Thai Companies Plan Exchange for Carbon Credits, Emulating China

(Bloomberg) -- Thailand’s state-owned electricity generator and 10 of the nation’s biggest companies have set up a voluntary emissions-offset program that they intend to expand into a full carbon-trading exchange for the country. 

Kasikornbank Pcl, billionaire Dhanin Chearavanont’s Charoen Pokphand Group and Bangkok transit operator BTS Group Holdings Pcl are among the founders of the Carbon Markets Club, whose members are trading credit over-the-counter in an effort to expedite an energy transition, said Chaiwat Kovavisarach, chief executive officer of energy company Bangchak Corp., one of the founding members.

The plan is to build a system similar to exchanges in the European Union and China, where big emitters offset their carbon footprint by purchasing credits from companies like Bangchak’s renewable subsidiary BCPG Pcl. Earnings from the trades would be invested in clean energy or technologies that can expedite the energy transition, Chaiwat said in an interview. The club has traded the equivalent of 15,000 tons of carbon dioxide since its start in June. 

The Thai initiative is part of a global effort to mitigate climate change impacts and limit global warming from pre-industrial levels to well below 2 degrees Celsius. Voluntary corporate commitments to net-zero emissions are the main driving force behind increased carbon-credit demand, according to a World Bank report.

“This is a good, small start that could have a snowball effect,” Chaiwat said. “Eventually we can grow and become an exchange” once volumes are large enough, he said. Chaiwat said the Stock Exchange of Thailand is open to the idea of forming an exchange and as many as 40 other companies and organizations have shown interest in joining the group.

Climate Goals

Unlike the EU, where energy-intensive sectors such as oil refineries and steelmaking are subject to a cap-and-trade that is set to push up prices as authorities tighten climate goals, Thailand’s voluntary system still has more supply than demand, keeping prices at less than $1 per ton, compared to more than $70 in the EU and about $7 in China.

“If prices are too high, there’s less activity. But if they’re too low, like in Thailand, the reallocation of resources won’t happen,” Chaiwat said. “There’s a million tons of supply and not a lot of companies wanting to cap their own emissions.”

Among the ways to accelerate activities are to set up global systems for carbon trading similar to trading in stocks and currencies, and for governments to set mandatory emission standards such as in the EU, he said. The Thai government, which has been pushing its so-called bio-circular-green economic model, does have a voluntary emission reduction program called T-VER, and is planning a trading system for its highly-industrialized region. The club plans to extend the carbon market beyond T-VER to ultimately provide a platform for trading all carbon credits both within the country and across borders.

Chaiwat said that due to the pandemic, governments have limited resources to pay subsidies for energy transition and carbon trading presents a way in which large emitters can fund carbon reduction projects.

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