Challenge
Thailand intends to reduce greenhouse gas emissions by 20-25 percent by 2030 under the Paris Agreement. Thailand has been a net energy importer with growing energy demand, especially fossil fuel products, resulting in a steady increase in greenhouse gas emissions. As of 2020, energy industries and transport account for almost 70 percent of total greenhouse gas emissions.
Thailand recognizes the importance of carbon pricing instruments and their alignment with other policies to help decarbonize the economy. As an early mover in the region in implementing carbon pricing, the government started several voluntary carbon pricing instruments, such as the Thailand Voluntary Emission Reduction Program and the Thailand Carbon Offsetting Program in 2013. However, to mitigate greenhouse gas emissions at scale Thailand still needs to put in place a legal and institutional framework and develop the capacity of public and private stakeholders to understand and implement carbon pricing measures.
Approach
The World Bank’s support targeted enhancing knowledge and capacity of the key government agencies through in-depth technical and analytical work, and by facilitating knowledge sharing with the other early mover countries/region, such as European Union (EU), China, Japan, and India. This partnership under the PMR project also supported the local government’s greenhouse gas abatement implementation under the Low Carbon City Program, combined with financial mobilization through carbon trading based on Thailand’s voluntary emissions reduction program, and a pilot program for the promotion of internal carbon pricing at targeted flagship companies in Thailand’s Eastern Economic Corridor.
In addition to providing the right technical input, building understanding and strengthening stakeholders’ buy-in were critical to project implementation, the World Bank team focused resources on strategically developing a number of policy dialogues, informal discussions, site visits, and consultation mechanisms to strengthen cooperation and communication among relevant public agencies.
“Consistent with the Vision of the Department of Alternative Energy Development and Efficiency, the Energy Performance Certificate initiative under this PMR corporation will be part of our to achievement to become a leader in alternative energy development and energy efficiency in Asia by 2036.”
Mr. Sarat Prakobchat, Director of Energy Regulation and Conservation Division.
Results
All key technical assistance and policy deliverables were well recognized including the legal framework for Emission Trading System, Energy Performance Certificate System, and the abatement plans for low carbon cities by the recipient agencies and targeted private sector and adopted by government entities for further implementation. The project enhanced the government's legal, institutional and technical capacity and stakeholders’ understanding and engagement for carbon pricing, and advanced the country’s readiness to implement carbon pricing instruments. These instruments will be fully integrated into Thailand’s energy, climate change, and other sector policies, and will help the country meet its long-term decarbonization goals under the Paris Agreement:
The government is developing laws for carbon pricing, such as the Climate Change Act, Greenhouse Gas Reporting Law, and Emission Trading System Law. The Thailand Greenhouse Gas Management Organization submitted on April 26, 2021 the draft Greenhouse Gas Reporting Law to the Office of Natural Resources and Environmental Policy and Planning to be considered in the draft Climate Change Act. The Emission Trading System law is in the process of public consultation with all stakeholders, and the Climate Change Act is expected to be submitted to the Cabinet in the near future. The Policy Committee of the Eastern Economic Corridor (EEC), a special economic zone made up of three provinces in eastern Thailand, also approved the framework of investment and development of clean energy for electricity generation for implementation in the EEC area. Thailand Greenhouse Gas Management Organization was assigned to design a management and planning system, and to develop the carbon credit mechanism and Emission Trading System among entrepreneurs in the EEC area.
The Department of Alternative Energy Development and Efficiency plans to implement an Energy Performance Certificate pilot program targeting 20–30 manufacturing facilities with high greenhouse gas emissions in 2021. The department aims to learn from this pilot program to be better prepared to roll out a more comprehensive data acquisition program in the next phase. The plan was postponed during the COVID-19 pandemic as the implementation of the pilot program during this unusual situation will distort the baseline energy consumption of industries from their business as usual. Beyond this, the Energy Performance Certificate is being considered in the National Energy Efficiency Plan as a program to be carried out for long-term implementation.
Most of the 25 municipalities under the Low Carbon City Program are planning to make green investments based on local greenhouse gas abatement plans. The government is now considering scaling up the program from the city level to the regional level. These municipalities have used the plans to propose and prepare waste-to-energy projects as part of a three-year municipality development plan. The project also mobilized additional co-financing from private enterprises to support the municipalities green investments, including the Udonthani City municipality which was successful in getting THB369.6 million (or US$12.3 million) for their investment in the waste-to-energy project. Most municipalities integrated the plans into awareness-raising and information dissemination programs. The program was also successfully used as a platform to work in close collaboration with the Ministry of Interior to design and incorporate climate change performance indicators into the overall performance indicators of municipalities. The project also mobilized additional co-financing from private enterprises to support the municipalities green investments.
Thailand has been recognized among the PMR participating countries as one of the most advanced countries in the region following Japan, Korea, China and Singapore in terms of carbon pricing preparation and implementation. The project helped local municipalities with capacity building in mobilizing financial support in total of more than THB 376 million or US$12.8 million from the carbon credit mechanism and built technical capacity in climate change planning and implementation for medium and small municipalities across Thailand.
Bank Group Contribution
The World Bank Group’s Partnership for Market Readiness Trust Fund (funded by Australia, Denmark, European Commission, Finland, Germany, Japan, Netherlands, Norway, Spain, Sweden, Switzerland, United Kingdom, and the United States), provided US$3 million in technical assistance to support the Royal Thai Government in its ongoing effort to reduce greenhouse gas emissions. Additional funding, of US$ 450,000, from the PMR was mobilized for analyzing carbon pricing options.
Partners
- Thailand Greenhouse Gas Management Organization (TGO) – Main implementing agency, with co-financing of US$ 3.68 million
- Department of Alternative Energy Development and Efficiency – Advisor and main beneficiary on the energy performance certificate schemes
- Department of Local Administration – Advisor and main implementing agency on the low-carbon city development
- World Bank – leveraging funds in total of more than THB 376 million or US$12.8 million from the carbon credit mechanism, developing partnerships with private enterprises to mobilize additional co-financing to support the municipalities green investments of the municipalities and secretariat to the PMR
Moving Forward
The government will be taking legal and policy actions to implement enhanced carbon pricing. The Department of Alternative Energy and Efficiency plans to implement a pilot Energy Performance Certificate program. The Thailand Greenhouse Gas Management Organization intends to scale up and enhance the existing carbon offsetting program and crediting program with a view to introduce additional carbon pricing instruments, such as a mandatory Emission Trading System, after the approval of the Climate Change Act and other laws.
Based on the World Bank-supported pilot program in 2020 targeting six flagship power, petrochemical, refinery, and real estate industries in the Eastern Economic Corridor for the promotion of internal carbon pricing at the firm level, the Thailand Greenhouse Gas Management Organization is extending the program to cover more companies. In a 2021-2022 period, the organization will carry out an extended pilot program targeting 21 private firms. This is helping companies to prepare for future carbon pricing implementation and consider appropriate investment and business decisions. This apparently fits the global momentum of the Dow Jones Sustainability Indices (DJSI) which are a family of benchmarks for the investors to recognize that sustainable business practices are critical to generating long-term shareholder value, of which the internal carbon pricing is one of the criteria for the company’s sustainability scores, of which three out of the six participating flagship companies - PTT Global Chemical, Siam Cement Group, and IRPC - also got listed in the Dow Jones Sustainability Indices.