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2 Oct 2023

Econ Digest

KResearch views that thriving forest carbon credit is set to accelerate the journey towards net zero


        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 the communities, including new food sources, job creation, preservation of watersheds, mitigation of pollution and natural disasters. Forests, therefore, represent another viable solution for creating value from carbon credits, which can in turn help support the journey towards net zero.
        Meanwhile, forest carbon credit projects are expected to 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 over the next two years (2024-2025), Thailand’s potential certified forest carbon credits will amount to approximately 600,000-700,000 tons of carbon dioxide equivalent (tCO2eq), which would be 5x higher than the total amount that has been certified so far, although the figure may depend on the project developers’ applications for carbon credit registration at any 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 the time required for the projects to be developed so that there are forest carbon credits available to be certified in each round. The demand for forest carbon credits from carbon removal projects will also increase in order to achieve the set net-zero target at the national level.
        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 target. As the business sector may not be able to realize the net-zero target on its own, 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 using their lands or funds to invest in other projects for a stable cash flow, or to obtain a round of cashflows, including non-monetary benefits, by investing in carbon credit projects. If they find that investing in a carbon credit project is worthwhile and meets their business needs, they are advised to accelerate their investment now to keep pace with the time it takes for forests to grow.    

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Econ Digest