Thai regulators exclude gas from green category in draft taxonomy

A consultation on the draft document is open until 26 January.

Natural gas will not be classified as green under Thailand’s upcoming sustainable finance taxonomy, according to draft documents released last week.

The documents show that Thai regulators have adopted the EU taxonomy’s lifecycle emissions limit of 100g CO2e/kWh, effectively excluding most fossil-generated power including natural gas. Producers of gas power – which makes up 60 percent of Thailand’s energy mix – will instead be able to raise green financing to retrofit power plants for green hydrogen use.

In July, members of the European parliament voted to partially exempt natural gas from the lifecycle emissions limit, despite pushback from green groups and ESG investors.

Nuclear energy was also reclassified as green by the EU, and subsequently added to the Korean green taxonomy in September. Thailand does not currently use nuclear and it was not referenced in the draft taxonomy.

The Thai taxonomy will utilise a traffic-light system, with amber denoting transition activities and red for polluting activities, in addition to green.

Organisations claiming amber activities must provide a transition timeframe and targets aligned to Thailand’s NDC. Regulators stressed, however, that the category is “not a catch-all for activities that are a light shade of green or represent only a slight change from business as usual”.

Activities to retrofit facilities to reduce emissions intensity will be considered amber if they meet certain environmental thresholds and are on track to be retired by 2040.

The current phase of the Thai taxonomy roll-out will account for the climate mitigation objective, out of a total of six environmental objectives, and apply to the energy and transport sectors. Regulators have not detailed additional reporting or fund-level requirements, but suggested that the government “can use the taxonomy to formulate policies and create incentives”.

The taxonomy was developed by the Bank of Thailand and the local Securities and Exchange Commission. Both bodies sit on the regulatory Working Group on Sustainable Finance steering committee which is co-ordinating Thailand’s ESG strategy.

Stakeholders have until 26 January to comment on the draft (Thai only).

Regulators have said that the Thai taxonomy will be “closely aligned” to a regional taxonomy being developed for ASEAN, although the latter is still in the early stages of development. The ASEAN taxonomy and that of regional neighbour Singapore will similarly adopt a traffic-light system to assess sustainability performance.