Thailand’s Climate Change Act and the Rise of Rules-Based Climate Governance

On 2 December 2025, the cabinet’s approval in principle of the Draft Climate Change Act marked a major structural turning point in Thailand’s economic and legal system toward green initiatives. This legislation is not merely an environmental regulatory framework; it represents a fundamental shift in Thailand’s policy architecture transitioning the country from a predominantly voluntary, incentive based approach toward a binding, rules based system with legal enforceability. 

The Act is designed to steer Thailand toward achieving carbon neutrality by 2050 and net-zero greenhouse gas emissions by 2065, with an ambitious interim target of reducing emissions by 47% by 2035 compared to the 2019 baseline. These targets signal a clear long-term decarbonisation pathway and embed climate policy firmly within Thailand’s core economic and development strategy. 

The Draft Climate Change Act established a centralised national governance framework led by the National Climate Change Policy Committee (NCCPC), chaired by the Prime Minister or a designated Deputy Prime Minister. The NCCPC serves as the highest-level body responsible for setting national climate policy and ensuring cross-ministerial coordination.

The Ministry of Natural Resources and Environment functions as the secretariat to the NCCPS, supported by the Department of Climate Change and Environment and the Greenhouse Gas Management Organisation, providing technical, administrative, and market-based implementation support.

The governance framework integrates key economic, infrastructure, and social ministries including Finance, Energy, Industry, Transport, Commerce, Agriculture, Digital Economy, Public Health, Education, and Foreign Affairs  together with central planning and budget agencies. This structure embeds climate policy directly into Thailand’s economic planning, fiscal policy, infrastructure development, and international engagement. In addition, the framework incorporates expert advisors, private sector representatives from the Chamber of Commerce, Federation of Thai Industries, and Thai Bankers’ Association, as well as civil society organisations, ensuring that policy design reflects technical expertise, market realities, and social considerations.

Overall, the Act establishes four national-level governance bodies to oversee climate policy and its implementation:

• National Climate Change Policy Committee

• Climate Fund Committee

• Climate Fund Evaluation Committee

• Greenhouse Gas Management Organization

Key Regulation in the Climate Charge Act 

1. Climate Change Fund 

The Draft Climate Change Act established the Climate Change Fund as an autonomous state entity and a ring fenced financial mechanism to support Thailand’s transition to a low carbon and climate resilient economy. The Fund is financed by revenues from the emissions trading system (ETS), carbon border adjustment mechanism (CBAM), carbon credit fees, government support, private and international contributions, and regulatory penalties, and is reinvested into climate mitigation, adaptation, technology development, and capacity building. 

2. Mandatory Emission reporting 

Under the Draft Climate Change Act, businesses operating in key sectors, including energy, transport, heavy industry, agriculture, and waste management are subject to mandatory emissions reporting. Regulated entities are required to measure, verify, and report their greenhouse gas emissions on an annual basis.  

All reported data must be independently verified and certified in accordance with regulatory standards. The submission of false, misleading, or incomplete information constitutes a legal offence and may result in administrative or criminal penalties under the Act.

3. Emission Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM)

The Draft Climate Change Act introduces a comprehensive carbon pricing framework to operationalise the Polluter Pays Principle. Thailand has adopted a dual-track approach, combining a Carbon Tax and the Thailand Emissions Trading System (TH-ETS) to regulate both the price and volume of greenhouse gas emissions across the economy.

Thailand’s carbon tax is administered by the Ministry of Finance, through the Excise Department and the Customs Department, and was initially implemented in early 2025 for petroleum and basic petroleum products. The pilot tax rate is set at THB 200 per tonne of CO₂ equivalent (tCO₂e) and is embedded within existing excise tax structures. Hence, the act set out a carbon tax on 31 categories of goods, with manufacturers and importers required to pay the tax based on product volumes and tariff rates prescribed by ministerial regulation, subject to statutory caps. The carbon tax is administered by the Excise Department and the Customs Department, which are authorised to assess liabilities, impose penalties and surcharges, and enforce collection of unpaid taxes. Taxpayers may appeal assessments and apply for reductions, exemptions, or refunds in accordance with prescribed rules. A portion of carbon tax revenues may be allocated to local authorities under ministerial regulation, capped at 10 percent of total collections.

