A government pledge to cut a large amount of greenhouse gas emissions is expected to reshape how Thai businesses operate.
Authorities are pushing ahead with Thailand's first climate change bill, aimed at achieving carbon neutrality and net-zero targets, which were announced by the Prayut Chan-o-cha government at the UN Climate Change Conference in Glasgow in 2021.
Vowing to strike a balance between carbon dioxide emissions and absorption by 2050, along with a balance between greenhouse gas emissions and absorption by 2065, the government needs to enforce rules requiring businesses to take stronger actions to reduce their carbon footprint.
The new bill, slated to be forwarded to the cabinet for approval in the third quarter, makes it mandatory for entrepreneurs to add environmental measures to their business processes, including monitoring and reporting the amount of greenhouse gases they release as well as paying a new tax based on carbon dioxide emissions.
The bill also promotes the use of funds and loans to assist entrepreneurs in transitioning to eco-friendly practices.
CARBON TAX
Pornchai Thiraveja, director-general of the Fiscal Policy Office (FPO), said the climate change bill plans to impose a carbon tax on manufacturers.
The bill stipulates the collection of a carbon tax on goods based on the assessed amount of greenhouse gases in a product's life cycle.
According to Mr Pornchai, given the lack of clarity regarding the scope and rates of the carbon tax, it is not yet possible to assess the impact on the business sector.
The bill was drafted based on the 2016 Paris Agreement, which required participating countries to report the amount of greenhouse emissions they release into the atmosphere and arrange plans to adapt to climate change.
Under the bill, businesses in major sectors, such as energy, transport, agriculture and industry, must collect data on greenhouse gas emissions and report it to the Office of Natural Resources and Environmental Policy and Planning.
A similar attempt to impose a tax or fine on polluters is included in the clean air bill, which aims to reduce air pollution. This bill was sent to the House of Representatives for consideration.
The FPO is studying these two draft laws to establish tax measures that support the transition to a low-carbon economy, which requires further discussions with relevant agencies, he said.
FINANCIAL HELP
Another proposal in the climate change bill is to focus on enhancing financial support, including soft loans from banks and environmental funds, to help businesses invest in green technology.
This helps small entrepreneurs with limited budgets that want to cut greenhouse gases from their manufacturing processes, said Chayasak Ittisiri, managing director for Thailand at SP Group.
SP Group is a Singapore-based energy solutions provider and electricity transmission operator that is monitoring the crafting and implementation of the new bill to help the government and businesses achieve net-zero goals, he said.
There is a significant global need for financial support related to climate change. Data indicates the average value of annual global climate finance is US$1.3 trillion, which is much lower than the estimated average financial need to combat climate change of $8.6 trillion per year, roughly six times less than is required, according to Export-Import Bank of Thailand (Exim Bank).
In Thailand the government could set up a new fund worth 10 billion baht to help businesses deal with higher costs resulting from a shift towards eco-friendly operations, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries.
Many other countries have already established such funds to help entrepreneurs transform their operations and Thailand should follow this trend, he said.
"Businesses need to buy new machines and invest in clean energy, which means they need to bear more costs," said Mr Kriengkrai.
"We are concerned about small and medium-sized enterprises [SMEs], which will face a challenge in adapting to the requirements in the climate change bill," he said.
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said he agrees with the need to provide financial support to SMEs to help them better access loans to comply with the state's green initiative.
He applauded the establishment of "decarbonisation loans" under a government-sponsored fund for SME operators wishing to invest in equipment and facilities that reduce their environmental impact, notably reducing carbon dioxide emissions.
Kasikorn Research Center anticipates the new bill will affect 14 carbon-intensive industries in Thailand, representing 6.5 trillion baht or 37% of the country's GDP.
INEVITABLE PATH
The planned climate change bill is expected by companies amid intensified international campaigns against global warming, making it imperative for enterprises of all sizes to redesign their operations to be more eco-friendly, said Mr Chayasak.
Thai companies have for many years been implementing measures to curb carbon dioxide emissions on a voluntary basis, but this bill will commit them to taking serious action to better deal with this environmental problem, he said.
"There may be some disagreement, but even opponents of the bill will, sooner or later, need to join the government to cut carbon dioxide emissions because not only is Thailand requiring stricter regulations, but other countries that import from the region also improved environmental standards," said Mr Chayasak.
One example is the EU's Carbon Border Adjustment Mechanism (CBAM), he said. CBAM is a non-tariff barrier meant to encourage entrepreneurs to use more renewable power in their manufacturing to reduce their carbon footprint.
The transitional phase of CBAM, which started last October, requires importers of iron and steel, aluminium, cement, fertiliser, electricity and hydrogen to report greenhouse gas emissions embedded in their imports without being subject to financial payments or adjustments.
Importers are scheduled to pay a levy for CBAM certificates from Jan 1, 2026.
Mr Chayasak said he believes other economic tools similar to CBAM will be enforced by developed countries, led by the US, accelerating changes to traditional manufacturing reliant on fossil fuels.
According to the report by Exim Bank, the increasing severity of climate change has led many governments to implement roughly 18,000 environmental trade measures, with an average annual increase of 16% during the period from 2013 to 2022. This is particularly notable in Thailand's major export markets, such as the US, EU, Japan, China and India, which collectively accounted for 51% of the total export value in 2023.
Thailand exports relatively few environmentally friendly products, accounting for 7.6% of the total export value in 2021. This is lower than other countries, as 15.4% of Germany's shipments are deemed eco-friendly, Japan 15%, China 10.4% and South Korea 10.2%.
NET ZERO
Many businesses in the energy and industrial sectors have already joined the government to launch campaigns against climate change, creating their own plans to achieve net-zero targets.
