Last month, our Climate Finance Network Thailand (CFNT) network hosted a webinar titled “Time to Act: Looming Climate Impacts on Thailand’s Financial Sector”. Our highlight was our guest, Dr Kannika Thampanishvong, section head at the Puey Ungphakorn Institute for Economic Research, who told us about how finance professionals view climate change and how economists prepare to deal with natural disasters.
Usually, ordinary Thais perceive climate change as a distant problem belonging to future generations.
However, the latest extreme weather events, such as the summer heatwave and heavy rainfall that occurs at the start of the season instead of its middle or end tell us that nature is changing fundamentally.
In fact, Dr Kannika told us that economists have been trying to quantify and project the economic losses caused by climate change for over two decades.
The latest research released this year by the Potsdam Institute for Climate Impact Research (PIK) estimates that damage to farming, infrastructure, productivity, and health from climate change will amount to $38 trillion (1.3 quadrillion baht) per year by 2050.
So, what is Thailand going to be like in the future?
According to the GermanWatch Global Climate Risk Index 2021, Thailand ranks 9th worldwide for long-term climate risk. Our coastline is 2,673km long, and 23 provinces have communities subjected to coastal erosion and increasingly rough seas.
Our economy is highly dependent on agriculture, and heavily populated urban areas are located on flood-prone plains. Bangkok, Thailand’s economic heart and capital, sits only 0.5 to 1.5 metres above sea level, making it especially susceptible to climate-induced flooding.
Thailand’s average temperatures have increased by 1.04C during the last four decades, and they are projected to rise more than 0.95C to 3.23C by 2090, above the 1986–2005 baseline. Equally concerning are more fluctuating rainfall patterns.
In 2019, Thailand witnessed the lowest rain precipitation in four decades; two years earlier, the rainfall pattern was recorded as the highest. That means the country will have a shorter and more drastic flood cycle alternating between heavy floods and severe drought.
The agricultural sector is the most vulnerable in terms of the economy. Key crops such as rice, maize, cassava, sugarcane, and rubber will be hardest hit. Local economists estimate that climate change could cost agriculture up to 83 billion baht per year.
Although agriculture’s share of GDP is about a tenth, the sector employs about a third of the workforce. Crop failures will impact food security.
Climate change will also affect tourism — a golden goose that provides almost a quarter of Thailand’s GDP.
Climate change threatens natural and cultural attractions, such as floods in Ayutthaya heritage sites. Coral reefs, a major tourist draw, are bleaching due to higher sea temperatures. In the North, Chiang Mai, smog pollution caused by agricultural burning and wildfires deters tourists.
Needless to say, climate change, particularly floods, affects the industry sector. A glaring example was the epic 2011 flood that hit major industrial estates in the mid-region. More recently, Delta Electronics reported that flash floods in August 2021 cost it 393 million baht in losses.
The impact is not limited to physical risks. Climate change will change the future of global exports.
Then there is the Carbon Border Adjustment Mechanism (CBAM), which the European Union will implement in 2026. Other key trading partners of Thailand, including the US, Canada, and Australia, are considering similar mechanisms.
Even in Thailand, there is a hearing process for a climate change act which will implement carbon pricing mechanisms, including carbon taxes and emissions trading schemes.
So what is Thailand doing?
The Department of Climate Change and Environment of Thailand has already published a risk exposure map at the provincial level, portraying risks from floods, droughts, heat, and other climate-related events.
The map is free to use and provides both historical and projected data. This database is a good starting point for assessing business exposure and strategising to minimise or adapt to risks. It is hoped that businesses will make use of it.
A recent survey by PwC revealed that 67% of Thai CEOs fear their businesses may not be viable in the next decade if they do not adapt to climate change and generative AI. CEOs interviewed by PwC said that they have yet to reinvent their business and blamed a lack of technological capabilities and regulatory problems.
Surprisingly, around two in three Thai CEOs don’t plan to incorporate climate risks into their financial plans. Moreover, only a minority of CEOs actively invest in climate-friendly practices, even with the looming critical physical and transition risks. This highlights a significant gap in proactive measures against climate risks.
The big question is: What must be done?
Dr Kannika urged every vulnerable sector to prepare, starting with educating and training personnel to understand climate change and what they must do to mitigate its impact.
Understanding is the first step, but it is not enough. Organisations must prepare assessments that offer them reliable, measurable, and granular details on the extent of the climate’s impacts.
The next step is creating carbon accounting, which helps organisations determine the amount of emissions caused by their business activities. With good carbon accounting, businesses can implement carbon pricing mechanisms.
For Thailand, standards for carbon accounting are already in place, such as the Greenhouse Gas (GHG) Protocol or ISO 14064 Greenhouse Gas.
These processes are still costly, and the government might need to provide support.
If not, businesses will be reluctant to transition to low-carbon manufacturing or pass the additional cost to consumers instead. With the right resources and incentives, Thai businesses can thrive in an increasingly climate-conscious world.
First Published on the Bangkok Post
