Thailand’s Carbon Market: Regulatory Drivers and Business Implications

1. Current Overview of Thailand’s Carbon Market

Thailand has actively promoted investment in greenhouse gas (GHG¹) mitigation projects to generate carbon credits, which can be used to offset unavoidable emissions or traded in both domestic and international carbon market, thereby creating environmental and financial benefits.

A carbon credit is a certificate representing one ton of carbon dioxide or its equivalent in other GHGs (tCO₂e) reduced or removed through mitigation activities. Credits are issued and recorded in the registry of the relevant carbon crediting authority and are retired upon use to prevent double counting.

The Thailand Greenhouse Gas Management Organization (TGO) administers the Thailand Voluntary Emission Reduction Program (T-VER) as the national carbon crediting standard. In this capacity, TGO establishes and oversees a comprehensive regulatory and operational framework governing the mitigation project, issuance, ownership, and transfer of emission reduction units, ensuring transparency, traceability, and overall market integrity.

As of 18 June 2026², total T-VER credit issuance reached 26.64 million tCO₂e. However, only 9.6% of total issuance was used for offsetting, and just 50.9% of purchased credits were utilized. Meanwhile, Thailand’s total emissions continue to rise, reaching 422.39 million tCO₂e in 2024³. This low utilization, combined with rising emissions, suggests that reliance solely on voluntary corporate climate commitments may be insufficient to achieve the 2050 net-zero target, highlighting the potential need for binding reduction mandates.

2. Cross-Border Trading of Carbon Credits

Thailand participated in international carbon credit sales under three channels:

2.1 Clean Development Mechanism (CDM) under Kyoto Protocol⁴ or Articles 6.4 of the Paris Agreement:

CDM is a centralized system operated by a United Nations supervisory body. The Executive Board of the UNFCCC (United Nations Framework Convention on Climate Change) issued Certified Emission Reductions (CER) for Thailand’s CDM projects from 2009 to 2023 totaling 16.44 million tCO₂e. Following the end of the Kyoto Protocol in 2020, eligible CDM projects must transition to the Paris Agreement Crediting Mechanism (PACM) under Article 6.4 of the Paris Agreement by June 2026, with higher environmental integrity requirements. Projects that fail to transition will no longer be eligible to issue CERs for post-2020 emissions.

2.2 Articles 6.2 of the Paris Agreement (voluntary, decentralized, and country-driven framework)

• Joint Crediting Mechanism (JCM): A bilateral cooperation mechanism between Thailand and Japan. Carbon credits were issued by a Joint Committee comprising representatives from both countries. To date, 4,032 tCO₂e of credits have been certified, of which 2,017 tCO₂e have been transferred to Japan. Several projects currently under development are expected to generate approximately 422,322 tCO₂e annually.
• Bangkok E-Bus Program: A bilateral initiative between Thailand and Switzerland to replace internal combustion engine buses in Bangkok with electric buses, managed by Energy Absolute Public Company Limited. Carbon credits were issued under the T-VER standard, with completed transfers totaling 51,633 tCO₂e in 2023 and 2026. Totaling up to 500,000 tCO₂e is expected to be transferred by 2030.

2.3 International Voluntary Carbon Market:

This market facilitates the sale of carbon credits to foreign corporates seeking to meet their sustainability and net-zero commitments. Credits were issued under recognized independent standards, including the Verified Carbon Standard (VCS), Gold Standard, and the American Carbon Registry (ACR). To date, projects in Thailand projects generated a total of 15.53 million tCO₂e under these international voluntary standards.

To enhance international market acceptance, the TGO has introduced the Premium T-VER standard, a high-integrity carbon crediting framework aligned with the PACM. Key difference from T-VER include the application of a “below business-as-usual (BAU)” baseline, which requires emissions reductions beyond typical scenarios, as well as mandatory sustainable development assessments and stakeholder consultations to ensure tangible benefits for local communities and the environment. Premium T-VER offer a cost-effective and credible alternative to established international standards.

Notably, Premium T-VER has achieved international recognition from the International Civil Aviation Organization (ICAO) as an eligible carbon credits standard for offsetting CO₂ emissions under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) during the 2024–2026 voluntary compliance period. Under CORSIA, covered airlines are required to offset growth in CO₂ emissions above the baseline—set at 85% of 2019 levels—by purchasing carbon credits issued by ICAO-approved crediting mechanisms. This recognition enhances the competitiveness and market positioning of Thai carbon credits, enabling them to command higher prices among premium buyers.

TGO’s maintenance of stringent international-standard-aligned requirements is expected to support the continued recognition of Premium T-VER credits as ICAO-eligible instruments in the 2027–2029 mandatory compliance phase, strengthening the scalable supply of high-quality carbon credits in Thailand for both corporate reporting and compliance purposes.