Furthermore, Thailand Emission Trading System (TH-ETS) targeted emission control mechanisms for medium to large emitters in energy intensive sectors such as energy, petrochemicals, steel, cement, and chemicals. Under a cap-and-trade model, the government sets an emissions cap, allocates allowances (free or by auction), and enables firms to trade allowances based on their emissions performance, thereby turning emissions reductions into tradable economic assets.

Hence, with an introduction of a Carbon Border Adjustment Mechanism (CBAM) to address carbon leakage and align the carbon cost of imported goods with domestic carbon pricing. The Department of Climate Change and Environment administers the system by registering importers, collecting emissions data, managing carbon adjustment certificates, and overseeing compliance, under the policy supervision of the National Climate Change Policy Committee. Importers of designated goods must report embedded emissions and purchase corresponding certificates annually, with credits available for carbon prices already paid abroad.

4. Thailand Taxonomy for sustainable finance

The National Climate Change Policy Committee to establish a national sustainability taxonomy as a common reference framework for classifying economic activities based on their environmental and climate impact. The taxonomy is designed to support consistent assessment. Strategic planning, policymaking, and capital allocation across the public and private sectors.

Developed jointly by the Bank of Thailand, the Securities and Exchange Commission, the Department of Climate Change and Environment, the Stock Exchange of Thailand, and other agencies, the taxonomy classifies activities into three categories: Green (environmentally sustainable), Amber (transitional activities aligned with decarbonisation pathways), and Red (activities misaligned with long-term climate goals).

The latest Phase 2 expansion extends coverage beyond energy and transport to include agriculture, manufacturing, construction and real estate, and waste management, using a mix of performance-based and practice-based criteria tailored to sector-specific realities. The taxonomy provides a standardised basis for sustainable finance, investment screening, regulatory alignment, and the prevention of greenwashing, thereby integrating climate objectives into Thailand’s financial and economic system.

Penalties 

The Draft Climate Change Act establishes a system of offences and administrative penalties proportionate to the severity and impact of non-compliance, with the objectives of preventing environmental harm and incentivising regulated entities to fulfil their legal obligations. Penalties may include fines ranging from THB 10,000 to THB 5 million, or up to three times the economic benefit gained, together with daily fines until compliance is achieved.

In cases of serious violations, the Act also criminal sanctions, including imprisonment of up to three years. In addition, company directors and responsible managers may be held personally liable where violations result from their instructions, approval, or negligence.

Business Implications

The draft act creates significant strategic opportunities for businesses that adapt early. Mandatory emissions reporting and carbon pricing accelerate the integration of carbon management into operational and financial decision-making, enabling companies to improve efficiency, reduce long-term cost exposure, and strengthen their sustainability positioning. Access to climate finance through the Climate Change Fund, carbon markets, and green investment channels creates new revenue and cost-offset opportunities for firms developing low-carbon technologies, energy-efficient processes, or emissions reduction projects. At the same time, alignment with international climate mechanisms enhances the ability of Thai businesses to maintain export competitiveness, meet investor and customer expectations, and position themselves as credible participants in the global low-carbon economy. 

At the same time, the challenges may occur from regulated entities as compliance with MRV requirements, carbon taxes, and emissions trading obligations increases operational complexity and costs, particularly for energy-intensive industries and resource-constrained firms. Regulatory frameworks are still evolving, creating uncertainty around thresholds, methodologies, and enforcement, which requires ongoing investment in compliance capabilities, legal interpretation, and governance systems. Businesses also face transition risks associated with capital-intensive decarbonisation investments, potential competitive disadvantages if peers adapt faster, and exposure to financial penalties and reputational damage in the event of non-compliance. Together, these factors elevate climate regulation from a peripheral ESG issue to a core operational, financial, and strategic risk management priority.