Internal Carbon Pricing (ICP)

Objectives to implement a carbon price

Drive energy efficiency; embed climate issues into risk assessment and decision-making; enable cost–benefit analysis; identify low-carbon opportunities; and support the setting/achievement of climate policies and targets.

At group level, YFY uses ICP as a planning tool that translates the cost per ton of planned mitigation at each plant into an investment signal, influencing capital allocation and capex evaluations.

GHG Scopes covered

ICP conversion and evaluation explicitly cover Scope 1 and Scope 2 emissions.

Type of internal carbon price

Implicit price (abatement-cost basis): Chung Hwa Pulp used it as an internal planning/valuation signal.

Shadow price: YFY’s basis is the cost per tCO₂e reduced from planned measures—applied consistently as part of capex evaluation.

Application

ICP is an indicator for capex evaluation and influences investment decisions and capital allocation by converting Scope 1–2 reductions into financial benefits.

Applied to Capital expenditure, Operations, Procurement, Product & R&D, and Risk management; mandatory for some processes (specified: Environmental Capital Expenditure Evaluation).

In facing the global challenge of achieving net-zero carbon emissions, YFY is uniquely positioned with its long-standing commitment to practicing a circular economy.

GHG Emissions Trends

YFY has established a carbon sequestration industry chain, from forestry to paper production. Through photosynthesis, plants convert carbon dioxide into natural cellulose and starch, which are the primary raw materials for the paper industry. Paper products, as a result, contribute to carbon capture by utilizing fiber, creating a green carbon sink.

YFY's GHG emission boundaries are set based on the operational control approach. All production sites of the three business groups follow the ISO 14064-1, GHG Protocol, or National Development and Reform Commission of China's "Accounting Guidelines for the Paper Industry" and conduct annual emissions inventories. In major production sites, verification in Taiwan is carried out by independent third-party agencies, while in mainland China, the local government-designated agencies verifies and issues the inventory report, which is then publicly disclosed on the competent authority's website. In accordance with Financial Supervisory Commission regulations, YFY Inc. (parent company) completed its inventory and verification in 2023. The first-year inventory of all consolidated reporting subsidiaries is planned for 2025, with regular annual inventories to follow. Additionally, the parent company has conducted a Scope 3 inventory, detailed in the appendix "Environmental Performance Data", P.108. The Scope 3 schedule for its subsidiaries is currently under planning.

The GHG emissions in 2023 across the three business groups decreased by 1% compared to 2018. In Taiwan, total GHG emissions were 1.501 million tCO2e, a 9.3% decrease from 2018 but a 1.1% increase from the previous year. This increase is primarily due to annual maintenance projects, with more boiler operating hours in 2023 than the previous year, resulting in higher emissions from the Containerboard and Packaging Group. Taiwan's Scope 1 emissions were about 1.234 million tCO2e, accounting for over 80% (82%) of total emissions, mainly from the Containerboard and Packaging Group and the Forest, Pulp & Paper Group. In 2023, plants in Taiwan used alternative fuels and biomass energy, reducing Scope 1 emissions by 9.8% compared to 2018. Additionally, due to the continued expansion of biomass alternative fuels, Taiwan's biogenic emissions in 2023 were 699 thousand tCO2e, an increase of 3.9% from the previous year.

*Data Scope: Parent company (YFY Inc.) and all production sites listed in the “Entities Included in the Report.”
*The location-based and market-based emissions for Scope 2 are identical.
*Explanation of Emission Calculation:
-Methodology: Primarily follows ISO 14064-1 and the GHG Protocol; however, Yangzhou Plant and Dingfeng Paper adopt the “Accounting Guidelines for the Paper Industry” issued by China’s National Development and Reform Commission.
-Scopes: Disclosures are standardized to include Scope 1 and Scope 2. According to the Accounting Guidelines for the Paper Industry, Yangzhou Plant and Dingfeng Paper calculate five emission sources: fossil fuel combustion, industrial processes, wastewater treatment, net purchased electricity, and net purchased steam. The first three fall under Scope 1, while the latter two are classified under Scope 2.
-GWP Values: Taiwan plants adopt IPCC AR5, with YFY Inc. (parent company) and Taiwan corrugated container plants using IPCC AR6; Mainland China plants adopt either IPCC AR6 or the Accounting Guidelines for the Paper Industry; Vietnam plants use IPCC AR6.

