Thailand will introduce a CO2 tax in 2025, but the oil tax burden will remain unchanged

Image courtesy of the International Energy Agency

The Excise Department plans to do this introducing a carbon tax by 2025with the whole The oil tax burden is expected to remain unchanged. This step is intended to be in line with the Global Warming Act, which is scheduled to come into effect in 2025.

According to Director General of the Excise Department, Ekniti Nitithanprapas, the department has examined global practices for introducing a carbon tax and plans to adopt international standards, focusing on taxing emissions at source .

He highlighted the shift in vehicle tax bases from engine displacement to carbon dioxide emissions. For example, vehicles that emit more than 200 grams of CO2 per kilometer are taxed at 35%, while vehicles that emit less than 150 grams per km are taxed at 25%, Ekniti said.

“The collection of the carbon tax will start with oil, and the ministry can implement this tax without the need for new legislation.”

He assured the public that the carbon tax would not increase their burden because it would simply convert part of the existing oil tax into a carbon tax.

For example, the current excise tax on diesel is 6.44 baht per liter. Since diesel emits 0.0026 tons of carbon per liter, the carbon tax rate of 200 baht per ton of carbon equates to an average of 46 satangs per liter.

Diesel tax

This carbon tax will be included in the diesel excise structure of 6.44 baht per liter.

Thailand’s carbon tax rate is comparable to Singapore’s, making it the second country in ASEAN to introduce such a tax. The future implications of the tax were also heavily considered by Ekniti.

“When we refuel in the future, we will know how much carbon is emitted. Initially this will not have any consequences for the public.”

He also pointed out the immediate benefits, especially with Europe set to introduce its Carbon Border Adjustment Mechanism (CBAM) for five types of goods in 2026.

Export-oriented factories, such as Thai steel mills that use diesel in their operations, will have a carbon tax included in the diesel price. The ministry is negotiating to make this carbon tax deductible so that Thai companies can remain competitive.

In addition, the department supports measures to promote electric vehicles (EVs), which have led to a significant increase in EV use. In 2024, electric vehicle sales grew by 685% compared to the previous year, while the excise tax rate on electric vehicles fell from 8% to 2%, reducing excise taxes on these purchases.

Drastic carbon reduction

This measure has contributed to a reduction of more than 240,000 tons of CO2 emissions.

The government has also encouraged manufacturers to set up EV production plants in Thailand, with 22 companies participating in the initiative, resulting in more than 80 billion baht in investments.

The department is also looking into tax collection on batteries, which is currently set at 8% for all types, including car batteries, flashlights and power banks.

Ekniti said the department aims to differentiate these rates, particularly to encourage environmentally friendly practices through tax reductions for recycling.

“Eco-friendly practices are a global priority, especially in Europe, which will fully implement CBAM by 2026, impacting traders.”

To mitigate these effects and increase competitiveness, the Excise Department is preparing mandatory mechanisms for companies through excise legislation, Bangkok Post reported.

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