Can Thailand Lead ASEAN in Climate Action Through Tax Reform? Here’s What You Need to Know!

Thailand is on track to be the second country in ASEAN, following Singapore, to introduce a carbon tax as part of its strategy for reaching carbon neutrality by 2050. This development comes through the draft Climate Change Act being prepared by Thailand’s Department of Climate Change and Environment.

Experts from Tilleke & Gibbins, Charuwan Charoonchitsathian and Phareeya Yongpanich, emphasize the significance of this move. They explain that the carbon tax will target greenhouse gas emissions from both domestic and imported goods.

How Will the Carbon Tax Work?

Initially, the tax will focus on oil products, though it’s planned to expand to other fossil fuels like gas and coal. According to the legislative draft, there is a specified schedule of tax rates, with the maximum set at 120 baht (about $3.67) per unit for fossil fuels.

The tax will apply to industrial operators and importers as defined by Thai law. This framework allows the carbon tax to extend beyond the oil sector in the future. Importers of specific goods will be required to register and report their emissions. They will also need to purchase carbon adjustment certificates based on the emissions of their imports.

Interestingly, the draft includes a provision that allows importers to request deductions if they have already paid a carbon price in their home country. This could help avoid double taxation for multinational companies.

Impact on Existing Contracts

The new carbon tax may complicate existing contracts. According to Charuwan and Phareeya, businesses might face unexpected costs if contracts lack clauses that address change in laws or tax adjustments. It’s wise for companies to review their contracts to determine any financial impacts and explore ways to adjust those agreements, especially in long-term deals.

What Lies Ahead for Thailand’s Climate Strategy?

As Thailand aims for carbon neutrality by 2050, the carbon tax framework is expected to evolve. Authorities may extend its reach to include more products or sectors over time. Industries that use a lot of energy should start preparing by assessing their carbon emissions and planning for regulatory compliance.

Thailand’s actions might inspire local and regional environmental policies that promote an ASEAN-wide carbon market. This shift could lead to enhanced disclosure requirements for Thai businesses involved in international trade, along with revised compliance procedures and environmental reporting standards.

Recent Trends and Statistics

Many countries are now moving toward carbon pricing. As of late 2022, over 60 jurisdictions had implemented carbon pricing mechanisms, covering more than 20% of global greenhouse gas emissions. Thailand’s entry into this realm could set a benchmark for other countries in the region, driving a collective march toward sustainability.

As people become more aware of climate change, social media users frequently express support for climate policies. Recent hashtags like #CarbonTaxNow have gained traction, reflecting public demand for action against environmental challenges.

In conclusion, Thailand’s carbon tax initiative is a significant step towards combating climate change and could influence broader regional efforts. As businesses prepare for these changes, staying informed and adaptive will be key for success in the evolving regulatory landscape. For further insights into global carbon markets, you can explore this World Bank Report on Carbon Pricing.

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