3. Mandatory Carbon Pricing under the draft Climate Change Act

Evolving international trade measures, including the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) in 2026 and the United Kingdom (UK) CBAM in 2027, which impose carbon costs on imports⁵ while allowing offsets for carbon costs paid in the country of origin, are driving Thailand to implement domestic mandatory carbon pricing.

The Climate Change Act, anticipated to take effect in 2027, seeks to strengthen Thailand’s business competitiveness while supporting the country’s ambition to achieve net-zero GHG emissions by 2050.

Key mechanisms under the Act are the introduction of a mandatory carbon pricing framework, comprising: (i) an Emissions Trading System (ETS) and (ii) a carbon tax. Under the ETS, a market-based price will be established for carbon allowances, which represent the right to emit GHG. In parallel, the carbon tax will impose a fixed price on emissions.

This dual approach is intended to balance flexibility and price certainty, enabling businesses to manage compliance costs while supporting the transition toward a low-carbon economy.

3.1 Thailand’s ETS framework

The Department of Climate Change and Environment (DCCE) is responsible for establishing and administering carbon allowances for covered entities under the ETS, enforcing compliance, and maintaining the carbon allowance registry. Key Thailand’s ETS framework includes:

• Carbon Footprint for ETS Compliance: Covered entities must measure and report their organization carbon footprint focusing on scope 1 (direct emissions from production processes), in accordance with the monitoring, reporting, and verification (MRV) requirements set by the DCCE. The DCCE and relevant agencies will use these data to determine long-term plan and strategies, with stricter obligations for high-emission industries and incentives for early mitigation, promoting early action and a level playing field in meeting Thailand’s emissions reduction targets.

• Cap on Emissions: The DCCE is responsible for preparing a GHG emissions allowance allocation plan (the allocation plan) covering periods of up to five years. The plan sets emission limits for each regulated industry, outlines compliance obligations, and specifies allowance allocation methods, trading, banking, and offsetting mechanisms. It must undergo a public hearing, obtain approval from the National Climate Change Policy Committee (NCCC), and be published at least one year before the start of the allocation period. The allocation plan is expected to guide businesses’ operational and strategic decisions, including production levels, investment choices, and the potential pass-through of abatement costs to consumers. Emission limits will focus primarily on major emitters and may be progressively reduced over time to support Thailand’s net GHG emissions reduction targets.

• Compliance and Surrender: Covered entities are required to measure and report their annual carbon footprint—verified by TGO-accredited third-party bodies—to the DCCE within three months of the year-end, and to surrender sufficient allowances to cover verified emissions within six months of the year-end. Any shortfall must be rectified through additional allowance purchases from the secondary market or may incur fines.

• Use of Carbon Credits for Offsetting: Eligible T-VER credits, as prescribed by the NCCC, may be used to offset up to 15% of a covered entity’s verified emissions for each compliance year. Use of credits requires DCCE approval and must comply with limits set out in the allocation plan. These restrictions are designed to prevent excessive reliance on offsets, which could otherwise reduce demand for carbon allowances within the system.

• Banking of Allowances: Surplus allowances may be carried forward for use or sale in a subsequent compliance year, subject to DCCE approval and allocation plan limits. Maximum banking is expected to be 10% of a covered entity’s verified emissions. These rules help prevent market oversupply, support carbon prices, keep total emissions aligned with national reduction targets, and maintain incentives for investment in clean technologies.

3.2 Thailand’s Carbon Tax and CBAM Framework

• Carbon Tax: Applies to both domestically produced and imported goods listed under the Climate Change Act tariff schedule, focusing on key energy commodities—oil, natural gas, and coal—with rates varying by emission level and a maximum of 120 baht per unit. Taxes paid on raw materials may be credited against finished product liability to prevent double taxation.

• CBAM: Applies to imported goods, requiring importers to report embedded emissions and purchase carbon adjustment certificates. Deductions are allowed for carbon costs already paid in the country of origin. Importers are exempt from payment obligations during the first two years of implementation.

The carbon price signal from the ETS and carbon tax influences consumption and investment decisions, promotes the adoption of cleaner technologies, and supports alignment with evolving climate-related regulatory requirements

4. Capital Market Support Toward a Low-Carbon Economy

The Thai Securities and Exchange Commission (SEC) has established frameworks and guidelines to support the issuance of green, social, and sustainability bonds, aiming to channel capital toward sustainable investments, renewable energy financing, and clean technology innovation. The SEC also encourages listed companies to align sustainability disclosures with ISSB Standards and will require the adoption of IFRS S1 and IFRS S2 on a phased-in basis (SET50 in 2028, SET100 in 2029, SET in 2030, and MAI in 2031), with an initial climate reporting phase focusing on Scope 1 and Scope 2 emissions verified by qualified third-party verifiers. These measures are expected to enhance transparency and enable institutional investors and ESG-focused funds to allocate capital more effectively to companies with strong ESG integration.

