As the health crisis of Covid-19 gradually subsides, the attention of the government is now on measures to trigger economic recovery and promote economic growth. It is important to highlight that a return to “business as usual”, or the conventional economic growth paradigm involving excessive use of natural resources and environmentally destructive economic activities should be avoided. Instead, emphasis should be placed on alternative recovery policies and economic growth models that would help reduce the likelihood of future shocks and increase the country’s resilience to those shocks when they do occur_from impacts of climate change, air pollution, losses of biodiversity, and several others, writes Dr. Kannika Thampanishvong of Thailand Development Research Institute (TDRI)
During the Covid-19 pandemic, the top priorities of the government are to address the health emergency and initiate short-term economic stimulus and rescue measures, to get the economy and people’s livelihoods quickly back on their feet. Amid substantial losses in earnings, there needs to be a provision of immediate liquidity and protection of the livelihood of the general population.
As the health crisis gradually subsides, the attention of the government is now on measures to trigger economic recovery and promote economic growth. It is important to highlight that a return to “business as usual”, or the conventional economic growth paradigm involving excessive use of natural resources and environmentally destructive economic activities should be avoided.
Instead, emphasis should be placed on alternative recovery policies and economic growth models that would help reduce the likelihood of future shocks and increase the country’s resilience to those shocks when they do occur. Examples of future shocks or threats to the global economy include impacts of climate change, air pollution, losses of biodiversity, and many more.
Physical and economic impacts from climate change are already being felt, and some regions in Thailand have experienced extreme weather events at the same time as tackling Covid-19. For instance, in October 2021, eight provinces in Thailand_Nakhon Ratchasima, Lopburi, Saraburi, Suphanburi, Singhaburi, Angthong, Ayutthaya and Pathumthani_ faced a high risk of Covid-19 and were severely affected by floods.
Concerns about risks from climate change are not limited to Thailand. These concerns are shared by business leaders all over the world. A study by the World Economic Forum revealed that climate change-related risks, including extreme weather events, natural disasters, biodiversity loss, climate-action failure, and human-made environmental disasters, are among the most pressing risks facing businesses. This means that to drive economic growth, the impact of climate change and other environmental issues cannot be overlooked.
The 6th Assessment Report by the Intergovernmental Panel on Climate Change (IPCC) AR6 Working Group 1 emphasised the connection between increasing global surface temperatures and extreme heat and heavy precipitation. Southeast Asian countries are at a high risk of experiencing both events.
The Global Climate Risk Index has ranked Thailand as one of the countries most affected by climate change since 2017. Thailand has been impacted by both a high number of deaths and economic loss. The Swiss Re Institute estimated that in the most severe scenario, wherein temperatures rise by 3.2 degrees Celsius, the Thai economy may shrink by up to 44 per cent in 2050. Without structural changes to our economies, the continued accumulation of greenhouse gases (GHGs) in the atmosphere will lead to potentially catastrophic impacts.
The challenges of changing global trade rules and regulations
Besides problems posed by climate change in the near future, Thailand may face additional challenges from the changes in global trade rules and regulations. The European Commission has proposed the Carbon Border Adjustment Mechanism (CBAM), which would adjust the prices of goods to reflect the actual amount of carbon released during their production process. CBAM is one of the tools that the European Union is incorporating to achieve its carbon neutrality goal by 2050, according to the European Green Deal. This policy will directly affect Thai businesses that export to the region, especially industries with high greenhouse gas emissions, such as cement, aluminium, iron, steel, fertiliser, and coal.
To handle the aforementioned challenges in the future and to “build back better” after Covid-19, there is the need for urgent decisions today to incorporate a longer-term perspective. Thailand should shift its current economic development model to focus on resilience and green growth in the long term. This is an economic model that promotes economic growth and considers environmental and societal well-being.
To make co-benefits possible, technology is key to driving more efficient resource use and creating new business opportunities. Three examples of businesses using technology to create new opportunities and drive economic growth are electricity generation from clean energy, electric vehicles and environmentally friendly packaging. The key drivers for using renewable energy in power generation include the goal to attain carbon neutrality by 2050 and a surge in the demand for clean energy. Examples of companies in Thailand that use such technology include solar producers SPCG, BanpuNEXT, and BGrimm Power.
