaohsiung County government is requiring factories in Lin Yuan Industrial Park to supply air control improvement plans to demonstrate that expansions will not increase their overall emissions quantity. In addition, the county government is also pushing factories in the park to adopt ISO (International Standards Organization) 14000 systems.

Market for Mobile Sources

Testing Equipment Market
Taiwan has the highest vehicle density in the world, and the number of new vehicles is growing at a fantastic rate (see table 21). According to TEPA's data, roughly 10 percent of the motor vehicles in Taiwan are responsible for 50 percent of the air pollution. Many of Taiwan's older polluting vehicles are still on the road despite new emissions laws. For example, all new cars manufactured since 1990 and all new scooters manufactured since 1991 are required to have catalytic converters. However, one-fourth of the cars and one-third of the scooters on the streets were manufactured before the requirements came into effect.

Not surprisingly, emissions inspections play a key role in TEPA's efforts to control vehicle emissions. Shortly after implementation of the Air Pollution Control Act, TEPA helped fund the purchase of roughly 4,000 mobile testing units for gasoline vehicles. These units are from the Japanese manufacturer Horiba.

While few opportunities now exist in supplying portable testing equipment for gasoline vehicles, upcoming 1999 standards for diesel vehicles are creating a need for improved testing facilities. TEPA would like every county to install at least one diesel testing facility. To date, only five counties have established facilities, and two others have purchased equipment but have not yet established facilities. The biggest obstacle has been obtaining sites for the stations. Taiwan presently uses dynochasis systems to test diesel fuel emissions.

Table 21 - Registered Vehicle Volume and Density

Year	Number of Motor Vehicles	Number of Motorcycles	Motor Vehicle	Motorcycle Density
1987	7,539,269	5,805,373	209.42	161.26
1988	8,426,863	6,337,596	234.08	176.04
1989	9,284,463	6,760,077	257.90	187.78
1990	10,051,566	7,145,626	279.21	198.49
1991	10,611,037	7,409,175	294.75	205.81
1992	11,268,253	7,649,311	313.01	212.48
1993	11,856,526	7,867,394	329.35	218.54
1994	12,377,083	8,034,509	343.81	223.18
1995	13,201,471	8,517,024	366.71	236.58
1996	14,273,465	9,283,914	396.48	257.89
Jan./Jul. 1997	14,900,673	9,732,700	413.91	270.35

Source: Report of Environmental Protection Statistics Taiwan Area, Republic of China, September 1997

Additional opportunities exist in remote vehicle emissions testing equipment. Following a successful two-year pilot program, TEPA has decided to encourage establishment of remote testing stations around the island. Projects for remote emissions testing usually contract to consulting companies, who then purchase equipment to implement the projects. Interested testing equipment vendors should approach some of the local consulting firms active in the government contracting arena such as Cambridge Engineering, CTCI, and China Engineering.

Vehicle Upgrades
TEPA's increasing interest in controlling emissions from older vehicles has also created a market for retrofitted pollution control equipment on diesel trucks and buses. City governments are under increasing pressure from residents to reduce the black smoke emitted by city buses. Additional political pressure is being felt from Premier Vincent Siew, who has made controlling diesel emissions one of the key focus areas for TEPA under his cabinet.

TEPA has recently responded with a plan to subsidize private bus and trucking companies in retrofitting buses and trucks with catalytic converters, soot filters, and fuel additives, or in installing compressed natural gas (CNG) systems. The original plan was targeted for 300 buses, but has since been expanded.

To ensure quality, in 1997 TEPA had the Industrial Technology Research Institute (ITRI) perform evaluations of emissions control equipment offered by environmental technology companies. Seven companies supplied sample products to ITRI for testing.

Clean Fuels
The future wave of emissions controls is likely to come from clean or alternative-fuel vehicles. All new cars manufactured since 1990 run on unleaded gasoline, and the use of leaded gas will be phased out completely in the year 2000. TEPA is also looking at ways of limiting the amount of solvents used in gasoline. However, the sheer volume of cars on the road means that improvements on conventional technologies will have limited impact.

As a result, TEPA has been aggressively working to bring advanced alternative-fuel technology to Taiwan by helping fund the purchase of sample vehicles (see table 22). At the moment, TEPA sees CNG and liquid petroleum gas (LPG) as the most viable alternative-fuel technologies, mostly because they are the only technologies ready for mass commercialization. However, TEPA would also like to pursue other technology alternatives such as hydrogen fuels cells as they become ready for the market.

