EU Carbon Border Tax Set to Impact Thai Exporters as Full Implementation Approaches

Thai exporters are bracing for increased costs and regulatory compliance as the European Union's Carbon Border Adjustment Mechanism (CBAM) enters its implementation phase, requiring carbon certificates for six key product categories under the bloc's ambitious European Green Deal.

 

The mechanism, designed to protect the environment and elevate European industrial standards, mandates that importers of steel and iron, aluminium, fertilisers, cement, energy, and hydrogen—as well as downstream products such as steel nuts and screws and aluminium cables—purchase carbon certificates from designated regulatory authorities in their respective countries.

 

The EU has structured CBAM implementation across three distinct phases, creating a graduated approach to carbon border taxation.

 

 

Phase One: Transitional Period

Running from 1 October 2023 to 31 December 2025, this transitional phase requires importers to disclose the carbon content embedded in their products without mandating certificate purchases. This grace period allows businesses to adapt their reporting systems whilst familiarising themselves with the new requirements.

 

 

Phase Two: Partial Implementation

From 1 January 2026 to 31 December 2033, only authorised CBAM declaration holders will be permitted to import covered goods into the European Union. However, during this period, the EU will continue providing free carbon emission allocations to certain factories and enterprises to mitigate cost impacts and prevent carbon leakage—the relocation of production outside the EU to avoid climate regulations.

These free allocations will be entirely phased out when CBAM reaches full implementation, ensuring a level playing field between EU and non-EU producers.

 

 

Phase Three: Full Implementation

Beginning 1 January 2034, CBAM will operate at full capacity, requiring both EU manufacturers and importers of the specified products to pay carbon costs based on their actual emission levels, eliminating all free allocations.

 

 

 

Austria Embraces CBAM

The Trade Promotion Office in Vienna reports that Austria's Ministry of Finance (Bundesministerium für Finanzen: BMF) serves as the designated authority for issuing carbon certificates.

 

The ministry assumes direct responsibility for verification, registration approval, supervision, and carbon fee collection through customs systems, with enforcement beginning in 2023.

 

Data from Austria's Chamber of Industry suggests the country's Gross Domestic Product faces potential reduction or slower growth rates due to the mechanism's economic impacts.

 

 

Rising Export Costs for Thai Businesses

Thai businesses will face direct impacts on export costs as affected products must bear additional carbon certificate expenses.

 

Simultaneously, competitive structures in European markets will undergo inevitable adjustments, whilst supply chains will face increased scrutiny requiring production processes to meet enhanced EU environmental standards.

 

Consequently, clean technology with low carbon emissions will gain pricing advantages in maintaining market competitiveness.

 

Thai international traders must adapt to preserve their competitive edge, particularly in affected industrial product categories.

 

Whilst CBAM may be perceived as a trade barrier, it simultaneously presents a significant opportunity for Thai businesses to upgrade production standards in alignment with global market trends.

 

Proactive implementation and timely long-term planning could enable Thailand to sustainably maintain this valuable export market.

 

The Thailand Greenhouse Gas Management Organization (TGO), operating under the Ministry of Natural Resources and Environment, serves as the primary authority for issuing carbon certificates for products and organisations according to international standards.

 

TGO supports Thai businesses in transitioning to a low-carbon economy through training and consultancy services, developing appropriate carbon reduction frameworks for various export industries.

 

Exporters should consider monitoring developments and adaptation opportunities from TGO to ensure timely adjustment and sustainable competitiveness in global markets.

 

 

 

 

Source: Department of International Trade Promotion