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21 Sep 2023

Industry

CBAM poses major challenge of adaptation for Thai steel exporters to the EU (Current Issue No.3435 Full Ed.)

คะแนนเฉลี่ย

        EU authorities have introduced further details of the Carbon Border Adjustment Mechanism (CBAM), which will enter its transitional phase in October 2023 before coming into effect in 2026. Thai steel exporters to the EU may need to prepare for CBAM reporting, while considering the price of CBAM certificates in order to weigh cost effectiveness of investment to enhance production processes. They may have different alternatives in terms of making adjustments, depending on their market share, production structure, and adaptability. Going forward, government measures are essential to support Thai exports affected by the CBAM.

        Additional details of the EU CBAM have been released, though some issues are pending finalization. During the transition period, exporters of certain products are required to report carbon emissions data to the EU. The reporting obligations and processes are complex. Regarding CBAM certificates, companies with carbon footprint of products (CFP) can calculate the price of CBAM certificates using their own greenhouse gas (GHG) data. Meanwhile, businesses – especially SMEs – not having carbon footprint data must use the EU’s default values for the calculation. During the transitionary phase of the CBAM until its actual implementation in 2026, Thai steel exporters who are aware of the cost of CBAM certificates may consider investment options to transform their production processes aimed at reducing GHG emissions.

        KResearch projects that the overall cost of CBAM certificates will account for around 1.5-1.7 percent – amounting to THB 167-193 million – of the total value of Thai steel exports to the EU under the CBAM. Thai steel exporters to the EU may need to purchase CBAM certificates at a cost of THB 1,338-1,545/ton. However, these figures are only an estimate to assess the potential impact of this measure on the Thai steel industry. Businesses are scheduled to purchase CBAM certificates from January 2026. Their costs would vary depending on several variables.

        Given different specific factors, Thai steel exporters to the EU must consider appropriate timing, cost effectiveness for production process adjustment based on the available options, as well as the price of CBAM certificates which will tend to rise. Going forward, aside from business adjustments, government support in enactment of the Climate Change Act, a carbon pricing mechanism that meets international standards, carbon tax measures, and Thailand’s emissions intensity benchmark are essential. These endeavors will help to reduce the cost of CBAM certificates and expedite the green transition, driving the country and the global effort towards the net zero goals.

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