In addition, to support the Thai government’s policy to position Thailand as a regional carbon trading hub, the SEC has expanded financing and trading options for environmental commodities through the derivatives market and the digital asset exchange. Environmental commodities currently traded domestically on an over-the-counter (OTC) basis include carbon credit, carbon allowance, and renewable energy certificate*.

Note* A Renewable Energy Certificate (REC) represents ownership of the energy attribute associated with electricity generated from specific renewable sources like solar, wind, or hydropower. Each REC corresponds to one megawatt-hour (MWh) of electricity and enables holders to account for and reduce the indirect greenhouse gas (GHG) emissions linked to energy consumption.

In Thailand, REC are issued by the Electricity Generating Authority of Thailand (EGAT), the accredited local issuer under the International Tracking Standard Foundation. EGAT is responsible for certifying REC production, preventing double-counting, and ensuring that issued certificates meet international standards. The registry system of REC is managed by Evident as the Central Registry Operator.

The integration of exchange technologies, blockchain, and other advanced technologies is expected to improve market access for individuals and businesses and facilitate fair market price discovery through a centralized marketplace in real time. These initiatives operate under robust regulatory oversight, enhance investor protection, and reduce systemic risks.

4.1 Carbon Derivatives

Effective from 5 March 2026, the SEC expands the scope of eligible underlying goods and variables for derivative contracts to include carbon commodities and digital assets⁶, enabling their trading under a regulated framework and oversight. This revision provides businesses with additional instruments to manage carbon price risk and environmental compliance costs arising from both voluntary commitments and mandatory emissions reduction obligations.

• Carbon Credits – reclassified from reference variables to underlying goods eligible for derivatives contracts.

• Carbon Allowances and REC – newly introduced as underlying goods for derivatives contracts.

• Digital Assets under the Digital Asset Businesses Act: newly introduced as reference variables for derivatives contracts. This revision enables the trading of derivatives referencing Tokenized Carbons (see item 4.2 below) as underlying variables.

The SEC will further refine its regulatory framework to enable regulated entities (e.g., exchanges, brokers, and dealers) to provide services relating to these new derivatives products under appropriate regulatory oversight. It will also coordinate with the Thailand Futures Exchange (TFEX) to establish standardized contract specifications for derivatives referencing digital assets as underlying variables, ensuring alignment with their respective risk profiles and practical applicability for investors.

4.2 Tokenized Carbons

Tokenized Carbons, as ready-to-use consumption-based utility tokens, granting rights to underlying environmental commodities, including carbon credits, carbon allowances, and REC (collectively referred to as Tokenized Carbons), can be offered for sale to the public without obtaining prior approval from the SEC⁷.

In parallel, the regulatory framework governing digital asset business operators has been revised, effective 1 September 2025, to permit digital asset exchanges, brokers, and dealers (collectively, digital asset business operators) to provide services relating to Tokenized Carbons, subject to prior approval from the SEC, as such activities are classified as “other business operations.” To obtain such approval, digital asset business operators must demonstrate compliance with regulatory requirements, including (i) the implementation of robust screening processes to verify that token issuers hold legitimate underlying environmental commodities and to prevent double counting; and (ii) adequate transparency and disclosure of material information relating to the tokens, enabling users to make informed investment decisions.

5. Business Implications for Market Participants

Market participants in Thailand’s evolving carbon market face significant opportunities and obligations. Early monitoring and transparent reporting of carbon footprint will become a standard requirement under upcoming Climate Change Act, giving proactive businesses a competitive advantage with customers and investors who prioritize sustainability.

Companies should establish clear, measurable sustainability targets, particularly for GHG reduction, energy efficiency, and adoption of sustainable practices, allowing progress to be tracked against national benchmarks. Integrating these goals into an actionable plan will position businesses to benefit from carbon trading opportunities, manage regulatory and market risks through robust governance and compliance processes, and access domestic and international carbon markets more efficiently.

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1. GHG include carbon dioxide, methane, nitrous, and fluorinated gases. [↩]
2. Source: TGO website [↩]
3. Source: GHG Emissions of All World Countries 2025, European Commission’s Joint Research Centre. Total emissions for Thailand were 422.39 million tCO₂e in 2024 and 401.38 million tCO₂e in 2015 [↩]
4. The Kyoto Protocol operationalizes the United Nations Framework Convention on Climate Change by committing industrialized countries and economies in transition to limit and reduce GHG emissions [↩]
5. The EU’s CBAM covers iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen, while the UK’s CBAM covers the same sectors except electricity. [↩]
6. Notification of the Securities and Exchange Commission No. KorThor. 2/2569 Re: Determination of Additional Types of Goods and Reference Variables [↩]
7. Notification of the Securities and Exchange Commission No. KorJor. 16/2567 Re: Exemption of the Provisions regarding Public Offering of Digital Tokens for Certain Types of Digital Token Offerings (as amended) [↩]