รู้จักภาษีคาร์บอน (Carbon TAX)Understanding Carbon Tax

by the Climate Change Institute

As the world faces the challenges of global warming and climate change, the global community is establishing serious measures to address these issues, including the enactment of laws, regulations, or strategies aimed at mitigating these problems. Financial measures, which serve as penalties or fines on products or services that have detrimental environmental impacts and are likely to lead the world into a state of crisis, have also been introduced. One such measure is the tax initiative known as 'Carbon Tax', which is being implemented not only abroad but is also set to be introduced in Thailand under the (draft) Climate Change Act. Many parties may have heard about this already, and today we will learn more about the origin of the Carbon Tax and why Thailand needs to implement such a tax.

Climate Change Act

As of now (January 2025), Thailand is in the process of considering the (draft) Climate Change Act. The purpose of the draft Climate Change Act is to reduce Thailand's greenhouse gas emissions and promote adaptation to climate change. A support mechanism for this transition is to be established, which includes the establishment of a climate fund to be financed by a greenhouse gas emission trading system and a carbon border adjustment mechanism to raise funds for promoting projects, including the development of innovations and technologies that reduce greenhouse gas emissions. Furthermore, the establishment of a Carbon Pricing Mechanism will require greenhouse gas emitters to bear the costs associated with their emissions in accordance with the principle of 'the polluter pays', alongside the implementation of the Emission Trading Scheme (ETS), which sets a cap on greenhouse gas emissions from each sector and the Carbon Tax as an additional cost for the use of fossil fuels and products that emit greenhouse gases. Additionally, there will be a Thai Carbon Border Adjustment Mechanism (Thai CBAM) to prevent carbon leakage.

Understanding Carbon Tax

The term 'Carbon' refers to greenhouse gases (carbon dioxide CO2, methane CH4, nitrous oxide N2O, sulfur hexafluoride SF6, hydrofluorocarbons HFCs, perfluorocarbons PFCs, and nitrogen trifluoride NF3) that are assessed and reported in terms of carbon dioxide equivalent (CO2 equivalent: CO2eq).

'Carbon Tax' is a tax levied on goods or services that emit greenhouse gases measured in terms of carbon dioxide equivalent. Goods subject to the Carbon Tax include:
1. Goods that, during production, emit carbon exceeding the specified limits (currently [January 2025] Thailand lacks a baseline emissions database for the carbon emissions of each type of goods or industry)
2. Imported goods that emit carbon above the specified limits, known as Border Carbon Tax, which is collected when goods cross borders.
3. Goods that emit carbon during use.

Why impose a Carbon Tax?

The principle behind imposing a Carbon Tax is to raise the cost of goods that emit greenhouse gases, encouraging consumers to avoid using or consuming such products and providing a greater opportunity for environmentally friendly (higher-cost) products to become consumer choices. This will create competition among producers to develop environmentally friendly goods or services to help reduce greenhouse gas emissions, fostering competition in the market for environmentally friendly products, while also generating revenue for the government, which in many countries allocates these funds to support activities aimed at reducing greenhouse gas emissions that require knowledge, workforce, technology, and investment.