Large companies are working on measures to reduce carbon dioxide and greenhouse gas emissions, with other firms determined to follow suit.
PTT Exploration and Production Plc (PTTEP), the oil and gas drilling arm of PTT Plc, aims to achieve a net-zero target by 2050, 15 years faster than the government's goal. The company still plans to extract gas and oil, two key fossil fuels blamed for releasing carbon dioxide, but it wants to use technology to curb their emissions.
According to Montri Rawanchaikul, chief executive of PTTEP, the company is developing Thailand's first carbon capture and storage (CCS) facility at the Arthit gas field in the Gulf of Thailand, one of several efforts aimed at helping the government curb carbon dioxide emissions.
PTTEP expects the CCS project to store up to 1 million tonnes of carbon dioxide during gas production at Arthit by 2027.
Last year, the company completed the preliminary front-end engineering and design phase of the project. The CCS facility is scheduled to start operating by 2027.
The Gulf of Thailand offers great potential to store carbon dioxide, amounting to roughly 40 million tonnes a year, because geographically the terrain is a sink area, which is suitable for the storage of carbon dioxide, according to PTTEP.
Siam Cement Group (SCG), Thailand's largest cement manufacturer and industrial conglomerate, also wants to achieve a net-zero target by 2050 and aims to reduce greenhouse gas emissions by at least 20% by 2030.
The company is increasingly focused on manufacturing and selling more eco-friendly products and services, said Thammasak Sethaudom, president and chief executive of SCG.
SCG expects revenue from its green innovations to comprise 67% of total revenue by 2030, up from 53% at present, he said.
The company developed a new cement that reduces carbon dioxide emissions by roughly 15-20%, which can be used for structural work and interior decoration.
The Creative Climate Research Center established by KBank and partners aims to build awareness and provide information about sustainable economies.
GLOBAL RECOGNITION
The travel and tourism industry is also more focused on environmental issues.
In Thailand, some tourism areas were selected as low-carbon destinations for future development, such as Phangnga, where the previous government planned pilot projects on the beach and island areas of Khao Lak, Koh Kho Khao, Koh Yao Yai and Koh Yao Noi.
Siripakorn Cheawsamoot, deputy governor for Europe, Africa, the Middle East and the Americas at the Tourism Authority of Thailand (TAT), said the agency selected Phangnga as the host of Thailand Travel Mart Plus last week based on its potential as an emerging destination in the South and its sustainable practices.
He said European visitors and tour agencies seek out accommodation, tours and activities that cause little to no pollution, and prefer using supplies that are equipped with sustainable standards.
Sustainability has become a key inquiry from large tour companies in Europe that must comply with climate laws in their home countries, such as the European Climate Law adopted by the EU Council in 2021.
The TAT is also helping Krabi host the Tourism Cares Meaningful Summit in 2025, connecting tourism stakeholders with local businesses that have adopted sustainable practices for their products and services.
BLUE OCEAN
Pairote Cheunkrut, chief strategy officer at Bank of Ayudhya (Krungsri), said the draft climate change bill will fundamentally transform Thailand from a voluntary carbon regime to a compliance-based one. This shift will introduce new risk parameters, specifically transition risks, to commercial banks, he said.
According to Mr Pairote, banks will integrate transition risk management and mitigation into their policy formulations and underwriting processes, while supporting customers who could be affected by the bill.
Banks may identify business opportunities in sectors or industries affected by the bill by providing financial products and services that aid clients in their transitions, adaptations and adjustments, he said.
Mr Pairote said Krungsri formulated a sustainable lending credit policy that includes climate risk, particularly transition risk, as a core component. This policy covers risk management frameworks and positive listings for activities embedded with environmental and climate benefits.
Once the new bill is implemented, the bank plans to build on this policy to facilitate Thailand's transition towards a low-carbon economy, he said.
Duangkamol Limpuangthip, head of the SME Banking Group at Krungsri, said the bill will impact all businesses, including SMEs. The bank has been working to raise awareness among SMEs to prepare them for the transition to ESG (environmental, social and governance) practices, she said.
Krungsri organised various knowledge-sharing activities over the past few years, including ESG events, seminars and the Krungsri ESG Academy project, to help customers create and implement transition plans for their businesses.
Ms Duangkamol said the bank collaborates with partners through the Krungsri ESG Ecosystem to provide solutions and transition loans to support customers with ESG plans.
Kasikorn Research Center (K-Research) anticipates the new bill will affect 14 carbon-intensive industries in Thailand, representing 6.5 trillion baht or 37% of the country's GDP. These industries will face increased costs from carbon footprint assessments, an emissions trading scheme, and a carbon tax, noted the research firm.
Greenhouse gas reduction will become a new standard in business operations, requiring companies to consistently monitor carbon footprints, reduce fossil fuel consumption, and invest in renewable energy to remain competitive in both domestic and international markets, according to K-Research.
Pipit Aneknithi, president of Kasikornbank (KBank), said the bank is transitioning to sustainable finance in line with the Bank of Thailand's regulations and is ready to comply with the government's climate change bill.
The bank expanded its portfolio of sustainable finance products, KBank Green Banking, to 130 billion baht and aims to reach 200 billion by 2030, although it recently reported it expects to reach this target before 2030, he said.
KBank wants to fully transform its existing loan portfolio into a green loan portfolio by 2065, said Mr Pipit.
He said the bank supports SME customers transitioning from "brown" industries to less environmentally harmful ones, following the central bank's guidance.
KBank, in collaboration with the public and private sector as well as educational institutions, established the Creative Climate Research Center to build awareness and provide information about sustainable economies to the public.
Additial reporting: Lamonphet Apisitniran, Narumon Kasemsuk and Phusadee Arunmas