GHG Reduction Measures

Over 80% of YFY's carbon emissions come from Scope 1, making the reduction of fossil fuels the most critical and effective carbon reduction action. We are actively increasing the use of alternative fuels to replace fossil fuels and reduce Scope 1 emissions. Despite cost considerations and the challenges of multi-fuel-fired boilers in some plants, YFY has set an ambitious goal of achieving a 35% total alternative energy (biomass energy + alternative fuel) ratio by 2025. In 2023, the ratio for the three business groups reached 35%, with Taiwan's ratio as high as 42%. For details on alternative fuel use and application, please refer to the "Energy" chapter of this report.

The operating advantage of YFY's full circular economy is circled around the papermaking process. The raw materials used, such as wood pulp and recycled paper, are all renewable materials. We extensive use of eco-fibers from FSC certicated forest to make sure they are from legal and closely planned and controlled forests farms. 

After these forest materials are processed by the wood industry into furniture and other products, the leftovers are then recycled by the pulp industry to make wood pulp or paper products. They are further processed, used, and then returned to the manufacturing cycle through the recycling system, so that the life cycle is extended, and the carbon fixation value of paper can be maintained.

YFY actively purchases green products with environmental protection marks, energy saving marks and FSC international certification in items such as raw materials, plant facilities and ofce supplies to reduce environmental impact. In 2023, over 91% of YFY's papermaking raw materials will be recycled. For the Taiwan Containerboard and Packaging Group, 95% of the pulp used will come from recycled paper. The YFY Procurement Department reports that 78% of the raw materials purchased are FSC/PEFC certified, including those from CHP Taiwan. Among the wood chips purchased, 72% have FSC/PEFC certification, and 100% of the imported pulp raw materials are FSC/PEFC certified. Green procurement has reached 9 billion yuan, with the proportion of green procurement targets continuously increasing to support forest ecology sustainability.

YFY's global large-scale production bases and main operating bases are equipped with different green energy equipment, including biogas, lignin, waste-derived fuels, etc.We continue to invest in research, from biomass fuels that conform to the concept of circular economy to the use of alternative fuels, gradually reduce the proportion of fossil fuels.

Respond to Global Energy Initiatives, Aligning with Global Standards

YFY joined the RE100 initiative in 2023, becoming the first representative from the global paper industry to declare its commitment to achieving 100% renewable electricity by 2040 and net-zero emissions by 2050. On our RE pathway, we regularly review energy saving and carbon reduction performance. We develop diversified green energy at our operation sites, including solar photovoltaic systems and biomass energy, such as biogas power generation, lignin power generation, and biomass fuels, leveraging industry advantages.

From "Manufacturing" to "Intelligent Manufacturing": YFY and CHP's Integrated AI Team Honored with Harvard Business Review’s Digital Transformation Dingge Award

Since adopting digital transformation and AVM, Jiutang plant has boosted production efficiency by about 2.16%, raising paper machine operating rates from 80% to 94%. This has led to a reduction of 6,000 metric tons of carbon emissions within a year. Moving forward, YFY plans to extend AVM technology to other production sites. Beyond paper production, the technology can also be applied to the production processes of various related industries, enhancing power generation efficiency, improving water treatment quality, and optimizing microgrid energy management. YFY aims to develop AVM applications as a strategic tool to further strengthen operational capabilities.

Low-carbon energy transition: Increasing the use of alternative fuels

What sets the paper industry apart from others is its circular economy process, which creates a renewable energy cycle. Surplus materials from the process are converted into alternative fuels for power and steam generation. To reduce the organic content in water recycling treatment, biogas produced by an anaerobic system is used to generate electricity. This cycle not only meets plant energy needs but also lessens reliance on fossil fuels and addresses waste issues, making it a unique example of energy self-sufficiency in manufacturing. In addition to biomass energy, YFY has invested in solar energy. All qualified plants have completed solar photovoltaic installations that meet MOEA’s requirements for energy-intensive industries. In 2023, these installations were progressively converted to self-consumption, and we applied for renewable energy certificates accordingly. Total photovoltaic power generation exceeded 4.2 million kWh in 2023, with nearly 20% used for self-consumption.