Table 22 - Alternative-Fuel Pilot Projects

Technology	Implementing Entity
CNG	Taipei City
Hybrid Diesel/Electric	TEPA
Electric Scooter Technology	Local Manufacturers

TEPA currently has two pilot programs under way to purchase alternative-fuel buses. In early 1998, the Taipei City government was in the process of purchasing six CNG buses for a pilot project. If the project is successful, Taipei City hopes to purchase a second wave of 50 buses and eventually aims to replace the entire fleet of more than 2,000 vehicles. However, there are no existing regulatory standards for CNG buses, and the second wave of purchases will be delayed until relevant government agencies draft regulations.

In addition to the CNG program, TEPA is also funding the purchase of two hybrid diesel/electric and diesel/LPG buses. The buses will be purchased by local consulting companies for the purpose of testing and promoting the technology. If the program is successful, TEPA may fund additional purchases.

Electric scooters represent an additional potential market for alternative vehicle manufacturers. Starting in the year 2000, 2 percent of all scooters sold must be electric. Local manufacturers teamed with ITRI to develop a prototype electric scooter and are now in the final stages of preparing the vehicle for commercialization. A few models have already entered the market, but sales have been hampered by the limited range of the batteries.

Market for Stationary Sources

Overall Market Size
According to TEPA data, spending on air pollution control in the private sector has been remarkably steady from 1988 to 1995, averaging around $300 million dollars per year, peaking as high as $400 million in 1993. With implementation of the pollution tax in 1995, the amount of money available for public-sector spending on air pollution control has grown dramatically. After generating close to $250 million in 1995, the air pollution fee has consistently generated around $150 million per year to be dedicated to air pollution control programs. The use of the money has been somewhat controversial, as TEPA has chosen to devote as much as 17 percent of the budget to low-technology options such as tree planting.

Key Market Drivers
Upcoming air pollution fees will be the biggest market drivers for the near future. The ongoing implementation of the permitting system will also play a role in driving the market, but its impact will depend directly on the degree of enforcement. Both policies will push companies to invest in both monitoring and pollution control equipment.

Community pressures also play a role in driving companies to invest in air pollution reduction. Local residents have become highly sensitive to any potential air emissions by neighboring factories and have a relatively low understanding of air pollution issues. As a result, companies near communities often undertake substantial efforts to control any possible emissions, including relatively harmless ones such as vapors or odors.

Fees
Unlike the water discharge fees, which are widely seen as too low to stimulate new investment, the proposed air pollution fees have already created ripples in industry circles. For the short term, the fees will be based on SOx and NOx emissions (see tables 23 and 24). Over the longer term, TEPA would like to include VOC emissions as well.

Table 23 - SOx Emissions by Industry		Table 24 - NOx Emissions by Industry
Industry	SOx (tons/yr)	Industry	NOx (tons/yr)
Power	183,319	Power	1,833,190
Chemical Materials	20,138	Textiles	153,366
Steel	15,337	Chemical Materials	144,154
Cement	14,415	Steel	93,988
Paper	9,484	Paper	79,824
Food Processing	7,852	Glass Making	57,180
Totals	288,450	Totals	2,515,949

The fees have primarily stirred interest in NOx reduction technologies. However, companies have expressed considerable concern over the cost-effectiveness of current NOx reduction technologies. TEPA has tried to offer economic incentives to invest by offering fee reductions to users of natural gas or to companies that install low NOx combustors.

In terms of SOx reduction, many companies have already invested in fluidizied gas desulfuization (FGD) equipment. According to TEPA figures, the average range of SOx removal increased from 60 - 90 percent in 1995 to 90 - 99 percent in 1996.

Future plans to charge fees for VOC emissions have caused some factories to begin investing in testing and control equipment to beat implementation. To encourage proactive investment, TEPA is considering allowing companies to count early investments in equipment against future fees.

Permitting Systems
The permitting system has brought large numbers of factories under closer scrutiny by TEPA. Companies have been forced to upgrade their pollution control efforts and invest in monitoring equipment, and TEPA has begun requiring select industries and facilities to invest in continuous emissions monitoring systems (CEMS). Over the long term, TEPA hopes to establish computer systems to directly link CEMS to local enforcement agencies. To date, only 66 factories have been required to invest in CEMS by law, but TEPA will continue to gradually expand the number.

Tightening Standards
Recently, TEPA has also begun to tighten controls on VOC emissions by promulgating standards for both the petro-chemicals and polyurethane (PU) synthetic leather industry. The PU synthetic leather industry alone accounts for 14 percent of all VOC emissions and 24 percent of stationary source emissions in Taiwan.

