Cabinet Approves “Carbon Tax” Policy for Fuels with No Impact on Retail Prices
The Thai Cabinet has approved in principle a draft ministerial regulation to establish a carbon pricing mechanism under the excise tax structure. This initiative, proposed by the Ministry of Finance, aims to integrate carbon pricing into the excise tax rates for petroleum and petroleum products without increasing retail prices, fostering awareness among the public and industries ahead of the enactment of the “Climate Change Act B.E. ….”
Affected Fuel Products
The regulation covers various petroleum products, including:
- Gasoline and similar fuels
- Kerosene and related lighting oils
- Jet fuel
- Diesel and similar oils
- Liquefied Petroleum Gas (LPG)
- Propane and similar gases
- Fuel oils and related products
Maintaining Current Tax Rates
The excise tax rates will remain unchanged, incorporating the carbon pricing component within the existing structure. This approach is designed to encourage behavioral shifts among consumers and industries, supporting sustainable development by reducing greenhouse gas emissions.
Initial Carbon Price and Awareness Campaign
The regulation sets an initial carbon price at 200 THB per ton of CO2 equivalent, calculated based on the emission factor of each fuel type. For example, diesel fuel emits approximately 0.0027 tons of CO2 per liter, resulting in a carbon tax of 0.55 THB per liter. This amount will be included within the existing excise tax of 6.44 THB per liter.
The policy emphasizes public awareness rather than revenue generation, with the carbon pricing mechanism serving as a visible component in the excise tax calculation. This aims to educate consumers and businesses about the cost of greenhouse gas emissions without affecting production costs or consumer prices.
Long-Term Implications and International Alignment
In the future, adjustments to the carbon price will be subject to Cabinet approval. Should the carbon price exceed 200 THB per ton of CO2 equivalent, any resulting changes to excise tax rates will follow standard legislative procedures. The Ministry of Finance is coordinating with other agencies, including the Ministry of Energy, the Ministry of Natural Resources and Environment, and the Ministry of Industry, to align with Thailand’s forthcoming Climate Change Act.
The initiative supports Thailand’s goals of achieving Carbon Neutrality by 2050 and Net Zero emissions by 2065. The policy particularly targets the transportation and petroleum sectors, which account for 70% of national greenhouse gas emissions.
Enhancing Trade Competitiveness
Deputy Finance Minister Phupha Rojanasakul highlighted that the carbon pricing mechanism will enhance Thailand’s trade competitiveness by preparing businesses for compliance with international standards such as the EU’s Carbon Border Adjustment Mechanism (CBAM). This regulation ensures that Thai exporters can address carbon pricing requirements when shipping goods to countries with strict environmental policies.
Conclusion
The policy marks a significant step towards embedding environmental responsibility into Thailand’s fiscal system. By maintaining current tax rates and prioritizing awareness, the initiative aims to foster a transition towards sustainable practices while minimizing economic impacts. The integration of carbon pricing within the excise tax structure demonstrates Thailand’s commitment to balancing economic growth with environmental stewardship.
