Thailand maps climate law to tackle economic risks and fund green transition

Thailand is preparing a Climate Change Bill that could take effect in the third quarter of 2027, as officials warn that inadequate action to address climate risks could leave the economy facing losses equivalent to as much as 14% of GDP by 2050.

The proposed legislation would introduce carbon-pricing mechanisms, connect voluntary carbon credits with a mandatory emissions trading system and establish a Climate Fund to support businesses and communities through the transition.

Phirun Saiyasitpanich, director-general of the Department of Climate Change and Environment, outlined the plans at the Bangkok Business Summit 2026 during a panel discussion entitled “From Ambition to Execution: Policy Architecture and Low-Carbon Cities in Action”.

He said climate change was no longer a distant environmental concern but an economic challenge directly affecting Thailand’s macroeconomic stability. The view that climate adaptation and emissions reduction were merely additional costs, separate from revenue and business growth, was changing fundamentally.

The economic cost of inaction

Phirun highlighted the “cost of inaction”, citing a World Bank report estimating that Thailand’s GDP could be 7-14% lower by 2050 without stronger adaptation measures.

Taking action now was therefore not simply about environmental conservation, he said, but about protecting economic stability and employment. Reducing greenhouse-gas emissions would also be essential to maintaining Thailand’s competitiveness in the future global economy. The World Bank’s assessment similarly identifies substantial economic risks from failing to adapt and links future competitiveness to progress in reducing emissions.

To provide the clarity and predictability sought by investors in low-carbon technologies, Thailand has brought forward its net-zero greenhouse-gas emissions target by 15 years, from 2065 to 2050.

Phirun also referred to long-term plans to phase out coal-fired power plants gradually and increase the share of clean energy to 24% by 2050.

Near-term targets require faster action

Although 2050 remains some way off, Phirun stressed that the immediate priority was Thailand’s NDC 2.0 commitment for 2030.

Under that nationally determined contribution, the country aims to reduce greenhouse-gas emissions by 30-40% compared with a business-as-usual scenario.

The latest progress figure cited in the presentation was a reduction of about 16% in 2024. He emphasised that the public and private sectors would need to work closely together to accelerate progress over the six-year period from that point to the 2030 deadline.

Phirun described NDC 3.0 as a more ambitious approach, shifting from comparison with a business-as-usual projection to an absolute emissions-reduction target. The account of his remarks cited a reduction of 40% by 2035.

Achieving the 2035 commitment would require investment of at least THB2 trillion, he said. Financing would need to come from private-sector investment and government budgets, with climate change moved from the margins to the centre of national fiscal policy.

International finance and carbon-market cooperation

Alongside domestic investment, Phirun said Thailand would require approximately US$7 billion in international financial support, including for projects that were not yet commercially viable.

Potential sources include the Green Climate Fund and cooperation under Article 6.2 of the Paris Agreement, which provides for the international transfer of emissions-reduction outcomes. Thailand’s NDC 3.0 also identifies substantial international financing needs for the transition.

Phirun said Thailand had signed cooperation agreements with Switzerland, Singapore and Japan. The Bangkok electric-bus programme had already transferred carbon credits to Switzerland, while numerous other projects were being prepared. Further transfers from the bus programme were confirmed by the participating KliK Foundation in April 2026.

Climate bill designed as an economic blueprint

Phirun described the proposed Climate Change Act as an “economic blueprint” that would provide financial instruments to mobilise investment and regulate greenhouse-gas emissions.

Three principal mechanisms would be particularly important for businesses.

Carbon tax: The bill would provide for upstream taxation of carbon-intensive products, including natural gas, coal and petroleum. The mechanism would help establish a standardised emissions database and provide direction for a minimum carbon price.

Emissions trading system: An emissions trading system (ETS) would allocate emissions allowances to major emitters. Businesses exceeding their allocations would have to purchase additional allowances from other participants or use eligible carbon credits to offset excess emissions.

Linking voluntary credits with mandatory obligations: Phirun argued that a voluntary carbon market alone could not achieve sustained growth without genuine demand. The proposed legislation would connect carbon credits to the ETS, allowing regulated businesses to use eligible credits to cover excess emissions, subject to a 15% limit.

The restriction is intended to prevent greenwashing and ensure that large companies invest in their own emissions-reduction technologies rather than relying solely on purchased credits.

Climate Fund to support a just transition

Recognising that carbon taxes and emissions trading could increase financial burdens and investment costs, the draft legislation would establish a Climate Fund to support a “just transition”.

The fund would draw on revenue from the ETS, carbon-credit transaction fees and contributions associated with Thailand’s emissions cap, referred to as the “Thailand Cap”.

It would provide financial assistance through highly concessional loans, grants and equity investment. Support would extend from vulnerable small and medium-sized enterprises to large organisations seeking to invest in costly low-carbon technologies.

The fund would also assist communities in strengthening their capacity to adapt to climate change.

Phirun said it had been designed around a blended-finance model. Financial institutions would be able to bid to work with the fund on financing packages that lower borrowing costs and make environmental investment projects more financially viable.

Legislation expected in third quarter of 2027

The draft Climate Change Bill comprises 14 chapters and 205 sections.

Phirun said the working group was nearing completion of its review of Chapter 8 and would then move to Chapter 9, which addresses the Thailand Taxonomy, a framework for classifying environmentally sustainable economic activities, and its future development.

He expected the Council of State’s legal scrutiny to be completed and the bill to proceed through the House of Representatives, with enactment anticipated in the third quarter of 2027.

The legislation would mark a significant change for Thai businesses, which would need to prepare for new emissions obligations, carbon-pricing mechanisms and financing arrangements.

Source: Krungthep Turakij