The government is being advised to initiate a low-interest loan programme to assist businesses in upgrading their machinery and equipment in alignment with the EU's Carbon Border Adjustment Mechanism (CBAM).
According to Chaichan Chareonsuk, chairman of the Thai National Shippers' Council, since the EU enforced the CBAM on targeted industries during a transitional period, the Thai private sector has been preparing by enhancing its competitiveness.
However, the private sector wants the government to establish a fund to support businesses in their efforts to upgrade machinery and equipment to comply with the CBAM and environmental requirements, offering interest rates below the market rate, he said. Companies could improve their production systems using methods that are less harmful to the environment and adjust cost structures by focusing on energy saving, said Mr Chaichan.
Poonpong Naiyanapakorn, director-general of the Trade Policy and Strategy Office, said during the transitional period businesses need to prepare for the full implementation of CBAM measures and a low-carbon society.
CBAM is a tariff on products that generate a high level of carbon dioxide (CO2) during the manufacturing process. It is part of the "Fit For 55" measures under the European Green Deal policy. The objective of this policy is to promote fair competition and eliminate the price advantages of products that generate a high level of greenhouse gas emissions from countries that have less stringent emission standards.
The measure covers six product groups: iron and steel, aluminium, cement, fertiliser, electricity and hydrogen, and certain downstream products such as nuts and bolts made from iron and steel, and cables made from aluminium.
CBAM implementation has two stages, with a transitional period from Oct 1, 2023 to Dec 31, 2025, during which importers in the EU are required to report quarterly data, including import quantities and embedded emissions. The type of greenhouse gas that needs to be reported varies depending on the nature of the product. Only CO2 emissions need to be reported for products from the iron and steel, cement, electricity and hydrogen segments.
Both CO2 and nitrous oxide emissions must be reported for products in the fertiliser group. CO2 emissions and perfluorocarbons must be reported for products in the aluminium group.
Importers must apply for CBAM Declarant status, and Thai exporters must register in the CBAM Registry by Dec 31, 2024.
The second phase comprises mandatory full implementation, starting from Jan 1, 2026, when importers must purchase CBAM certificates based on the quantity of greenhouse gas emissions, referencing the prices of emission permits in the EU market (priced at €78.23 per tonne of carbon as of Jan 2, 2024). After 2026, the scope could be broadened to include products such as organic chemicals and polymers.
The value of Thai exports of CBAM-related products to the EU in 2022 was US$479 million, accounting for 2.12% of total shipments to the EU and 5.47% of global CBAM-related exports.
Iron and steel accounted for the highest amount among the group, valued at $369 million (1.64% of total Thai exports to the EU and 6.8% of global iron and steel exports), followed by aluminium, with exports valued at $110 million (0.49% of total Thai exports to the EU and 3.82% of global aluminium exports). Fertiliser had an export value of only $20,000. Thailand did not export cement, electricity or hydrogen to the EU.
Mr Poonpong said the public and private sectors have been collaborating during the transitional period to promote businesses in creating Carbon Footprint of Products (CFP) labels. These labels involve calculating the quantity of greenhouse gas emissions throughout the supply chain, which can be utilised to efficiently plan strategies for reducing such emissions.
CFP certification is endorsed by the Thailand Greenhouse Gas Management Organization.
He said CFP calculation measures the life cycle of a product, with the data structured in a format similar to embedded emissions. Calculation of CFP can be used to report the embedded emissions required by CBAM, said Mr Poonpong.