Thailand is ramping up its climate commitments after pledging to slash greenhouse gas (GHG) emissions by 47% by 2035 under the Paris Agreement. Key to this plan is a soon-to-be-enacted Climate Change Bill, introducing vital instruments such as an Emissions Trading System (ETS), carbon tax, carbon credits, and a Border Carbon Adjustment Mechanism (BCAM).
Thailand’s Climate Ambitions and Global Context
While over 50 countries now apply carbon pricing—together accounting for 28% of global emissions and generating US$100 billion in public revenue in 2024—Thailand faces steeper challenges. Unlike the European Union, which started enacting emission-reduction measures in 2005, Thailand now has to achieve double-digit annual emission cuts, making its 47% reduction target more aggressive than most ASEAN peers. This could translate into higher emission costs relative to neighboring countries.
Power Sector Under Pressure
Thailand’s power and energy companies, as in the EU, are singled out as primary emission sources and thus central to the emission-reduction strategy. The sector’s high emission intensity and low risk of relocation make it an immediate target for policy interventions aiming to sharply cut GHG output.
CBAM and Export Impacts
The EU’s Carbon Border Adjustment Mechanism (CBAM), effective from January 2026, will levy import tariffs on six high-emission product categories: cement, steel, aluminum, fertilizers, hydrogen, and electricity. However, only about 1% of Thailand’s exports to the EU fall under these categories, limiting direct exposure for now.
Rising Costs Cloud Investment Appeal
Thailand’s ongoing Power Development Plan (2018 Revision 1) promotes increased renewable energy, but the transition may not keep pace with the country’s ambitious Paris Agreement timeline. A rapid low-carbon push could lead to increased CAPEX and operational costs within the power sector, likely resulting in higher electricity tariffs. These rising costs could dampen Thailand’s appeal as a destination for foreign direct investment, with broader economic implications if the country sustains its aggressive emissions-reduction strategy.
