IEA: Thailand to meet its bold emission target by putting a price on carbon

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Thailand relies heavily on fossil fuels for its energy needs, but is showing promising signs of decreasing energy and CO2 emission intensity, the International Energy Agency (IEA) said on August 11.

With an ambitious GHG emission reduction target in its commitments under the Paris Agreement, Thailand has started shifting the focus of its energy policy to energy efficiency and the clean energy transition, the IEA said in an article posted on its website. Putting a price on carbon would greatly accelerate its progress towards the target, and in a cost-effective way.

While Thailand has some experience of creating voluntary carbon markets, and is currently considering a national emission trading system, it faces a number of hurdles, the IEA said, adding that these “readiness gaps” particularly relate to the nature of the country’s power system and policy environment, and stakeholders lacking the right tools to participate in a trading system. The IEA and TGO are working together to support the government in overcoming these hurdles, which are explored below.

According to the IEA, Thailand’s strong start towards a low-carbon future would quicken with carbon pricing.

Carbon pricing is considered part of the core policy mix in a climate-energy policy package, as a way to assign the costs of carbon emissions to those emitting them, the agency explained. This leverages the market to favour low-carbon solutions and enable cost-effective ways to reduce emission across sectors. The two main types of carbon pricing are emission trading systems, such as cap-and-trade programmes, and carbon taxes.

Robust carbon pricing can lead a clean energy transition and green economic development while maintaining energy security, supporting innovation, increasing efficiency and driving retirement of emission-intensive assets.

California’s emission trading system is a prime example. Its GHG emissions from electricity generation decreased by 30% between the start of the cap-and-trade programme in 2013 and 2017 due to retirement of coal plant and growth of renewables and natural gas generation. In addition, revenue from the cap-and-trade programme financed the California Climate Investments. These funded renewable fuel research, clean vehicle incentives, energy efficiency installations, wildfire protection and development of a low-carbon economy workforce.

Having confirmed its nationally determined contribution under the Paris Agreement in 2016, Thailand is implementing various action plans to reach its target of reducing GHG emissions in 2030 to 20.8% below the business-as-usual level, the IEA said, adding that the National Climate Change Master Plan (2015-50) refers to the carbon market as a potential mechanism to achieve targeted emission reductions in key industries and promote energy efficiency more widely. The upcoming Climate Change Act is expected to outline specific instruments to prepare for a national emission trading system, with a cabinet decision due in 2022.

According to the IEA, Thailand’s experience of carbon market mechanisms began in 2007, when the government established TGO to implement and manage GHG emissions projects. In 2103, the public body launched the Thailand Voluntary Emission Reduction programme, a baseline and credit programme. By 2020 it had 191 registered projects that are due to reduce emissions by 5.28 Mt CO2-eq annually and the Thailand Carbon Offsetting Program. It encourages public and private organisations to calculate their carbon footprint and buy carbon credits to offset their unavoidable emissions.

Most significantly, in 2015 TGO launched the Thailand Voluntary Emission Trading Scheme after six years of preparation. It is designed to serve as a pilot, setting up the infrastructure to develop a national emission trading system and identify gaps and opportunities. The first phase (2015-17) established and tested the market’s design features and the measurement, reporting and verification system. During the second phase (2018-20) TGO aims to encourage wider participation and develop participants’ trading capabilities.

Thailand has benefited from the pilot trading scheme in various ways: in addition to gaining valuable knowledge and capacity on carbon markets, it now has the legal framework to establish an effective emission trading system, the IEA said, adding that critically, the pilot scheme has also revealed Thailand’s readiness gaps, which fit into three broad themes.

 

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