The draft Climate Change Act (“Draft Act“), proposed by the Department of Climate Change and Environment (“DCCA“) under the Ministry of Natural Resources and Environment, is currently in the legislative process.

As Thailand is facing severe climate change impacts, including altered seasons, natural disasters, and biodiversity loss. Despite its commitment to carbon neutrality and net-zero emissions under the Paris Agreement, current laws fall short in addressing these challenges. To meet its goals, Thailand must set clear climate action targets, develop coordinated policies across agencies, and implement measures like emission reporting and carbon pricing. These efforts will boost resilience, support low-carbon investments, and transition the economy to a sustainable, value-driven model, necessitating the enactment of this Draft Act.

In this context, the Draft Act introduces 3 primary issues including carbon tax system, carbon credit business, greenhouse gas emissions trading system as summarized below.

A. Carbon Tax System

Establish a “Carbon Tax System” designed to levy taxes on goods based on the greenhouse gas emissions assessed throughout their life cycle for the purpose of reducing domestic emissions and address cross-border leakage.

The Ministry of Finance will collect taxes from producers or importers of goods with specified characteristics and types. Details regarding goods definitions, tax assessments, rates, criteria, methods, and collection conditions will be further announced under ministerial regulation jointly issued by the Ministry of Natural Resources and Environment and the Ministry of Finance.

B. Carbon Credit Business

Stipulate that the carbon credit business operators including trading centers, independent standard certification providers or specified other related carbon credit businesses must register their carbon credit business with the Committee of the Greenhouse Gas Management Organization (“CGGMO”), a public organization established under this Draft Act.

Additionally, the establishment and operation of carbon credit trading centers must comply with securities and exchange laws, and these carbon credit business operators must enter into agreements with the CGGMO to integrate their trading systems with the CGGMO’s carbon credit registry system.

C. Greenhouse Gas Emissions Trading System

To meet greenhouse gas reduction targets and promote low-carbon investments, Thailand will establish a “Greenhouse Gas Emissions Trading System,” stipulating the allocation of emission rights to regulated entities, treating these rights as property, and regulating their trading under securities and exchange laws.

Latest Status of the Draft

The Draft Act recently underwent public hearings conducted by the DCCA from February 28 to April 5, 2024, and is now under review by sub-committees of DCCA that plan to submit it to the Thai Cabinet for consideration by October 2024. Following cabinet approval, the Draft Act will be presented to the Thai House of Representatives and Senate for further approval.

By Kraisorn Rueangkul, Partner, Thailand

Kraisorn is a Country Partner of DFDL Thailand, and the Country Head of the foreign direct investment, regulatory & compliance, and employment practice groups.

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.