Regulation and Impact from Enforcement of the EU’s Carbon Border Adjustment Mechanism (CBAM) to Prepare for the Implementation of Thailand Industry in the Future

Abstract

Carbon Border Adjustment Mechanism: CBAM is one the of important regulations under the European Green Deal plan, which the EU has declared. When the draft legislation for the CBAM has been approved by the European Parliament, the first phrase called the transitional period will run from 1 October 2023 until 31 December 2025.

During the transitional period, the CBAM will apply to six groups of imported products, namely: 1) iron and steel, 2) aluminum, 3) cement, 4) fertilizer, 5) electricity, and 6) hydrogen. Regarding the impact of CBAM on the Thailand's industry, the negative impacts included higher export costs as CBAM will determine the price that importers have to pay for importing of high-emitting products. This will decrease the export competitiveness as well. However, CBAM have positive impact. Thailand industry accelerates its adjustments to meet targets to reduce carbon emissions and increase trading opportunities and invest in green businesses. Thai exports of iron and steel will be affected mostly by CBAM regulation as Thailand exports a lot of iron and steel products to the European Union. The Aluminum industry will be the second most affected as the export proportion to the European Union is less than the iron and steel products.

In preparing for the implementation of CBAM, Thailand Greenhouse Gas Management Organization (Public Organization), namely: TGO., is an organization which certifies 3 groups of carbon footprint labels that including Carbon Footprint Reduction (CFR), Carbon Footprint of Circular Economy Product (CE-CFP), and Carbon Footprint of Product (CFP) as well as  Voluntary Carbon Market Project. In addition to dependence on exports to the EU, other factors that will accelerate the CBAM impacts include the carbon intensity in manufacturing processes, the market power of importers to pass production costs through to exporters, and the existence of and access to replacement markets for both importers and exporters.