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13 Apr 2022

Econ Digest

Supporting businesses to achieve Net Zero goals by adjusting technology and shifting to renewable energy

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        Global warming is affecting the world, the latest Intergovernmental Panel on Climate Change (IPCC) report shows at least 95% of coal energy use, 60% of oil use and 45% of natural gas use must be reduced if we were to reach a net zero target and limit global temperature rise to 1.5 degrees Celsius by 2050. Failure to take urgent action to reduce greenhouse gas emissions will result in a future 3.2 degrees Celsius rise in global temperature by 2100 and will expose the world to numerous severe natural disasters.

        Every country has recognized and prioritized global warming and global climate change issues that affect the world. The Intergovernmental Panel on Climate Change (IPCC) Working Group III has released a new report of Climate Change 2022: Mitigation of Climate Change on April 4, in addition to the Working Group II report that had previously addressed the impact of severe natural disasters from global warming. This latest report says that without urgent action to reduce massive greenhouse gas emissions from now on, global temperature will rise another 3.2 degrees Celsius by 2100, which is twice as high as the 1.5 degrees Celsius increase that global leaders pledged at COP26 to hold global temperature to from the 1850 industrial revolution level. The report has also analyzed the shortcomings of current government actions around the world, where greenhouse gas emissions have increased by as much as 12% over the past decade, 65% of which come from fossil fuels usage and industrial sectors.
        Although nowadays there is an increasing use of clean energy, renewable energy and energy efficiency technologies, and the cost of producing clean energy has been greatly reduced, for example, the unit cost of electricity generated from solar and wind energy is 85% and 55% lower than a decade ago respectively, the volume of energy produced is still insufficient to meet current energy demand. To achieve the net zero goal and limit global temperature rise to 1.5 degrees Celsius by 2050, countries around the world must work together to reduce energy use by at least 95% for coal, 60% for oil, and 45% for natural gas by 2050. Preliminary estimates by IPCC experts suggest that a transition period to hold the global temperature rise to below 2 degrees Celsius by 2100 will affect global economic activities, with global GDP expected to decline by 1.3-2.7% YOY, or an average of 0.04 – 0.09% per year by 2050.
        However, the reduction of greenhouse gases is still more or less dependent on the cooperation of all parties. The above IPCC report reveals that if all parties work together to reduce energy demand and change behavior (Demand-side Strategies), this could help reduce greenhouse gases by 40-70% by 2050. In particular, changing people’s behavior such as reducing meat consumption and reducing the use of single-use plastics in food would help reduce greenhouse gases by 8 giga tons of carbon dioxide equivalent (tCO2e), or adjusting travel habits such as walking, cycling, using public transport and electric vehicles would help reduce greenhouse gases by 6.5 giga tCO2e.
        Besides, governments play an important role in supporting people to change their behavior to reduce greenhouse gas emissions. The Thai government has now started to implement policies such as the policy to reduce the availability of single-use plastic bags in retail outlets since 2020, and the 30@30 policy to support electric vehicles, which aims to produce at least 30% of the total zero-emission vehicles (ZEV) produced domestically by 2030. To this end, 725,000 EV cars and pickup trucks, 650,000 EV motorcycles and 33,000 EV buses and trucks will be produced. In the first phase, the government has approved a reduction in import tariffs and excise taxes on EV cars and will provide subsidies ranging from THB70,000-150,000 per EV car/pickup truck and THB18,000 per electric motorcycle, to help reduce prices and attract more consumers. It has recently been found that the retail prices of electric vehicles from automakers that have signed agreements with the government have been reduced by THB160,500-161,000, and bookings for EVs during the Motor Show held on March 21-April 3, 2022 reached 2,000 units. Moreover, clean energy buses will start operating in Bangkok from this August.

        The government also offers a variety of tax benefits through the approval of the Board of Investment of Thailand (BOI) in supporting the private sector to reduce greenhouse gas emissions, including:

  • For the acquisition of new machinery that can effectively reduce energy consumption or use alternative energy sources or reduce various polluting emissions according to the standards established, exemptions from import duties on machinery, as well as exemptions from corporate income tax for three years, amounting to 50 percent of the amount invested in improving the efficiency of the machinery.
  • The development of modern agricultural technology that reduce greenhouse gas emissions and sustainable agricultural technologies that enhance production efficiency will be exempted from corporate income tax for 3 years, with the exemption amount not exceeding 120% of the total investment.
  • Promotion measures of comprehensive electric vehicle business, including the manufacture of electric cars, electric motorcycles, and electric vehicle parts and equipment will be exempted from corporate income tax for 3-11 years, depending on the type of business.
  • A natural gas separation plant or petrochemical producer that uses carbon capture, utilization and storage (CCUS) technology to capture carbon dioxide from the atmosphere will be exempted from corporate income tax for 8 years.

        In addition to policies to promote behavior change, the government is currently accelerating the implementation of key policies that support infrastructure and technology development such as the development of carbon credit trading platforms and various industry standards to encourage the reduction of greenhouse gas emissions in the industrial sector, as well as supporting sustainable green business development in the bio-circular-green (BCG) industry. It is expected that Thailand will be able to achieve its carbon neutrality goal or net-zero greenhouse gas emissions by 2050, if all sectors, including the public, private and the government, work together.  

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