Thailand tackles sustainability with carbon credits

    Thailand tackles Sustainability with Carbon Credits

    Thailand’s new carbon credit exchange is an important sustainability milestone.

    In September 2022, Thailand launched its first voluntary carbon credit exchange in a bid to curb its greenhouse gas emissions.i The exchange, FTIX, is an important initiative for the country, which aims to achieve carbon neutrality by 2050.

    The International Energy Agency (IEA) points out that robust carbon pricing can be a game changer in leading a clean energy transition and for green economic development, all the while maintaining energy security, supporting innovation, and increasing efficiencies.ii

    Read more about the global carbon market opportunity.

    Thailand is already cited as among the ten countries in the world most affected by floodsiii, and, according to ReliefWebiv, the number of people impacted by extreme river floods could grow by over two million by 2035-2044, with coastal flooding having the potential to affect a further 2.4 million people by 2070-2100. Droughts and cyclones also pose significant risks. Thailand's new carbon exchange could help fund new solutions and technologies to address some of these challenges.

    FTIX was jointly developed by the Federation of Thai Industries, a non-profit organisation which comprises approximately 12,000 private companies across 45 sectors, and Thailand Greenhouse Gas Management Organisation,v which was established in 2007 as an autonomous public organisation to manage and expedite the development and implementation of greenhouse gas reduction projects.vi

    FTIX will incorporate the government's existing voluntary emission reduction programme,vii serving as a trading platform for carbon credits, renewable energy and renewable energy certificates for enterprises aiming to use 100% renewable energy.viii While it currently only allows domestic trading with the government programme, it is anticipated that the platform will look to international trading at a future point.

    Carbon exchanges in Asia are numerous and becoming increasingly meaningful in the fight against climate change

    Carbon exchanges in Asia are now the norm, not the exception

    Carbon exchanges in Asia are numerous and becoming increasingly meaningful in the fight against climate change. In 2015, South Korea became the first emerging economy to launch a nationwide mandatory emissions trading system (ETS),ix while since 2019, Singapore has implemented a mandatory carbon tax in a bid to encourage companies to reduce their emissions. Singapore's carbon tax level was initially set at just S$5/tCO2e to provide a transitional period to give emitters time to adjust, but will increase in 2023.x From 2024, companies will be able to use high quality international carbon credits to offset up to 5% of their taxable emissions.xi

    In Japan, Tokyo and Saitama prefectures launched city-level ETSs in 2010-2011. Meanwhile China launched seven pilot ETS programmes at the provincial and city levels starting in 2013-2014, plus an additional pilot program in 2016. China then launched its own national mandatory carbon market in 2021 and expects to expand it from power generation to cover a variety of new sectors, including refining and petrochemicals, other industrial chemicals, building materials, steel, and nonferrous metals.xii Its national ETS is already the world's largest by emission volumes, three times bigger than the European Union's.xiii It currently covers more than four billion tCO2 from the power sector, which accounts for approximately 40% of national emissions.xiv However, the EU ETS still is the most valuable carbon market in the world at EUR 680 Bn in 2021, or 90% of global carbon value, given its higher average carbon pricexv.

    On the voluntary carbon market side, Singapore's Climate Impact X, or CIX, launched in 2021xvi as a global marketplace and exchange for carbon credits, jointly developed by DBS Bank, Singapore Exchange Group, Standard Chartered, and the Singapore sovereign wealth fund Temasek. In November last year it completed a 250,000-tonne carbon credit auction.xvii Similarly, AirCarbon was founded in 2019 and started trading in 2021 in the country.xviii

    Elsewhere, the Hong Kong stock exchange carried out the first batch of carbon credit trades on its new voluntary carbon market in November 2022xix, while Bursa Malaysia's voluntary carbon market started trading in December 2022.xx Other countries are following suit. In September 2022, Japan started a trial trading carbon credits on the Tokyo Stock Exchange, for example.xxi

    Thailand can now be added to the small group of APAC countries which have set up carbon trading platforms, though more are due to follow. For example, Indonesia is also looking to issue emission quotas for coal-fired power plants as a first step towards creating a mechanism for domestic carbon trading, with a target to launch a carbon exchange later this year.xxii

    Discover the views on sustainability that Asia-Pacific high-net-worth individuals hold.

