Measures against Climate Change in Thailand

Climate change stands as one of the most pressing challenges of our time, demanding urgent and decisive action from nations around the globe. In response to this global call, Thailand has taken a significant step by setting up its commitments under the Paris Agreement on September 21st, 2016 that aims to peak its greenhouse gas emissions in 2030, with a plan to move towards net-zero greenhouse gas (GHG) emissions as early as possible within the second half of this century and towards carbon neutrality to be achieved by 2065. Accordingly, there are many national initiatives aimed at reducing GHG emissions including setting up Department of Climate Change and Environment (DCCE), a government agency responsible for climate change policy. However, the introduction of a specific regulation could be considered as a pivotal moment, signaling a more structured and legally binding approach to tackling climate change issues.

Ministry of Natural Resource and Environment has proposed an early version of Climate Change Act since 2020, four years before the establishment of DCCE. However, during February 14th to March 27th of this year, DCCE finally posted the latest draft of the regulation for public hearing, which can be obtained from this link https://qrcgcustomers.s3-eu-west-1.amazonaws.com/account10330187/9794131_2.pdf?0.25465363777216465. The Department also organized public hearing meetings at many provinces during this period of time and invited citizens to participate and provide their feedback on the draft legislation.

Dr. Phirun Saiyasitpanich, Director-General of DCCE stated that after he listened to opinions from all regions he now encourages everyone to think collectively about the draft act. He emphasized that the adverse global climate situation is now evident, and everyone who advocates actions against climate change understands the urgency of this issue. “Today, severe and clearer natural disasters are happening in all regions worldwide. The global plan to achieve low GHG emissions in the next seven years, namely the first global goal as known as the updated Nationally Determined Contributions (NDC) to be achieved by 2030, is crucial. This means that if we set the target to keep the global temperature increase below 1.5 degrees Celsius, we are still not doing well enough.”

Dr. Phirun further explained that if we are to control GHG emissions to keep the temperature increase below 1.5 degrees Celsius, we can only emit up to 500 gigatons of GHGs. However, in the next 7 years, global emissions are projected to reach 430 gigatons, leaving only 70 gigatons for the remaining 20 years before 2050. This is the scenario that the world has discussed together. The question is, can we reduce emissions so quickly and deeply while ensuring sustainability? Is it truly sustainable when the entire world can only emit 70 gigatons in the last 20 years, while emitting 430 gigatons in just 7 years?

Dr. Phirun continued, stating that he believes there will be various mechanisms introduced on the international stage. Trade mechanisms, such as the Carbon Border Adjustment Mechanism (CBAM), will become more prevalent, he said. The CBAM, for example, is a measure taken by the European Union to adjust carbon pricing before goods cross its borders. The United States, China, and Canada are also considering similar measures.

“The driving factor is the survival performed on our planet. As the global efforts are still insufficient, there need to be factors that push for greater action. The factors that most effectively raise awareness are often not voluntary. This is why mechanisms like CBAM are coming into play to address carbon issues. Moreover, previous voluntary efforts to reduce GHG without any legal requirements have exceeded the targets set by Thailand at UN meetings by double in both the energy and transport sectors. We have government policies and regulatory tools from the Prime Minister’s Office, which work through DCCE, linking to the work of related ministries, though perhaps not quickly enough,” Dr. Phirun said.

 

Focus of draft Climate Change Act

Considering that current regulations do not legislate operation necessary for reduction of GHG emission. New ones are required. Three important mechanisms are proposed under draft Climate Change Act, as follows.

1. Mandatory greenhouse gas (GHG) accounting

Previously, GHG monitoring and reporting were voluntary and disclosed in annual reports of registered companies in the stock market. However, the draft law empowers state agencies to request GHG emission data from activities in five designated industries. For Carbon Footprint Organization (CFO) assessment, organizations must hire consultants annually to measure and certify GHG emissions, which costs approximately 30,000 baht each time. Meanwhile, Carbon Footprint Product (CFP) assessment shall be conducted every two years, each taking two days for evaluation. If business structures or products are complex, the time and costs allowed for assessment will be increased. The government should provide supportive measures by offering subsidies or tax deductions to offset these expenses.

