Thailand to become second in Southeast Asia to tax carbon emissions.
Bangkok, July 30 2024 – In time, Thailand's strategy could give its industries a competitive edge while reducing greenhouse gas emissions, experts say. Singapore was the first in the region to introduce a carbon tax in 2019.
Thailand is set to be Southeast Asia’s second country after Singapore to tax carbon emissions, a move that experts say will give the region greater impetus to adopt clean technologies that help slow global warming.
Its carbon tax, expected to be introduced by next year, is not likely to make a dent on domestic or regional emissions initially. But it sends an important signal to energy producers and the private sector that reducing their carbon footprint is a government priority, they say.
The kingdom’s experience, together with Singapore’s, could help get more of their neighbours on board and take carbon pricing to a scale that would move the needle on the region’s emissions, according to an expert.
For countries that are still heavily reliant on fossil fuels – 85 per cent of Thailand’s energy mix is oil, natural gas or coal – introducing a carbon tax is a “no brainer”, said Dr Vinod Thomas, a visiting senior fellow at ISEAS-Yusof Ishak Institute and the former director general of the Asian Development Bank.
“The air is free, and so people pollute. And when the pollution is carbon dioxide, the air warms up, causes floods and storms of extreme proportions and then heatwaves and fires, which are already wreaking havoc in Southeast Asia. So, in that context, the question would be, why don't we then price the air?” he said.
--- It is just like putting a tax on cigarettes. As it becomes more expensive, people may think twice before smoking.”
Singapore rolled out a carbon tax in 2019 that covers about 80 per cent of its emissions. The tax was S$5 (US$3.70) per tonne of carbon-dioxide-equivalent (tCO2e) for the first five years and increased to S$25/tCO2e this year. It could reach S$50 to S$80 per tonne by 2030.
Thailand will follow suit, with the government announcing in June it would levy 200 baht (US$5.60) per tonne of CO2e on oil products such as diesel and gasoline.
Existing taxes on oil products will be converted to a carbon tax, meaning no additional revenue will be collected and thus, no costs should be passed onto consumers. It also means no new laws need to be passed.
“At those rates, you don't see any effect, really. People would rather pay that and not cut carbon. And just to be clear, the objective is not to raise money. Your objective is to cut emissions,” Dr Thomas said.
“But one cannot ignore the importance of even a US$5 tax, because it's a signalling,” he said, comparing it to Singapore’s five-cent levy on plastic bags at supermarkets aimed at cutting the use of disposables.
Like in Singapore, the tax rate and types of industries targeted in Thailand are expected to expand. For example, a higher tax could eventually be introduced to battery production and the transport or manufacturing sectors.
“As the time goes by, we will see an increase from 200 baht per tonne. How high, we don't know. There’s no ceiling,” said Associate Professor Wongkot Wongsapai, deputy director of the Multidisciplinary Research Institute at Chiang Mai University.
The tax will be part of a broader legislative package under the Thailand Climate Change Act, expected to take one to three years to implement and could include mandatory emissions reporting, a formal climate change fund and an emissions trading scheme where firms can buy and sell carbon credits.
Under such a scheme, the government would set a cap or a maximum amount of emissions allowed, and a firm that manages to reduce its emissions below that cap could sell its extra allowance to a high-polluting firm.
“That would allow those companies to have more flexibility … They can purchase carbon credits or they may install new technologies instead,” said Assoc Prof Nattapong Puttanapong from the Faculty of Economics at Thammasat University.
“Maybe the new technology might be too expensive, so you just trade the credits, or if you realise that the new technology is affordable enough, (you) can implement them,” he explained.
“Carbon pricing, trading, and taxing are crucial aspects of the decarbonisation agenda.”
With the CBAM, the Thai government will negotiate with the EU to ensure Thai exports are not penalised twice – once the carbon tax is active – and allow Thai products to be promoted as more climate-friendly.