Key Industry Sectors
The best market opportunities will lie in industry sectors that are high emitters of NOx, SOx, or VOCs - primarily petrochemicals, power, steel, cement, electronics, and paper industries.

From the perspective of pollutants generated, the petrochemicals industry is one of the best potential markets. According to TEPA figures, petrochemicals ranks second in SOx production and third in NOx generation. Despite the industry's high rates of NOx and SOx generation, its most pressing problem is probably control of VOCs and odors caused by VOCs. TEPA recently tightened controls, and there is strong interest in control equipment, in particular catalyst incineration technologies. Some companies in the industry have also tried adopting active carbon absorption technologies.

Over the long term, the petrochemicals industry may also have to address hazardous air pollutants. TEPA has commissioned ITRI to screen 30 hazardous air pollutants to measure their toxicity, levels of usage in Taiwan, and related data. TEPA hopes to implement regulations targeting the pollutants with a particularly high usage rate. Petrochemicals would most likely be among the first industry sectors hit.

The pending pollution control fees have stirred considerable interest in NOx reduction technologies in industries such as cement, steel, and paper. The cement industry and some paper companies have been interested in reduction technologies for some time, but have delayed investments because of concerns regarding the cost-effectiveness of the technologies. Companies have been conducting economic analyses to determine the most cost-efficient balance of investment versus emissions fees.

The power, chemical products, steel, and cement industries represent the best remaining potential markets for SOx control equipment. Together, they account for over 70 percent of the SOx generated in Taiwan. Future opportunities most likely lie in the upcoming 10 independent power projects and in supplying equipment to cogeneration facilities located in factories. Most existing facilities in Taiwan have already invested in equipment over the last few years.

More limited opportunities may develop in supplying CEMS equipment to the steel and petrochemicals industries. TEPA has already ordered the power, steel, and cement industries to install CEMS equipment on certain facilities. TEPA is currently in the process of negotiating a second round of mandatory installations, but is moving forward slowly because of the high investment cost of installing CEMS equipment.

Other technologies in demand in a variety of industries include wet scrubbers and electrostatic precipitators.

Competition
The vehicle emissions control market is dominated almost completely by all international companies. The one exception is the electric scooter market, where local companies have collaborated with ITRI on research and development. Formosa Plastics founder Wang Yung Ching has plans to begin manufacturing electric cars and electric car batteries by the year 2000. Wang has already visited the United States to meet with General Motors regarding possible cooperative ventures.

The industrial market is currently dominated by imported equipment. Companies have tried to localize the manufacture of basic parts such as baghouses, filters, and other equipment to reduce costs, but in general these locally produced parts are perceived as being of lower quality. Larger companies concerned about enforcement have tended to choose overseas equipment, while local manufacturers have found their niche in producing FGD equipment for smaller facilities. Foreign companies have cornered the market in the area of NOx and VOC control equipment. However, foreign imports of SOx control equipment must compete with cheaper local equipment. Market shares broken down by nationality are not available.

Best Prospects for U.S. Firms
For the mobile market, the best opportunities lie in either supplying alternative-fuels technologies or emissions control equipment that can be retrofitted onto diesel buses and trucks. Once Taipei gets its program under way, other municipalities will begin showing interest in developing similar programs. TEPA will continue to fund pilot programs for some time to come, making it easier for local governments to deal with budgeting for projects. Likewise, with pressure coming from Premier Siew, bus companies and local Environmental Protection Bureaus will likely show considerable interest in cost-efficient retrofitting technologies.

In the industrial arena, the best market opportunities lie in supplying NOx reduction and VOC control technologies. Cement and steel factories will most likely be the strongest customers for NOx equipment. Companies with cost-efficient technologies that can remove a high percentage of NOx should be able to find a number of customers. However, the cost of the equipment will have to compete against the cost of emissions fees. If purchasing equipment is less economical than paying emissions fees, companies will be unlikely to invest.

Best sales prospects for VOC control technologies will be with large companies in key sectors, including petrochemicals, synthetic leathers, steel, and industries that use large amounts of solvents such as paints and electronics. However, U.S. firms interested in entering into the VOC market should be prepared for a relatively long lead time on sales. Smaller companies tend to avoid investing in expensive VOC systems and prefer to use simpler technologies such as activated carbon. Dry cleaners also represent a potential market niche for companies with highly cost-efficient compact systems. The key will lie in the degree to which local agencies enforce regulations.

Marketing opportunities for SOx control equipment will be limited as many companies have already invested heavily in this area, and the local competition is quite stiff. Best prospects will lie in selling equipment to the independent power projects or cogeneration facilities.

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