 

2. Climate Change Fund

Financial support for GHG reduction projects is currently provided by state agencies, which can only support measures within their jurisdiction, such as:

  • Tax exemptions through the Board of Investment (BOI)
  • Subsidies for electric vehicles by the Excise Department
  • Support for renewable energy projects through the Electricity Development Fund, available only to government agencies.

The Climate Change Fund would enable comprehensive support for GHG reduction efforts across all dimensions and industries, both public and private. This includes projects like forest carbon credit initiatives, which previously lacked financial support, as well as carbon footprint measurement and certification. The fund’s role in reducing fossil fuel usage will be crucial for the country’s GHG reduction goals. Thailand aims to increase the share of electricity generated from renewable energy to 68% by 2040 and 74% by 2050.

 

3. Carbon Pricing Mechanisms

Emission Trading System (ETS) and Carbon Tax.

ETS

mandatory carbon market, which is employed in the European Union, requires businesses in designated GHG-emitting industries to submit GHG emission allowances to the government annually. These allowances can be allocated, auctioned, or traded between businesses.

Carbon Tax

tax which is imposed based on the amount of GHG emissions assessed from the lifecycle of products. This tax can be applied to both domestically produced and imported goods, similar to the EU’s Carbon Border Adjustment Mechanism (EU-CBAM). Currently, Thailand levies a tax on vehicle CO2 emissions as part of the excise tax on automobiles.

However, implementing both ETS and a carbon tax simultaneously could result in overlapping business costs. It is advisable to allow expenses from one measure (ETS or carbon tax) to be deductible from the costs of the other. This is because the ETS encompasses GHG emissions from both product manufacturing and other business operations. If a carbon tax is also imposed, businesses would face double taxation on GHG emissions from their products.

Business consultant, Kasikorn Research Center, estimates that industries affected by climate change regulations can be divided into three groups:

Group 1

Industries with high GHG emissions and those to be covered by the EU-CBAM by 2026, including transportation, utilities, metals, and non-metals. The total industry value is 1.71 trillion baht, or 10% of Thailand GDP.

Group 2

Industries expected to be covered under the second phase of EU-CBAM, such as petroleum products, rubber and plastics, petroleum drilling, chemicals, coal mining, and paper and pulp. The total industry value is 1.77 trillion baht, or 10% of Thailand GDP.

Group 3

Other domestic industries with high GHG intensity, including agriculture and livestock, food and beverages, computers and electronics, and electrical equipment. The total industry value is 3.02 trillion baht, or 17% of Thailand GDP.

 

Other Provisions of the Draft Regulation

Emission Reduction Targets

The cornerstone of the Draft Climate Change Act is its ambitious targets for reducing GHG The act provides specific, measurable goals aligned with Thailand’s NDCs. By 2030, the act aims to cut emissions by 20-25% from the 2005 baseline levels. This target is to be achieved through a combination of regulatory measures, incentives for clean energy, and penalties for non-compliance.

 

Renewable Energy Initiatives

A significant focus of the act is put on the promotion of renewable energy. Recognizing the need to transition away from fossil fuels, the draft legislation includes provisions to boost investment in solar, wind, biomass, and other renewable energy sources. It proposes financial incentives such as tax breaks and subsidies for renewable energy projects, and mandates that a certain percentage of the national energy grid be powered by renewables by specific milestones. These initiatives are designed to reduce Thailand’s carbon footprint and enhance energy security.

 

Adaptation Strategies

Beyond mitigation, the Draft Climate Change Act places a strong emphasis on adaptation to climate changes. Recognizing that some climate impacts are unavoidable, the act outlines comprehensive strategies to enhance the resilience of communities and ecosystems. This includes investing in climate-resilient infrastructure, such as flood defenses and drought-resistant agriculture, as well as protecting natural buffers like mangroves and wetlands. The act also calls for the development of early warning systems and disaster response plans to more effectively prepare for extreme weather events.

