I. Introduction: Global carbon policies are becoming stricter, and business operations are facing challenges

 As global net-zero goals advance, 2025 will become a key node in the development of climate policies. Major economies such as the European Union, North America, and Asia have strengthened regulations related to carbon emissions, including policies such as carbon tax, carbon emission trading system (ETS), and carbon tariff (CBAM), which have had a profound impact on global supply chains and trade environments. In the face of increasingly stringent carbon emission regulations, companies will need to readjust their operational strategies to cope with the burden of trade carbon taxes and supply chain crowding out. 

The uncertainty of carbon emission policies also affects companies' investment decisions and long-term financial planning. The fluctuation of carbon prices will further increase the variables of enterprises in future market competition. Therefore, companies need to ensure long-term stable market competitiveness through precise carbon risk management and low-carbon transformation strategies. 

II . The impact of global carbon policies on business operations in 2025 

1. The EU Carbon Border Adjustment Mechanism (CBAM) and supply chain crowding out effects 

The EU began piloting CBAM in 2023 and plans to formally impose carbon tariffs on high-carbon emitting products (such as steel, cement, aluminum, fertilizers, electricity, and hydrogen) in 2026. 2025 will be a period of adaptation for businesses, with importers required to submit complete carbon emission reports and begin preparing for future carbon tax burdens. The Supply Chain Displacement Effect can affect businesses in the following ways : 

• High-carbon emission companies are gradually excluded: carbon-intensive industries such as steel, cement, petrochemicals, textiles, etc., face higher import tariffs and supply chain pressures due to their high carbon emission characteristics. In order to reduce carbon emission costs, EU buyers will be more inclined to source low-carbon emission products or suppliers who have already implemented carbon neutrality strategies, leading to the gradual marginalization of high-carbon emission companies in the global supply chain. For Taiwanese companies, if they cannot reduce their own carbon emissions, they may lose the European market. 

• Surge in demand for low-carbon products: With the increase in carbon tariffs, the demand for low-carbon footprint products has increased significantly. If companies can introduce low-carbon manufacturing technologies, such as using renewable energy, improving production processes, and investing in carbon capture and storage (CCS), they can gain an advantage in market competition. This is not only a challenge at the operational level of the enterprise, but also the key to survival and competitiveness. 

• Taiwanese companies need to strengthen carbon disclosure: In the future, trading partners will require more transparent carbon emission reporting, such as meeting IFRS S2 and TCFD climate disclosure standards. 

• Supply Chain Adjustments and Regional Production Shifts: Some companies may move some production to countries with looser carbon policies, such as Southeast Asia or South America, to avoid the cost of carbon tariffs. However, this strategy may face challenges in the local infrastructure and regulatory environment, necessitating careful evaluation of the costs and risks of relocating production sites. 

2. Expansion of ETS and Increase in Carbon Credit Costs Carbon Trading Markets (ETS) in various regions around the world are expanding at an accelerated pace, affecting corporate operating costs: 

• EU ETS Phase IV (2024-2030): Reducing free allowances and increasing carbon price pressure, carbon credit prices may continue to rise in 2025, affecting manufacturing competitiveness. 

• China's national carbon market: It may expand to steel, petrochemical and other industries in 2025, affecting Taiwanese investment layout in China. 

• U.S. and California Independent Carbon Markets: While climate policy is weakened at the federal level, the California Cap-and-Trade Program will continue to impact energy-intensive businesses. 

• Emerging ETS markets in Asia: Japan, South Korea, and Southeast Asian countries are planning more complete carbon trading mechanisms, which may lead to higher regional carbon costs in 2025. 

• Carbon emission competition among enterprises: With the increasing popularity of the global ETS mechanism, high-carbon emitting companies will face greater competitive pressure, and low-carbon technologies and emission reduction plans will become the key to corporate competitiveness. 

3. Carbon tax and liability preparation in corporate financial statements

 In 2025, many countries will raise carbon tax standards, affecting the financial structure and tax preparation strategies of companies. 

• Carbon Tax Burden Increases: 

(1)Canada:The carbon tax standard will be raised to $170 per tonne.

(2) Singapore: Plans to increase carbon tax to S$50-80 per tonne by 2026. 

(3)Taiwan: The collection of carbon fees will be launched in 2025, which may affect the operating costs of the manufacturing and export industries. 

• Companies need to include carbon liabilities: 

(1)Companies need to set aside carbon fees and carbon tax costs in their financial statements to cope with future financial risks. 

(2)Some high-carbon industries will need to set up "Environmental Provisions" to ensure that carbon emission costs do not affect operating cash flow. 

(3)International accounting reporting standards such as IFRS S2 will mandate the disclosure of climate risks and carbon emission costs, affecting corporate capital allocation and financing capabilities. 

III . Corporate response strategies: Reduce risks and strengthen competitiveness 

(1)Establish an internal carbon pricing (ICP) mechanism 

• to assess future carbon costs through internal carbon pricing and improve decision-making efficiency.

•  Include carbon trading and carbon tax expenditures in advance to reduce future policy risks. 

(2)Supply chain decarbonization and ESG transparency 

• Invest in low-carbon technologies, improve energy efficiency, and reduce carbon emissions. 

• Ensure that the supply chain complies with IFRS S2 and TCFD climate disclosure standards.

(3) Participate in international carbon markets and green financing 

• explore carbon credit trading opportunities to offset the carbon emission burden of enterprises.

•  Apply for green bonds and sustainable financial instruments to receive capital market support. 

(4)Strengthen compliance management and financial planning 

• Allocate carbon tax liabilities in advance to ensure that companies are not affected by unexpected policies. 

• Conduct tax planning to reduce the impact of carbon taxes and fees on the company's net profit. 

IV . Conclusion: How can companies maintain their competitive advantage in 2025? 

2025 will be a critical year for global carbon policy changes, with carbon tariffs, ETS expansion, and carbon tax increases directly affecting the financial burden and profitability of companies. In the face of supply chain crowding out effects and trade carbon tax pressures, companies should actively implement carbon management strategies, including internal carbon pricing, investment in carbon emission reduction technologies, supply chain transparency, and financial risk preparation.

 Bu-zhen Low Carbon Strategy Co., Ltd. will continue to assist companies in addressing carbon policy challenges, providing carbon management consulting, carbon market trading strategies, and financial risk assessments to ensure that companies maintain market competitiveness in the process of carbon neutrality and meet the requirements of global investors and regulators. Through effective carbon management strategies, companies will be able to adapt to emerging climate policies and ensure competitiveness in the international market.