Thailand and Switzerland have become the first countries in the world to sign a bilateral agreement on carbon trading under the Paris Agreement. The deal, which was announced on Friday, will allow Switzerland to offset its greenhouse gas emissions by investing in climate projects in Thailand.
Carbon trading is a market-based mechanism that allows countries or entities to buy and sell emission reductions or mitigation outcomes. The idea is to create an incentive for reducing greenhouse gas emissions and to promote low-carbon development.
The Paris Agreement, which came into force in 2016, is a global pact to limit the rise in global temperature to well below 2°C above pre-industrial levels, and to pursue efforts to limit it to 1.5°C. The agreement recognizes that countries have different capacities and responsibilities to tackle climate change, and allows them to set their own national targets and plans, known as nationally determined contributions (NDCs).
Article 6 of the Paris Agreement provides a framework for voluntary cooperation among countries to achieve their NDCs and to raise their ambition over time. Article 6.2, in particular, enables countries to trade emission reductions or mitigation outcomes with each other, subject to certain rules and standards.
How does the deal between Thailand and Switzerland work?
The deal between Thailand and Switzerland is the first of its kind under Article 6.2 of the Paris Agreement. It was signed by Natural Resources and Environment Minister Varawut Silpa-archa and his Swiss counterpart Simonetta Sommaruga in Bern, Switzerland, on Friday.
According to a joint statement issued in May, the deal will allow Switzerland to offset part of its carbon emissions by supporting climate projects in Thailand, such as renewable energy, energy efficiency, and electric mobility. In return, Thailand will receive Swiss expertise and technology to enhance its climate action and to pursue its goal of carbon neutrality by 2050 and net-zero emissions by 2065.
The deal will also facilitate the exchange of carbon credits between Thailand and Switzerland, as well as the involvement of the private and other sectors in climate cooperation. The carbon credits will be generated from the climate projects in Thailand and will be transferred to Switzerland to count towards its NDC. The carbon credits will also be deducted from Thailand’s NDC to avoid double counting.
The deal is expected to be implemented from 2023 to 2030, with a possible extension until 2035.
What are the benefits and challenges of the deal?
The deal between Thailand and Switzerland is seen as a win-win situation for both countries, as well as a milestone for global climate action. It demonstrates the potential and the feasibility of Article 6.2 of the Paris Agreement, which has yet to be finalized by the parties.
For Thailand, the deal will provide additional resources and incentives to reduce its greenhouse gas emissions and to transition to a low-carbon economy. Thailand is one of the largest emitters in Southeast Asia, accounting for about 4% of the region’s total emissions. Thailand has pledged to reduce its emissions by 20-25% by 2030 from the 2005 level, and to achieve carbon neutrality by 2050 and net-zero emissions by 2065.
For Switzerland, the deal will help it meet its ambitious climate target of reducing its emissions by 50% by 2030 from the 1990 level, and to achieve net-zero emissions by 2050. Switzerland is a small and wealthy country with a high standard of living, but also a high per capita emission rate. Switzerland has already implemented various measures to reduce its domestic emissions, such as carbon taxes, subsidies, and regulations. However, it also relies on international cooperation and carbon markets to achieve its goal.
The deal also sets an example and a precedent for other countries to follow and to enhance their climate ambition and cooperation. It shows that carbon trading can be a viable and effective tool to address the global climate crisis, if done in a transparent and robust manner.
However, the deal also faces some challenges and uncertainties, such as the lack of clarity and consensus on the rules and standards of Article 6.2 of the Paris Agreement, the verification and accounting of the emission reductions or mitigation outcomes, and the social and environmental impacts of the climate projects. The deal also requires the approval and participation of the relevant stakeholders and authorities in both countries, as well as the public awareness and acceptance of the concept and the benefits of carbon trading.
The deal between Thailand and Switzerland is a historic and innovative agreement that marks the first country-to-country carbon trading under the Paris Agreement. The deal will enable both countries to achieve their climate targets and to contribute to the global effort to limit the temperature rise to well below 2°C. The deal will also pave the way for more cooperation and ambition among other countries and sectors in the fight against climate change.
