11 July 2024

Thailand is set to become the second country in Southeast Asia to impose a carbon tax, a move seen by many as crucial to securing a sustainable future.

“We plan to start collecting carbon tax later this year, probably from around October,” Ekniti Nitithanprapas, director-general of the Excise Department, said earlier this month.

The carbon tax will initially be imposed on oil products since they are a direct and major source of greenhouse gas emissions. Thailand currently emits 372 million tonnes of greenhouse gases per year, with 70% generated by the transport and energy industries alone.

One litre of diesel emits about 2.7 kilograms of carbon, while a litre of petrol emits 2.18 kilos. The Excise Department plans to collect 200 baht per tonne of carbon emitted by these fuels.

“We can start collecting carbon tax by amending a ministerial regulation,” Ekniti explained.

If the Excise Department receives approval from the Cabinet, the plan can proceed without the need for long-winded deliberations in Parliament, he added.

Benefits of a carbon tax

Ekniti said collecting carbon tax would ease environmental problems more effectively than voluntary measures have so far. Studies indicate that mandatory mechanisms are required to change consumer behaviour and shift it towards eco-friendly practices.

“Thailand still relies on people to practice sustainability voluntarily, but results are still very limited. So, we believe that a carbon tax should be imposed,” he said.

He added that the carbon tax would be a fair price to pay for emissions while also qualifying for international trade schemes such as the European Union’s Carbon Border Adjustment Mechanism (CBAM).

“The collection of carbon tax will be fair and will encourage positive behavioural changes,” he said.

If implementation of the tax on oil products proceeds smoothly, then the Excise Department will consider extending it to vehicles, which would be taxed according to the amount of carbon they emit. A car emitting more than 200 grams of carbon per kilometre will be subject to a tax of 35% in 2026 rising to 38% in 2030, based on the vehicle’s retail price. Vehicles emitting less than 100g of carbon per kilometre will be taxed at 13% in 2026 and 15% in 2030.

Impacts on consumers, business

Consumers will see little effect on prices from carbon tax in the initial phase, as the tax can be offset by existing excise tax on oil products.

“Although we expect consumers to become more eco-friendly, we are also taking into account the financial burdens they already shoulder,” Ekniti said.

As for the impact on businesses, Ekniti promised Thailand’s carbon tax would be considered by the EU to be equivalent to CBAM, so exporters would be shielded from incurring added costs from the European carbon tariff.

“Our department is working closely with the Department of Trade Negotiations ahead of negotiations with the EU,” he said.

The EU implemented CBAM to account for the carbon emissions generated in producing imports, with the aim of reducing greenhouse gases and supporting global progress towards net zero. The mechanism currently covers imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen products. Thailand’s iron, steel and aluminium exports to Europe are worth more than 17 billion baht per year. 

CBAM will eventually apply to both locally produced and imported goods by levying a charge on emissions during the production of carbon-intensive goods.

Doubts raised

Sonthi Kotchawat, an independent environmental expert, expressed doubts about the Excise Department’s plans, especially since Thailand has not yet established carbon standards.

“As far as I know, our country has only prepared a carbon footprint framework,” he said.

Instead, he said, Thailand should be addressing environmental concerns through strategies such as the BCG (bio, circular and green economy) model, to prevent negative impacts on Thai exports.

Dr Somkiat Tangkitvanich, president of the Thailand Development Research Institute (TDRI), however, supports the implementation of a carbon tax, saying it will generate revenue for the country without forcing exporters to pay double.

“Our carbon tax rate should be close to that of CBAM,” he told participants at the “Earth Jump 2024: The Edge of Action” seminar held by Kasikorn Bank on May 27.

He suggested the Thai tax could start at US$5 (about 184 baht) per tonne of carbon emitted.

The carbon tax would also improve the image of Thai products in the global market, making them appear more environmentally friendly, he added

Applying a carbon tax also suited Thailand’s revenue structure far better than the EU’s Emission Trading System (ETS), he said.

Somkiat listed four benefits of the tax.

First, the Thai government already had a system to collect the tax, via the Excise Department. Second, it would not have to create an intermediary to trade in emission allowances under an ETS scheme.

Third, it would be easier for businesses to calculate costs.

Fourth, carbon tax collection is recognised globally.

Somkiat also recommended establishing a Green Transition and Adaptation Fund, which could use carbon tax revenue to mitigate climate change impacts and support affected individuals.

Global context and comparisons

Japan was the first Asian country to implement a carbon tax in 2012, setting a rate of 289 yen (about $2) per tonne of carbon emitted.

Currently, Singapore is the only country in Southeast Asia to apply a carbon tax, levying S$5 (about US$3.7) per tonne of carbon equivalent. However, it plans to more than triple the tax to S$25 per tonne later this year.

Inspired by Japan and Singapore, several other countries in the region are also eyeing the option of a carbon tax to slow down climate change, which appears to be accelerating under pressure from greenhouse gas emissions.

Some countries, meanwhile, are exploring European-style ETS carbon trading, where a central authority or government body allocates or sells permits that allow the discharge of a specific quantity of emissions over a set period. Thailand’s ETS is expected to be in place by 2029.

By Thai PBS World’s General Desk