 

Regulatory Framework

To ensure the effective implementation of these measures, the draft act proposes a robust regulatory framework. This includes the establishment of a National Climate Change Committee to be responsible for overseeing and coordinating climate actions across various sectors. The act also outlines specific responsibilities for government agencies, local authorities, and the private sector, ensuring a cohesive and comprehensive approach. Enforcement mechanisms are included, with penalties for non-compliance designed to ensure accountability and to drive adherence to the legislation.

 

The response to the Draft Climate Change Act has been diverse, reflecting the varied interests and concerns of different stakeholder groups. Environmental organizations have largely welcomed the draft, praising its ambitious targets and comprehensive approach. They see it as a vital step towards safeguarding Thailand’s environment and meeting international commitments. Industry representatives, on the other hand, have expressed mixed reactions. While some businesses recognize the long-term benefits of transitioning to a low-carbon economy, others are concerned about the short-term economic impacts. Industries that are heavily reliant on fossil fuels and high emissions are particularly apprehensive about the costs associated with compliance and the potential impact on their competitiveness. Several key concerns have emerged during the public hearings. One major issue raised is the economic impact of the proposed measures. Small and medium-sized enterprises (SMEs) have voiced worries about the financial burden of compliance, including the costs of adopting new technologies and meeting emission reduction targets. There are calls for more supportive measures and incentives to help businesses, especially SMEs, transition smoothly.

Another significant concern is the feasibility of the renewable energy targets. Some stakeholders argue that the infrastructure and investment required to achieve these targets may be challenging to mobilize within the proposed timelines. They stress the need for a detailed implementation plan and sufficient government support to address these challenges.

 

Recommended actions for companies

Kasikorn Research Center also issued recommendation for businesses as follows.

1. Carbon Footprint Assessment for Organizations and Products

This will become a new standard in business operations. Although currently being voluntary, GHG measurement is trending towards becoming a norm similar to financial reporting. This standard, known as IFRS S1 and S2, is being developed by the International Sustainability Standards Board (ISSB). Countries like the UK, Japan, Canada, and Australia are currently exploring ways to enforce these standards.

 

2. Reducing GHG in Production Processes and Operations

Reducing GHG emissions will become unavoidable for businesses. Future environmental policies will increase production costs for high GHG emitters, reducing their competitive edge against low GHG emitters. Entrepreneurs should adapt to reduce GHG emissions in both production processes and other operations.

Short-Term

Businesses can reduce GHG emissions by using certified carbon credits, such as T-VER (Thailand Greenhouse Gas Management Organization), VCS (VERRA), or Gold Standard. They can also purchase renewable energy certificates (RECs) to reduce reliance on fossil fuel-based electricity.

Long-Term

Businesses will need to invest in changes to energy use or technology to reduce GHG emissions, including:

        • Switching from fossil fuel-powered machinery to electric-powered machinery.
        • Transitioning to hybrid or electric vehicles for transportation.
        • Using renewable energy by installing solar roofs or entering into power purchase agreements (PPA) with private clean energy providers.
        • Using low-GHG materials such as recycled materials or waste products.
        • Implementing advanced technologies like Carbon Capture Utilization and Storage (CCUS) and hydrogen fuel.

 

3. Keeping Up with Stricter Environmental Policies

Entrepreneurs should regularly monitor developments in environmental regulations. The EU-CBAM policy will be fully enforced by 2026, with an expanding range of products covered. Additionally, the US-CBAM, currently under Senate consideration, could impact the long-term competitiveness of manufacturers.

By preparing for these changes, businesses can stay ahead of regulatory requirements, manage costs effectively, and maintain their competitive edge in an evolving market.

 

 

Thailand’s Draft Climate Change Act represents a bold and necessary step towards addressing the pressing issue of climate change. By setting ambitious targets, promoting renewable energy, implementing carbon pricing, and enhancing adaptation strategies, the act lays a solid foundation for a sustainable and resilient future. While the journey towards implementation will undoubtedly face challenges, the potential benefits far outweigh the obstacles. Through continued public engagement, government commitment, and international cooperation, Thailand can successfully navigate these challenges and emerge as a leader in global climate action.