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9 Jan 2023

Econ Digest

From October 1, 2023 onwards, Thai exporters must report carbon emissions for products in the CBAM’s targeted industries exported to the EU


        The Members of the European Parliament (MEPs) on December 13, 2022 reached a preliminary agreement on the implementation of the Carbon Border Adjustment Mechanism (CBAM). From October 1, 2023, the importers of non-EU countries’ products with prices higher than EUR150 in the targeted industries – cement, electricity, fertilizers, iron and steel, aluminum and hydrogen, including those with indirect emissions and downstream products such as screws and bolts that use materials in targeted industries, are required to report CO2 emissions generated in the production of products imported into the EU. Such reports must be submitted on a quarterly basis, consisting of (1) volume of goods imported to the EU, (2) amount of CO2 emissions emitted, and (3) carbon fees paid for greenhouse gases generated in the countries of imported goods (if any).

        By 2025, following the implementation of its CBAM, the EU will assess the progress and outcome based on data obtained during the green transition before considering enforcement of carbon tax from 2026 onwards. The tax rates will be based on average weekly prices in the EU Emission Trading System (ETS). In addition, the CBAM will likely be expanded to other sectors covered by the ETS such as basic organic chemicals, plastics and polymers, glass, ceramics, gypsum, paper, etc. The role of the EU ETS will be phased out and eventually ended by 2034.

        As for the impact on Thai exporters, the proportion of Thai exports to the EU in the CBAM’s targeted industries is small, mainly dominated by 2 industries - iron, steel and related products, and aluminum. The total export value in 2021 was THB18.1 billion, accounting for 2.3% of the total export value to the EU and 5.8% of the total export value of the same type of products, involving 1,298 exporters. However, even though the EU is not the main market for Thai exporters of products under the CBAM’s targeted industries, they should accelerate their adjustments to comply with such measures in order to maintain their customer base. They may enjoy an opportunity for market expansion if other countries’ exporters fail to make adjustments to keep pace with this development. Additionally, this effort is a preparation for potential implementation of measures in other countries similar to those of the EU. For instance, the US is considering the US Clean Competition Act and may start to levy a carbon tax by 2026 as well.

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