Venturing into energy storage: Taiwan's first cogeneration behind-the-meter energy storage system

In 2023, Ensilience, a YFY subsidiary, and CHP jointly developed Taiwan's first "cogeneration behind-the-meter energy storage system," with a total capacity exceeding 5 MWh. The auxiliary service of the system allows clients to manage energy storage independently by charging during off-peak hours, reducing reliance on Taipower during peak times. This approach alleviates pressure on the grid, lowers plant energy demand, and enables cogeneration units to participate in Taipower's auxiliary services, benefiting both the client and Taipower.

Water Risk Management Programs

YFY has a water risk management program that recognizes operational dependency on freshwater and screens sites via WRI Aqueduct; manages impact through controls beyond legal limits and two-stage discharge; evaluates future quantity/quality risks with monitoring/early-warning; considers stakeholder impacts and transparency; and assesses local regulatory changes including permits.

Dependency-related water risks considered in risk assessment

High operational dependency on freshwater

Paper-making relies on water as a process medium; supply interruptions can halt production, so dependency is explicitly acknowledged in strategy and targets. YFY monitors legal groundwater wells (dynamic/static levels) to maintain safe aquifers.

Portfolio screening for basin stress (TCFD-aligned)

Sites are screened with WRI Aqueduct; seven sites (all corrugated) are projected under SSP1-RCP2.6 to face extremely high water stress by 2030.

Climate physical risks linked to water 

The risk register includes drought/water shortage and continuous rainfall/flooding with financial impact pathways.

Impact-related water risks considered in risk assessment

Effluent quality/receiving-environment risk

All sites meet local standards and set internal limits stricter than legal; design/operations consider receiving water bodies, with hydrology records showing no adverse impact.

Process/endpoint controls 

Upstream controls, coagulation-sedimentation and biological treatment; white-water recycling reduces load/chemicals.

Regulatory compliance risk

We note tightening water-pollution controls and potential fines/treatment costs if non-compliant.

Assessment of future water quantities available

Forward-looking basin stress (2030)

Under Aqueduct projections, seven sites face extremely high stress; these sites are in regulated industrial parks with municipal supply planning and together account for ~0.28% withdrawals / 2.42% consumption of the Group.

Assessment of future water quality-related risks

Early-warning & real-time monitoring 

YFY runs online monitoring for process/discharge, public real-time disclosure, alerting and emergency shutdown protocols—explicitly framed as critical under intensifying climate hazards (typhoon/earthquake).

Two-stage discharge pathway 

On-site treatment to exceed legal standards → industrial-park treatment → discharge to natural water bodies; hydrology records show no adverse impact.

Assessment of impacts on local stakeholders

Transparency & community interface 

YFY publicly discloses real-time water quality and operates wetland programs where treated effluent supports habitat (e.g., Old Railway Bridge Constructed Wetland), with community volunteering.

Stakeholder concern recognized in risk map 

“Stakeholder concerns or negative feedback” is tracked with mitigation (water/energy saving plans and communication).

Assessment of future potential regulatory changes at a local level

Permitting/tariff/compliance tightening 

Chung Hwa Pulp, a YFY subsidiary, identifies increased difficulty obtaining withdrawal permits, rising water costs, and stricter pollution control as medium-term, likely risks with financial effects.

Maximizing Water Value Through Responsible Management

In order to uphold the concept of maximizing the value of water resources, also ensure that products can meet quality and safety requirements of customers, YFY takes water prudently; monitors, evaluates and analyzes water carefully; and discharges appropriately.

We trace upstream and innovate such as the development of low water consumption products, online recycling and the deployment of back-end water treatment technologies that we can use recycled water to replace clean water. According to the annual report to the Water Resources Department of the Ministry of Economic Affairs, the water reuse rate of YFY process in 2023 was more than to 90%. Additionally, the Yangzhou plant of the Containerboard and Packaging Group has implemented a rainwater recycling system to convert rainwater into renewable resources, promoting water reuse. In 2023, this system saved about 133 million liters of water and nearly 300,000 RMB in sewage treatment costs.

Ｍost of our productions bases are located in non-protected areas and non-agricultural areas with abundant water. But In the face of extreme conditions of climate change, and according to the risk and opportunity assessment and control system of ISO14001, the water management and control standards from our plants are all superior to the laws and regulations. 

