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2 Oct 2023

Thai Economy

Thriving forest carbon credit market is set to help support the journey towards net zero (Current Issue No.3436 Full Ed.)

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        Forest carbon credits from carbon removal projects are seen as more popular than those from general carbon reduction/avoidance projects because they help create co-benefits with added economic value for communities, including new food sources, job creation, preservation of watersheds, pollution and natural disaster mitigation. Forests, therefore, represent another viable solution for the creation of value from carbon credits, which can in turn help support the journey towards net zero.
        Meanwhile, it is expected that forest carbon credit projects will gain more popularity in Thailand, thanks to the country’s advantages in terms of agricultural expertise, related knowledge, workforce and government support. KResearch estimates that the volume of Thailand’s forest carbon credits that have the potential to be certified will reach approximately 600,000-700,000 tons carbon dioxide equivalent (tCO2eq) over the next two years (2024-2025), which would be 5x higher than the total volume that has been certified so far although the figure may depend on the project developers’ applications for carbon credit registration at any given time. Looking ahead, it is expected that prices of forest carbon credits will increase, albeit at a slower rate in line with an anticipated growth in carbon credit supply amid the proliferation of related projects. Subsequently, prices of carbon credits will likely remain at elevated levels for an extensive period of time because of the limited forest areas and amount of time required for the projects to be developed so that there are forest carbon credits available to be certified in each round. There will be increased demand for forest carbon credits from carbon removal projects to achieve the set net-zero goal at a national level, as well.
        Although reforestation carbon offsets involve processes and costs, including other expenditures, which may affect the decision to carry out related projects, it is expected that forest carbon credit projects will gain increased popularity at home and abroad in alignment with the need to offset carbon emissions to achieve the net-zero goal. As the business sector may not be able to realize the net-zero goal alone, nature-based forestry solutions will play an increasing role in reducing the gap in GHG emissions. Those interested in a carbon credit project are advised to weigh the opportunity costs of either enjoying steady cashflows from using their lands or funds to invest in other projects or enjoying a round of cashflows, including non-monetary benefits, from investing in a carbon credit project. If they find that investing in a carbon credit project is worthwhile and meets their business needs, they are advised to accelerate their investment today to keep pace with the time it takes for forests to grow.    

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Thai Economy

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