With regard to the use of technology in the production of electric vehicles, the key drivers include policies to use 100 per cent zero-emission vehicles (ZEV) in many countries to increase consumer demand for more environmentally friendly cars; Thailand’s goal to produce 100 per cent ZEV by 2035; and national targets to reduce greenhouse gas emissions and air pollutants. A joint venture between PTT and Foxconn, a Taiwanese electronics manufacturer, is one of the examples and promising businesses, focusing on the development of end-to-end production platforms to produce a complete range of electric vehicles for various car brands around the world.
Last but not least, technology can be used to produce environmentally friendly packaging. The key drivers for environmentally friendly packaging include increasing consumer interest in more environmentally friendly products, measures by the government to promote the reduction of single-use plastics, increasing the use of food delivery services, especially during the current COVID-19 pandemic, and the high demand in the market for environmentally friendly packaging.
An example of a Thai company that uses such technology is Gracz. The company supplies food containers and packaging produced from different types of natural plant pulp, such as bagasse, bamboo, and rice straw, which are naturally biodegradable, useful in everyday life, and safe for health.
In addition to using technology to create new business opportunities, technology can also be employed to increase the efficiency of resource use in businesses in different sectors. Three examples of businesses that employ technology to increase the efficiency of resource use which results in cost savings are discussed here. They are livestock farming, hotel, and building. In the livestock farming business, such as Betagro, biogas technology can be used to convert greenhouse gases, especially methane, into electricity. This reduces electricity usage on farms and at the same time reduces greenhouse gas emissions. Furthermore, the wastewater treated using wastewater treatment technology can lead to savings in the livestock farm’s water bill.
In the hotel business, such as Sivatel Hotel, Siam Bayshore Resort Pattaya, and Sukosol Hotel, installation of solar PV and switching to energy-saving electrical equipment, such as LED light bulb, or replacing the central air-conditioning system with split air-conditioning units can help hotels save on electricity bills while emitting less greenhouse gas emissions.
Last but not least, in the commercial and residential buildings, such as Siam Cement Group’s “100-year building”, cost savings can be achieved through more efficient resource management, especially through switching to LED lighting, generating electricity from solar power, and treating and reusing wastewater.
Although technology helps create new business opportunities or helps achieve resource efficiency as mentioned above, there are problems and obstacles that still need to be addressed. First, in the renewable energy or clean energy business, the Thai government has to unlock some rules and regulations that are obstacles to the use of renewable energy, such as third-party access, carrying out grid modernisation to better support a decentralised power generation system, and accelerate the promotion of research and development of renewable energy technologies to reduce costs of technologies, such as cost of energy storage system or solar panel, in order to make renewable energy technology more competitive and accessible.
With regard to electric vehicles, it is vital that the Thai government quickly create a clear policy framework for promoting the electric vehicle industry and invest in the necessary infrastructure, such as charging stations. The Thai government should raise customer awareness of the benefits of environmentally friendly packaging to create sustainable demand and create a clear pathway for banning packaging that is harmful to human health or the environment in order to help environmentally friendly packaging become more competitive.
Regarding the use of technology to enhance efficiency in the use of resources, there are important barriers that must be overcome, and actions should be taken by the Thai government. For livestock farming and crop production, small farmers typically do not have access to technologies needed to increase resource efficiency. The government should step in to provide appropriate support to these farmers and businesses to ensure that they have access to necessary finance and technology.
Since switching to energy-efficient appliances or installation of a renewable energy system would entail higher costs for hotels, the Thai government could help ease this burden through tax measures, such as by allowing hotel operators to use these expenses to reduce their corporate income tax. In addition, the government should support green hotels through green procurement policies, such as choosing these hotels as a venue for organising governmental meetings.
Finally, for green commercial and residential buildings, one of the main challenges is the higher cost, especially the cost of acquiring green building certifications, and the lack of serious government support. In response to such challenges, the Thai government could provide support by using tax measures to help reduce the cost burden for these green building operators.
In terms of overall policy recommendations to support green recovery and stimulate green growth, it is important that the Thai government takes action on the following issues. First, the government should not dismantle, water down or backtrack on environmental policies as this would increase policy uncertainty for green businesses, especially renewable energy investments or infrastructure to support electric vehicles which require long-term planning horizons.
Second, the government should consider providing support to businesses contingent on their environmental improvements. Examples of support include ensuring access to low-cost financing and tax incentives. Third, the government should invest in low-carbon infrastructure and avoid locking-in emission-intensive technologies.
Last but not least, the government should provide continuous support for the development of low-carbon or green technologies to reduce reliance on the import of these technologies and achieve market scale.
Senior Research Fellow specialising in environmental economics at Thailand Development Research Institute (TDRI)