On 21 January 2025, the Thai Cabinet approved a draft Ministerial Regulation proposed by the Ministry of Finance (MoF) that serves to implement a carbon tax as part of its efforts to reduce greenhouse-gas emissions and promote environmental sustainability.

Under the approved draft Ministerial Regulation, the carbon tax will be embedded within the current excise tax structure on oil and petroleum products without affecting consumers, as the existing excise tax rates will remain unchanged. This regulation is intended to support the decarbonization of the economy, minimize the carbon footprint and encourage sustainable practices among both consumers and businesses without losing overall Government revenue prior to the eventual implementation of the Climate Change Act.

A few key provisions in the pending regulations are outlined below.

Products subject to the Carbon Pricing Mechanism

Products affected by the proposed carbon tax include:

Carbon Price

The carbon price is set at 200 Thai Baht (THB200) per metric ton of carbon dioxide (CO2) equivalent, calculated based on the Greenhouse Gas Emission Factor for each oil and petroleum product as specified in the excise tax tariff.

Any adjustment to the carbon price exceeding THB200 per metric ton of CO2 equivalent shall be subject to Thai Cabinet's approval, in accordance with excise tax rate change process.

For carbon price adjustments, the MoF will collaborate with other relevant agencies including the Ministry of Energy, the Ministry of Natural Resources and Environment and the Ministry of Industry to ensure consistent alignment with Thailand's carbon pricing objectives and facilitate reaching a consensus.

Carbon tax embedded in excise tax rates for oil and petroleum products

While the existing excise tax rates will remain unchanged, a carbon cost component is embedded within the excise tax rate to reflect the respective Greenhouse Gas Emission factor of the oil and petroleum products, as outlined below.

The Council of State is currently reviewing the approved draft Ministerial Regulations. The Minister of Finance must issue the Regulations for publication in the Royal Gazette for them to become law (expected within February 2025).