    The bigger picture

    The development of carbon pricing programs and associated carbon exchanges in APAC countries like Thailand have the potential to go a long way in helping the region meet its sustainability goals

    At Lombard Odier, we believe that our global economic model is undergoing a transformation. We are moving away from today's Wasteful, Idle, Lopsided and Dirty (WILD) system towards a model where growth is decoupled from extraction and is linked to the regenerative power of nature. We believe this economy is Circular, Lean, Inclusive and Clean. We call this the CLIC economy.xxiii

    However, the challenges the world faces are stark. The level of carbon dioxide and other heat-trapping gases in the earth's atmosphere is higher now than it has been for at least four million years.xxiv 1.7 trillion tonnes of CO2 have been emitted by fossil fuels and industry since 1850.xxv

    Carbon markets have the potential to significantly address many challenges. When businesses factor in the cost of emissions into the bottom line, they are incentivised to adopt low carbon technologies and working practices. Some of the more established carbon markets are already demonstrating this. Between 2005 and 2019, following the introduction of the EU's Emissions Trading System, carbon emissions fell by 35%xxvi, even as GDP grew 42%. Carbon markets in the Eastern United States and in California have seen similar success, with carbon emissions reductions of 47% and 26% respectively.xxvii

    The development of carbon pricing programs and associated carbon exchanges in APAC countries like Thailand have the potential to go a long way in helping the region meet its sustainability goals.

    Read more about Lombard Odier's commitment to sustainability.

    i https://www.bloomberg.com/news/articles/2022-09-21/thailand-launches-first-carbon-credit-exchange-to-curb-emissions?leadSource=uverify%20wall
    ii https://www.iea.org/articles/putting-a-price-on-carbon-an-efficient-way-for-thailand-to-meet-its-bold-emission-target
    iii https://reliefweb.int/report/thailand/climate-risk-country-profile-thailand
    iv https://reliefweb.int/report/thailand/climate-risk-country-profile-thailand
    v https://www.bangkokpost.com/business/2397368/fti-rolls-out-carbon-credit-trade-platform
    vi http://www.tgo.or.th/2020/index.php/en/page/background-544
    vii https://www.bloomberg.com/news/articles/2022-09-21/thailand-launches-first-carbon-credit-exchange-to-curb-emissions?leadSource=uverify%20wall
    viii https://www.nationthailand.com/thailand/40020292
    ix https://www.lombardodier.com/home/rethink-sustainability/the-global-carbon-market-opportu.html
    x https://www.nccs.gov.sg/singapores-climate-action/carbon-tax/#:~:text=The%20carbon%20tax%20level%20is,give%20emitters%20time%20to%20adjust.&text=To%20achieve%20our%20climate%20ambition,tCO2e%20by%20203.
    xi https://www.nccs.gov.sg/singapores-climate-action/carbon-tax/#:~:text=The%20carbon%20tax%20level%20is,give%20emitters%20time%20to%20adjust.&text=To%20achieve%20our%20climate%20ambition,tCO2e%20by%20203.
    xii https://www.controlrisks.com/our-thinking/insights/asias-booming-carbon-market
    xiii https://www.forbes.com/sites/energyinnovation/2022/04/18/chinas-emissions-trading-system-will-be-the-worlds-biggest-climate-policy-heres-what-comes-next/?sh=5afb76b22d59
    xiv https://www.eex.com/en/markets/environmental-markets/china-carbon
    xv https://www.reuters.com/business/energy/global-carbon-markets-value-surged-record-851-bln-last-year-refinitiv-2022-01-31/
    xvi https://www.cnbc.com/2021/05/21/a-new-global-carbon-exchange-will-be-launched-in-singapore-this-year.html
    xvii https://www.reuters.com/business/environment/carbon-exchange-cix-completes-250000-tonne-carbon-credit-auction-2022-11-04/
    xviii https://www.senecaesg.com/insights/singapores-carbon-exchange-to-launch-futures-trading-for-carbon-offsets/#:~:text=Singapore's%20AirCarbon%20was%20founded%20in,in%20various%20stages%20of%20joining.
    xix https://www.nasdaq.com/articles/hong-kong-exchange-carries-out-first-carbon-credit-trades
    xx https://www.bursamalaysia.com/bm/about_bursa/media_centre/bursa-malaysia-launches-a-voluntary-carbon-market-exchange
    xxi https://www.jpx.co.jp/english/corporate/news/news-releases/0060/20220922-01.html
    xxii https://www.businesstimes.com.sg/international/asean/indonesia-set-coal-power-plants-emission-quotas-month
    xxiii https://www.lombardodier.com/home/rethink-sustainability/the-global-carbon-market-opportu.html
    xxiv https://www.lombardodier.com/home/rethink-sustainability/the-global-carbon-market-opportu.html
    xxv Co2 emissions – Our World in Data
    xxvi The EU Emissions Trading System in 2020: trends and projections – European Environment Agency (europa.eu)
    xxvii https://www.lombardodier.com/home/rethink-sustainability/the-global-carbon-market-opportu.html

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