Thailand is transitioning to a sustainable economy, marked in part by the implementation of Thailand Taxonomy Phase 2 on May 27, 2025, which focuses on a sustainable finance framework.
The taxonomy initiative is based on a classification system designed to identify and categorise economic activities based on their environmental sustainability.
The project serves as a reference tool to guide investments, financial decisions and policy measures as Thailand seeks to achieve its climate goals, particularly reducing greenhouse gas (GHG) emissions and aligning with the Paris Agreement and the UN's Sustainable Development Goals.
Phase 2 expands the scope to cover the agriculture, manufacturing, construction and real estate, and waste management sectors, industries that are among the highest greenhouse gas emitters in the country.
Phase 1 was launched on June 30, 2023 and focused on the energy and transport sectors.
A truck emits black fumes as it travels along a busy Phahon Yothin Road in Pathum Thani. (Photo: Apichit Jinakul)
Initial consultations began in February 2024, followed by a public consultation period from Oct 28, 2024 to Jan 10, 2025. Throughout this process, the Thailand Taxonomy Board received valuable feedback from a broad range of stakeholders, including government agencies, companies, civil society, academia, and international organisations.
The Thailand Taxonomy Board comprises representatives from the Department of Climate Change and Environment (DCCE), the Bank of Thailand, the Securities and Exchange Commission (SEC), the Stock Exchange of Thailand, and other relevant stakeholders from both the public and private sectors.
The board said most of the feedback supported the taxonomy in principle, with some suggestions to strengthen it such as incorporating additional environmental standards, certification schemes, and practices tailored to the Thai economic context for each sector.
To promote public awareness and engagement about sustainable development, stakeholders hosted a seminar on Phase 2 on May 27, 2025.
Moving Forward
Over the past 25 years, Thailand's economy has gradually shifted from an agricultural model to an industrial one, with exports and tourism driving growth.
However, this expansion created a rift between economic growth and the environment, while environmental issues have become more prominent in recent years, said Boonrod Yaowapruek, managing director of Creagy, during the seminar.
Since 2022, Thailand has stepped up its climate commitments, setting targets aligned with the Paris Agreement, including reducing GHG emissions by 30-40% from the business as usual level by 2030, achieving carbon neutrality by 2050, and reaching net-zero emissions by 2065.
"This journey is like running a marathon -- it takes time and cannot be achieved in one or two years," he said.
The first phase of the taxonomy was initiated in 2023, focusing on the energy and transport sectors, among the largest GHG emitters.
With the seven sectors covered under both phases of the taxonomy, up to 95% of Thailand's domestic GHG emissions are addressed, said Mr Boonrod.
"Implementing both taxonomy schemes could help reduce emissions by as much as 95%," he said, stressing the importance of collaboration across all sectors to ensure a successful transition towards long-term sustainability.
Government Assistance
Phirun Saiyasitpanich, director-general of the DCCE, said the agency plays a central role in steering the country towards a low-carbon economy.
The DCCE is responsible for developing policies, plans and measures aimed at reducing GHG emissions, include financial mechanisms and the drafting of the Climate Change Act meant to provide a legal framework for the transition to a low-carbon society.
A key mechanism involves reducing emissions in the industrial sector through carbon pricing, emissions cap-and-trade systems, and carbon taxation -- all designed to influence consumer behaviour nationwide.
In addition, specific mechanisms are in place to support emission reductions in sectors where cuts are difficult, including the development of a voluntary carbon credit market and the establishment of a Climate Fund to facilitate the transition to a low-carbon economy.
The Thailand Taxonomy is an integral part of the draft Climate Change Act. Under this framework, GHG reduction must become a primary objective for investments, alongside financial returns and economic growth.
To accelerate progress, the law is being fast-tracked through the Revolving Fund Committee, which already approved the establishment of the Climate Fund.
The bill is expected to be considered under the fast-track legislative process to expedite its enactment.
"Thailand is fully committed to collaborating with the global community in tackling climate change," said Mr Phirun.
"In preparation for COP30, the country is submitting its updated GHG reduction targets for 2035, known as NDC 3.0, which will guide our economic direction over the next decade."
Financial Sector Support
In the financial and banking sector, the taxonomy serves as a tool for banks to assess the environmental sustainability of their clients and identify factors that can support local businesses in transitioning to a greener economy.
This enables financial institutions to tailor products accordingly and evaluate their loan portfolios in terms of environmental performance and the pace of the green transition, said Roong Mallikamas, deputy governor for financial institutions stability at the central bank.
"From the Bank of Thailand's perspective, use of the taxonomy remains limited at this stage, although there has been some adoption in green bond issuance," she said.
"Moving forward, the central bank hopes to see broader application of the taxonomy across financial services."
Capital Market Involvement
In the capital market, green bonds and sustainability bonds can refer to or adopt the Thailand Taxonomy as a standard for investment selection.
The taxonomy provides a centralised and science-based framework with clear criteria for evaluating investments, aligned with environmental goals and the national commitment to achieving net-zero emissions by 2050 -- consistent with the Paris Agreement's target to limit global warming to no more than 1.5°C, said Thawatchai Pittayasophon, deputy secretary-general of the SEC.
Green bonds also help enhance the credibility of debt instruments by assuring investors that the proceeds will be used to fund genuine eco-friendly activities, he said.
Recognising the importance of aligning with the Thailand Taxonomy, the SEC introduced a fee waiver for filing sustainable debt instruments that reference either the Thailand Taxonomy or the Asean Taxonomy, effective from June 1, 2024 to May 31, 2028.