* Data Scope: All Taiwan production sites listed in the "Operation and Production Sites."* Total discharge includes efuent and water discharged to industrial zone treatment facilities.

By 2030, it is projected that seven sites will be in areas with extremely high water stress (>80%). These sites are all corrugated container plants, which have significantly lower water withdrawal and consumption compared to paper plants. They are situated in industrial zones carefully planned by local governments, with water usage precisely aligned with these plans. The process effluent is treated on-site to exceed regulatory standards, then further treated by the industrial zone's sewage system before being discharged into natural water bodies. Under strict management, water withdrawal and consumption at these sites account for only 0.3% and 1.4% of YFY's total, respectively, demonstrating extremely low usage.

Starting with agricultural and forestry surplus materials for building materials and papermaking, YFY has embraced zero waste to create a sustainable circular economy. This approach optimizes the use of surplus materials, by-products, and energy resources throughout the value chain, finding new applications. We have developed three key waste management strategies, aiming for a 95% waste-to-resource ratio by 2030, and are committed to reducing outsourced waste by 1% annually compared to the previous year.

Waste is prioritized for recycling, reuse, or incineration with energy recovery. Only waste that cannot be repurposed is incinerated without energy recovery or sent to landfills. In 2023, although total waste generated increased, repurposed waste also rose by 6.6% from the previous year. Waste repurposing includes 43% reused, 34% incinerated with energy recovery, and 17% recycled into paper products, achieving a 93.3% waste-to-resource ratio.

*Data Scope: All production sites of the Containerboard and Packaging Group in Taiwan and Vietnam listed in the “Entities Included in the Report.”* Waste-to-resource ratio = (Waste recycled + Waste reused + Waste incinerated with energy recovery) / Total waste generated.
* Description of transfer and disposal methods: 
1. Reused waste is converted into products like cement raw materials/products, insulation materials, and fertilizers.
2. Waste otherwise disposed is handed over to a third-party organization for reuse or to a licensed waste disposal service for proper treatment.

All large-scale production sites of YFY are equipped wi th dus t col lec t ion sys tems and moni tor ing equipment , which are cont inuously checked, adjusted at any time, and regularly repor ted to ensure no emissions of ozone-depleting substances (ODS) and strictly control air quality. 

The primary guidelines followed are ISO 14064-1 and the GHG Protocol. Plants in Taiwan use GWP values from IPCC AR5, whereas YFY Inc. (the parent company) and Taiwan's corrugated container plants use IPCC AR6. In Mainland China, plants use either IPCC AR6 or the "Accounting Guidelines for the Paper Industry." Scope 1 and Scope 2 emissions are reported consistently. For corrugated container plants in Mainland China, Scope 1 emissions mainly come from boilers, while the corrugated container plant in Vietnam reports only Scope 2 emissions related to electricity. Additionally, Yangzhou Plant and Dingfeng Paper Industry calculate emissions in five categories—fossil fuel combustion, process emissions, wastewater treatment, net electricity purchase, and net heat purchase—according to the "Accounting Guidelines for the Paper Industry." The first three categories are classified as Scope 1, while the latter two are Scope 2.

We uses the core elements of the Task Force on Climate-related Financial Disclosures (TCFD) as an information framework for identification and analysis to implement the GHGs reduction plan with a rigorous attitude, and contribute to the goal of global net zero carbon emissions.

*Scope of data: All production sites listed in the “Entities Covered by This Report.”
*Historical data coverage has consistently been 100%. *Other air pollutants include hazardous air pollutants (HAPs) such as lead, cadmium, mercury, arsenic, hexavalent chromium, and their compounds, regulated under the Environmental Protection Administration’s “Emission Standards for Hazardous Air Pollutants from Stationary Sources.” The emissions in 2022, 2023, and 2024 were 0.1, 0.1, and 0.2 metric tons, respectively. 
*Emission statistics are based on actual monitoring results from sites and pollutants with available data.
*The increase in VOCs compared to the previous year was mainly due to a malfunction in solvent recovery equipment at certain sites in Q3 2024, which led to a drop in recovery efficiency and higher emissions. The issue was resolved in Q4.