In Bangkok, known for its heavy traffic, pollution, and aging buses, a major Thai public limited firm Energy Absolute, or EA, is transforming public transport through the Bangkok E-Bus program. This groundbreaking initiative aims to replace old diesel buses with eco-friendly electric models, generating carbon credits for sale. Since 2022, EA has already deployed 3,000 such buses, marking a significant environmental leap in the city. The effort is part of a historic agreement between Thailand and Switzerland, Asia’s first transfer involving Internationally Transferable Mitigation Outcomes, or ITMOs, for a country to achieve Nationally Determined Contributions under the Paris Agreement’s Article 6.2. This mechanism facilitates countries to trade carbon emission reductions to achieve national climate targets. The Thai-Swiss cooperation, a cautious yet vital step in utilizing the voluntary carbon transaction between governments for climate goals, has set a precedent in Southeast Asia. Nine other countries in the region have followed suit, signing different types of agreements to benefit from this innovative approach. Supporting this endeavor is the KliK Foundation, a private entity established to fulfill the legal compensation obligation of Swiss motor fuel importers. It has provided crucial financial backing, primarily through purchasing ITMOs through climate-friendly initiatives. “The Thai-Swiss ITMO transaction is a trailblazer,” Axel Michaelowa, a climate policy and carbon credit mechanism expert, told Radio Free Asia. The actual amount of money has not been made public, but KliK and EA announced on Jan. 8 that the Swiss bought 1,960 ITMOs from the project. Each represents one metric ton of carbon dioxide equivalent (CO2e) reduced or removed from the atmosphere. An executive at EA said the value is more than US$30 per credit but did not give an exact figure. There is no market rate, and the government does not set the price. KliK plans to purchase at least 0.5 million ITMOs by 2030. EA plans to launch at least 4,000 electric buses in Bangkok. An electric-powered public bus picks up passengers at a bus station in Bangkok on June 6, 2023. (Lillian Suwanrumpha/AFP) The purchase of ITMOs, in Thailand and 12 other countries, is part of Switzerland’s climate strategy, particularly in meeting its obligations under its CO2 law and its commitments to the Paris Agreement. It aims to halve emissions by 2030 and reach net zero by 2050. The ITMOs are now credited to KliK’s account, while Thailand will deduct them from its newly formed carbon inventory to avoid double counting. Although groundbreaking, the process is fraught with complexity, opaqueness, and a lack of regulation, underscoring nations’ difficulties maneuvering through the intricate and sometimes disputed realm of global climate agreements. What is ITMO, and how does it work? ITMOs work by allowing countries to trade emission reductions in the form of carbon credit to help meet their climate targets. For example, if Country A exceeds its emission reduction targets, it can sell the surplus to Country B, struggling to meet its targets. This trade, recorded as ITMOs, helps Country B fulfill its commitments under the Paris Agreement while incentivizing Country A’s continued environmental efforts, even though the latter cannot count it as progress towards its climate goal. Since it is a country-to-country agreement, both must authorize it. “It’s a purely commercial contract between the implementer of the program and us as buyers of the credits. It’s individual negotiation specific for each and every program,” Marco Berg, the managing director of KliK Foundation, told RFA. He said it depends on what a country wants out of the project, among other things, with “the methodology behind it, the environmental integrity, and contribution to sustainable development” scrutinized before the project is implemented. ITMOs are taking place in “addition to what Switzerland is doing nationally, not in place of an emission reduction,” he added. A demonstrator holds a banner next to the House of Swiss Parliament during a national protest for climate justice in Bern, on Sept. 30, 2023. (Valentin Flauraud/AFP) Detractors of the mechanism question the effectiveness and equity of relying on market-based solutions for proper climate action, saying it could delay eradicating emissions. Some say rich nations are shifting responsibility to the Global South. There are also concerns that such deals might fund projects in poorer countries that would have proceeded regardless of foreign investment, potentially lacking additional environmental impact. The regulations and international institutions governing ITMO trade do not exist yet. Berg also noted challenges, including regulatory uncertainty affecting business risks and the need for capacity building, complicated by changing political landscapes. Negotiations over the carbon market at the Dubai COP28 climate summit in December came to a standstill after… (continued)
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