Every few months since 2023, a fresh wave of alarm about the European Union’s Carbon Border Adjustment Mechanism washes over Bangkok’s business press. The latest arrived with the definitive regime on January 1 this year, carrying a headline number: 28 billion baht of Thai exports “affected,” about 3.8 percent of what we sell to Europe.
I would like to suggest that we have been reading this backwards. CBAM is not a threat to Thailand. It is the best argument the Thai government has ever been handed for passing the Climate Change Act and mandating serious carbon accounting. Better still, unlike every domestic argument we have had for a decade, this one arrives with a deadline and a price tag attached.
Let’s start with the arithmetic, because the arithmetic is where the panic falls apart.
“Affected” is not “lost.” The 28-billion-baht figure describes the export value that falls inside CBAM’s scope, not the cost of complying with it. For steel, our most exposed sector, Kasikorn Research puts the added cost at 1,300 to 1,500 baht per metric ton — roughly 1.5 to 1.7 percent of product value, or something on the order of 167 to 193 million baht a year for Thai steel exporters to the EU. That is not a rounding error. It is also considerably smaller than what Thai exporters absorbed during the US tariff rounds without anyone proposing new legislation about it.
The number is modest because 2026 is not really the year CBAM begins. European producers still receive 97.5 percent of their allowances free this year, and the CBAM factor — the share of embedded emissions an importer actually pays for — is set at 2.5 percent. It rises to 5 percent in 2027, 10 percent in 2028, 22.5 percent in 2029, then 48.5 percent in 2030. By 2034 it is 100 percent.
So the real question is not what CBAM costs Thai exporters this year. It is what condition Thailand’s carbon accounting will be in when the factor more than doubles in a single year between 2029 and 2030. We have about four years – that is one parliamentary term.
Now, I would like to highlight the part that ought to interest the Ministry of Finance.
Article 9 of the CBAM regulation allows importers to deduct carbon prices already paid in the country of origin. The European Commission published its draft implementing rules in May, and they are specific in ways that we should focus on.
Three instruments qualify: binding emissions trading systems, point-source carbon taxes levied on measured installation emissions, and fuel-based carbon levies. Voluntary carbon credits do not — which means Thailand’s T-VER program, whatever its domestic merits, buys a Thai exporter nothing at the European border. Article 6 credits count only up to 10 percent of confirmed emissions. And, most consequentially, an importer using default emissions values forfeits the deduction entirely. Only actual, installation-level data earns the credit, certified by an accredited third party under ISO/IEC 17029, with a materiality threshold of 5 percent.
We should read that as a fiscal proposition rather than an environmental one. Every baht of carbon price Thailand declines to levy on its own steel and aluminum producers is a euro those producers will hand to the European Union instead. Not saved — transferred. CBAM does not offer Thai industry the option of paying nothing. It offers a choice of payee.
That is the argument for the Climate Change Act, and it does not require anyone in the room to care about the climate.
The bill has been circling since March 2024 — two rounds of public hearings, a series of missed submission deadlines, in-principle Cabinet approval finally arriving on December 2 last year. It carries both instruments that the EU recognizes, namely a carbon tax and an emissions trading system (ETS). It carries mandatory greenhouse gas reporting for major emitters, a national registry, and penalties for non-compliance. The machinery Thailand needs to keep that money at home has already been drafted. It is sitting in the legislative queue behind everything else.
I would like to end this article with two warnings, because half a Climate Change Act is worse than none and I will surely be writing more about Climate Change Act in the months to come.
Half a Climate Change Act is worse than none.
First, the price has to be real. Thailand’s much-publicized “carbon tax” to date is 200 baht per metric ton of CO2 equivalent (tCO2e) — about US$5.50 — and it was introduced by relabeling part of the existing diesel excise tax rather than by adding a charge. The EU ETS has traded in the €60 to €90 range. A €5 domestic price against a €70 border price deducts €5. Better than nothing, but nobody should mistake it for a shield. The draft rules also net out free allocations, rebates, and baseline exemptions. All in all, this means that the familiar Thai instinct, i.e. legislate a price, then exempt the industries with the best access, is worthless in the eyes of the EU.
Second, and more important: the accounting is the asset. Verified, installation-level emissions data is what unlocks the deduction. Without it, Thai goods are assigned default values, and default values mean no deduction at any domestic carbon price. This is why the reporting mandate in the Act cannot be drafted as a box-ticking exercise administered on the honor system, and why the penalties for false reporting need to be large enough that verification is cheaper than fabrication. Coal-based Thai steel has been estimated to carry up to seventeen times the emissions intensity of European equivalents. Some of that gap is real and will cost us. Some of it is an artifact of firms that have never had to count. We will not know which until they do.
There is a version of the next four years in which Thailand arrives at 2030 with a functioning carbon price, an audited emissions registry, and exporters who can document their way to a deduction — financing the domestic transition with revenue that would otherwise have gone to the EU budget. There is another version in which we spend those years lobbying for exemptions, defending the 200-baht fiction, and discovering in 2029 that the bill has come due and the paperwork does not exist.
In short, I think we should look at it this way: the imminent arrival of CBAM regime means that an important part of the Climate Change Act is already drafted for us. The deadline is external, dated, and immune to domestic lobbying (or worse yet, state capture), which in Thai policymaking is a rare and valuable thing. We should use this opportunity while it lasts.
