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March 21, 2025

Thailand’s Draft Climate Change Act: Key Business Considerations

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Thailand is continuing on its path toward comprehensive legislation to address climate change. In November 2024, the country’s Ministry of Natural Resources and Environment (MNRE) launched a public hearing on a new draft Climate Change Act following revisions made after an earlier hearing on a previous draft of the act. The revised version strengthens Thailand’s climate policy framework by introducing the Carbon Border Adjustment Mechanism (CBAM), modeled after the EU’s system of the same name. The new draft also restructures the planned Emissions Trading Scheme (ETS) and enhances carbon-tax provisions. These initiatives aim to minimize carbon leakage, promote fair competition for domestic industries, and encourage lower greenhouse gas (GHG) emissions.

As of March 2025, the Department of Climate Change and Environment, under the MNRE, is awaiting the Ministry of Finance’s input on the draft act’s establishment of the Climate Fund, a fund to support business innovation in responding to climate change. After incorporating this feedback, the department will submit the refined draft for cabinet approval, expected in 2025. The legislation will then undergo Council of State review, with implementation expected in 2026.

Key Provisions

The draft Climate Change Act contains a number of provisions that will affect businesses. Some of the most relevant are discussed below.

Mandatory ETS

The ETS is a mandatory mechanism designed to control GHG emissions by setting emissions caps for designated industries in alignment with national targets. Under this system, businesses receive emissions allowances allocated through free allocation or auctions. This scheme incentivizes emissions reductions by allowing businesses that emit less than their allocated allowances to sell their surplus allowances.

The specific business sectors covered by the ETS have not yet been identified in the draft act, as details are expected to be in subordinate legislation. However, it is anticipated that the sectors will align with EU Emissions Trading System standards, focusing on energy-intensive industries.

Thailand CBAM

A key addition of the revised Draft Act is the establishment of the CBAM, modeled after the EU’s system of the same name. This policy is designed to prevent domestic businesses from shifting production to countries with weaker environmental regulations while ensuring that imported carbon-intensive products face similar costs to domestic equivalents.

Under this mechanism, importers of specified goods must register, report the embedded emissions of their imports, and purchase carbon adjustment certificates corresponding to the emissions intensity of their products. Importers who have already paid a carbon price in the country of origin may apply for deductions.

Enhanced Carbon Tax Framework

The draft act imposes a mandatory carbon tax to control GHG emissions. The maximum applicable rate is set at THB 120 per unit, collected from industrial emitters and importers. Businesses are allowed to use their carbon tax payments as deductions against emissions allowance costs at ETS auctions. Moreover, industrial emitters can claim deductions on carbon taxes already paid on raw materials, potentially lowering their overall tax liability on finished products.

Mandatory Corporate GHG Reporting

To ensure greater transparency and accountability, the draft act mandates corporate GHG emissions reporting. Businesses falling within specified categories must follow transparent reporting, validation processes, and public disclosure of emissions data. This information will serve as a basis for policy development and emissions reduction measures, including ETS implementation. Further details on reporting obligations will be specified in a subordinate regulation.

Establishment of Climate Fund

The Climate Fund, which aims to support business innovation in emissions reduction, climate adaptation projects, and relevant research, will be established as a financial mechanism to enhance national competitiveness. The fund will be financed by revenues from ETS auctions, carbon taxes, CBAM fees, government grants, and private sector contributions.

Business Actions

These climate policy developments will significantly impact businesses across various sectors, particularly carbon-intensive industries and importers affected by the CBAM. Businesses should begin assessing their carbon footprint and preparing for compliance with the new regulatory framework.

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