What is CBAM?
The Cross-Border Adjustment Mechanism (CBAM) is a tax-collection approach designed to account for the carbon footprint of goods from sourcing raw materials through to final delivery. Following the signing of the 2015 Paris Agreement and the ambitious goals of the European Green Deal in 2019, CBAM aims to balance carbon pricing between the EU and exporting nations, including those without a carbon tax mechanism. By extending the EU’s Emissions Trading System (ETS) to imported goods, this mechanism compels importers to pay for their carbon emissions, creating a fairer playing field and supporting global climate goals.
Thailand and CBAM: Timeline
✓ 1 October 2023: New CBAM regulations now cover goods such as cement, electricity, iron and steel, fertilizers, aluminum, and hydrogen. Thai businesses must report embedded emissions, including both direct and indirect emissions [see the full list of goods here].
✓ 1 October 2023–31 December 2025 (Transition Period): Importers with CBAM declarant status are required to submit emissions data during this phase, setting up for full implementation.
✓ 31 December 2024: Thai business operators must register with the CBAM Registry by this date to continue exporting goods to the EU. Without CBAM status, goods cannot enter the EU market. Thai businesses must also apply for CBAM Declarant status before exporting to the EU.
✓ 1 January 2026: Importers of Thai goods to the EU will need to purchase CBAM certificates to cover the carbon emissions of their products. The goods list may expand to include industries at high risk of relocation, like organic chemicals and polymers.
✓ 2026 onwards: Thai businesses will be required to report their embedded emissions annually by 31 May, with verification handled by EU Accreditation Bodies.
✓ 2034 onwards: CBAM will require certification for 100% of embedded emissions in regulated goods, solidifying the commitment to fair carbon practices.
How will CBAM affect Thai businesses and operators?
✓ Impact on operational costs for Thai exporters:
⦾ Exporting goods from Thailand to the EU is set to become substantially more costly. With new fees tied to greenhouse gas emissions, Thai goods may see price increases that could reduce competitiveness against EU-produced items.
⦾ For Thai businesses, particularly small and medium enterprises (SMEs), adapting to these standards may drive up operational costs due to investments in emissions-reducing technology. SMEs may find these expenses especially challenging, as they require both financial and technical resources.
✓ Obligation to submit a CBAM report: Thai operators must prepare comprehensive emissions data for measurement, reporting, and verification—a process that introduces yet another layer of operational costs. Meeting the CBAM reporting requirements is essential, with the first report due on 31 January 2024 and the final report for the transition phase due on 31 January 2026.
Figure. CBAM Reporting Process.
✓ Penalties for failure to submit a CBAM report: Failing to report the volume of embedded emissions from imported goods may result in fines ranging from €10 to €50 per ton of carbon.
New Obligations and Duties of Thai Operators under the CBAM Framework
✓ During the Transitional Period (1 October 2023–31 December 2025): Thai operators must submit quarterly reports containing:
⦾ The types and quantities of goods imported in the previous reporting period.
⦾ The greenhouse gas emissions associated with these imported goods.
At this stage, operators are not yet obligated to provide CBAM certificates, which will later serve as evidence of carbon tax payments tied to the emissions of imported goods (calculated based on EU ETS prices).
✓ During the Full Enforcement Period (1 January 2026 onwards): Thai operators will be required to submit annual reports, due on 31 May each year, detailing:
⦾ The types and quantities of goods imported in the preceding year.
⦾ The embedded greenhouse gas emissions associated with these imports.
⦾ CBAM certificates, which verify that Thai operators have paid the relevant fines for greenhouse gas emissions, certified by authorized agencies as compliant with established standards.
Payments made in the local jurisdiction (Thailand) for emissions can be used as a credit, meaning only the remaining balance will be payable to the EU for imports. This framework establishes a structured compliance process for Thai operators, aligning their reporting and payment obligations with the EU’s environmental goals.
Strategies for Thai Operators to Thrive under CBAM Regulations
✓ Adoption of Innovative Production Methods: Thai operators are encouraged to implement production techniques that utilize renewable energy sources and advanced machinery designed to facilitate the use of clean energy. This transition will not only reduce carbon emissions but also enhance operational sustainability.
✓ Integration of Automation Technologies: Introducing automation can improve efficiency in data collection, production lines, and logistics systems. By streamlining these processes, operators can accurately calculate carbon emissions and simplify CBAM compliance reporting.
✓ Staying Informed on Governing Laws and Regulations: Remaining up to date with governing laws and regulations will be crucial for Thai operators to prepare effectively for CBAM compliance.
Conclusion
In the coming years, the initial impact of CBAM on Thailand may be minimal, as the country’s primary exports do not include the six regulated goods. In 2023, less than 10% of Thailand’s total exports were directed to the EU, with under 3% of that figure comprising four of the six regulated goods. This raises questions about the significance of CBAM’s impact on the Thai economy.
However, Thai operators should not underestimate CBAM’s importance, as it is likely to significantly influence business operations in the near future. Beginning in 2026, the list of regulated goods is expected to expand, and by 2034, nearly all exported goods may be subject to CBAM regulations. Consequently, Thai operators must equip themselves with the necessary knowledge, mechanisms, and technologies to adapt to these changes. Proactive measures will be essential to mitigate any adverse effects of CBAM on revenue and business growth.