Thailand’s new Prime Minister, Srettha Thavisin, has assertively announced active climate policies on both national and international stages, notably in his inaugural speech to Parliament and at the UN’s Climate Ambition Summit in September 2023. The country has pledged to achieve carbon neutrality by 2050 and targets net zero by 2065. These goals are to be realized primarily through the enhancement of carbon pricing policies and the execution of the National Energy Plan to curtail greenhouse gas emissions. But Thailand has frequently made strong pledges on combatting climate change before. It is thus worth taking a closer look at the policy tools it intends to use, and what are some of the challenges they face.
Figure 1: Thailand’s new Prime Minister, Srettha Thavisin attending the UN’s Climate Ambition Summit (Source: Thairath)
Strengthening Carbon Pricing Instruments
Carbon pricing is an increasingly popular tool to control carbon emissions. But will they work in Thailand?
Like many other countries, Thailand’s primary strategy to address climate change employs market-based approaches through carbon pricing, a focus that will be further intensified by the new government. Carbon pricing operates by incorporating the cost of the environmental damage from carbon emissions into the prices of goods and services that use carbon. When prices reflect only the costs to suppliers and not to the planet, we emit more carbon than the planet can sustain. By making carbon emissions more expensive, carbon pricing incentivizes firms to seek alternative energy sources and discourages consumers from using dirty energy.
Thailand has operated a voluntary carbon crediting program since 2016. While the country has not yet set the amount of carbon that can be emitted, a carbon market and crediting system were launched to encourage domestic firms wishing to “go greener” to voluntarily offset their emissions by purchasing carbon credits from projects certified by Thailand’s Greenhouse Gas Management Organization (TGO). The average price of carbon credit per ton has risen by approximately 40% within 6 years, with a total carbon credit trading volume of 1.92 million tons of CO2 equivalent. Many Thai analysts anticipate the price will continue to ascend further, especially if the country’s carbon crediting standard can align with international standards, a goal the new government is aspiring to achieve. Achieving this alignment would permit international firms to acquire carbon credits from projects certified by Thailand, thereby unlocking international demand within Thailand’s carbon market. Additionally, the country has been developing a cap-and-trade scheme to complement the carbon crediting system and is considering implementing a carbon tax in specific industrial sectors. This represents a significant advancement compared to other ASEAN countries; only Singapore has fully enacted a regulatory carbon pricing policy instrument, namely, a carbon tax.
Despite seemingly proactive policy actions and efforts related to carbon pricing, the tangible results in emission reductions seem uncertain at best. This is for three reasons. First, the carbon market price in Thailand is still significantly underpriced. It sits at approximately USD 3 per ton, significantly below the globally recommended carbon price of at least USD 75 per ton—the price deemed necessary to reduce emissions sufficiently to keep the temperature increase below 2°C.
Second, doubts persist regarding whether Thailand can align its methods for measuring and verifying carbon emissions with international standards. Currently, international carbon credit standards like those from Verra do not recognize Thailand’s standards. Moreover, TGO itself has become more reluctant to synchronize the country’s standards with Verra, especially after the controversy arose around the company’s overstatements of actual achieved carbon offsetting levels. Irrespective of the reasons, the inability to link Thailand’s crediting standards to international ones could hinder the anticipated rise in carbon prices, contrary to the expectations of Thai analysts. The ensuing low carbon prices may not effectively incentivize firms to reduce emissions, even with the implementation of a cap-and-trade scheme.
Third, the system of carbon credits – when they are poorly managed – can lead to detrimental effects on host communities where carbon credit projects are located. In many developing nations like Thailand, fostering emissions reductions involves not only limiting carbon emissions but also promoting forest restoration and planting. This approach is grounded in the principle that afforestation can capture a portion of emitted carbon, reducing overall emissions. When such a project receives certification from the TGO, the resultant credits can be sold by the host community as compensation. However, despite contributing the majority of the labor and care, community members reported receiving compensation from only 20 percent of the tradable credits. These are communities whose livelihoods are intertwined with both preserving and accessing resources in forest. Yet, they have been barred from utilizing resources from the forest – such as firewood or mushrooms, causing economic hardship and substantial alterations to their way of life. This situation is further exacerbated by the fact that utilizing such products does not detrimentally impact forest growth.
National Energy Plan: Moving Towards Clean Energy?
Aside from carbon pricing, there is a second prong to the Thai government’s plan to reduce carbon emissions, the new National Energy Plan (NEP). While carbon pricing adopts a more market-based approach, the NEP involves more direct government intervention through a roadmap to help industries transition from carbon-based energy to cleaner energy solutions. The impending plan is poised to encompass policy initiatives like the utility green tariff, designed to shift the country’s energy mix away from coal. Under this initiative, consumers who opt into utility green tariffs may pay a premium to ensure that their electricity consumption is matched with cleaner energy. The additional cost paid by the consumers usually goes toward supporting the development of cleaner energy projects, although the details are still unclear in Thailand’s case. The NEP seems particularly promising because the energy sector accounts for nearly 60 percent of Thailand’s total emissions.
However, upon closer inspection, the emphasis of these proposed policies leans towards transitioning from coal to fossil gas, rather than embracing a more substantial reliance on renewable energy sources. Despite the combustion of natural gas emitting 50-60 percent less CO2 than coal, investing in natural gas infrastructure could impose obstacles in meeting climate targets due to the risks of fossil lock-in and consequent delays in adopting renewable energy. Moreover, the long-term impact on emissions reduction is further clouded by increasing evidence suggesting that the advantages of natural gas as a bridge between coal and renewable energy are often overstated, and the economic risks inherent in investing in natural gas are significant.
Despite the country’s strong pledges on climate mitigation, the main policies currently in play make it highly unlikely that the climate goals will be materialized, not to mention the possible adverse impacts on other social dimensions. This trajectory becomes even more precarious considering the new Prime Minister’s recent proposition for Thailand to serve as the “central hub” for the final phase of the fossil fuel car industry, ostensibly to bolster the country’s industry supply chain, which implies a diminished commitment to addressing the issue.
Bio: Jittip Mongkolnchaiarunya is a PhD candidate in Political Science at the George Washington University, Washington DC. She is a Sigur Center Summer 2023 Research Fellow. To learn more about her, visit her website: https://jittipm.wixsite.com/jittipm.
