Green Alliance: Thai-Swiss Pact Puts Paris Climate Goals into Motion!

"Thai Electric Bus Operator Achieves Milestone in Paris Agreement Implementation with Sale of Carbon Offsets to Swiss Fossil Fuel Group"

Thai Electric Bus Operator Sells Carbon Offsets to Swiss Fossil Fuel Group

In a significant development for the implementation of the United Nations climate accord, a Thai electric bus operator has announced the sale of the initial carbon offsets under a new system established by the Paris Agreement to a Swiss fossil fuel group. This marks a milestone in the progress of the 8-year-old agreement.

The Paris Agreement, formulated in 2015, allows governments and corporations to offset a portion of their greenhouse gas emissions by funding initiatives that mitigate climate pollutants elsewhere. These offsets are converted into carbon credits, with each credit representing the reduction of one metric ton of carbon dioxide (CO2) emissions.

Switzerland’s KliK Foundation, representing fuel importers, has finalized the inaugural purchase of 1,916 carbon credits from Thailand’s Energy Absolute. This groundbreaking transaction demonstrates the potential of a nascent market for carbon credits. Switzerland is a strong supporter of bilateral credit trading as stipulated in article 6 of the Paris Agreement. The recent transaction is part of a broader pact between Switzerland and Thailand, signed in the first months of 2023. While the credits obtained will eventually be used in government strategies, private entities are responsible for executing the project. Swiss firm South Pole, a global leader in trading carbon credits, coordinated the project.

Energy Absolute, the seller, has faced controversy in the past year, sparking discussions and debates within the industry. The company is responsible for generating the credits by deploying a fleet of 4,000 electric buses in Bangkok, replacing conventional petrol-fueled vehicles and avoiding the release of CO2, which results in the creation of offsets.

The exact value of the credits sold was not disclosed, but Energy Absolute stated that the credit price exceeded $30. This partnership is shaping the Paris Agreement market, pending finalization of the UN rules at COP28 in Dubai last year. The evolving nature of these regulations means that both Energy Absolute and KliK, along with regulators in their respective countries, can influence this burgeoning market. However, it also presents the risk of needing to revise their agreement once the final UN rules are established.

KliK’s managing director, Marco Berg, emphasized the complexities involved in being pioneers in this area, citing substantial effort and costs. The Swiss government has mandated fuel importers to offset a progressively increasing percentage of their emissions, either domestically or through Paris Agreement-compliant credits, leading KliK to engage in this transaction. KliK has committed to purchasing offsets for up to 1.5 million metric tons of carbon dioxide emissions until 2030 from Energy Absolute. This is only a fraction of the 20 million credits it expects to purchase by the end of the decade. Switzerland aims to offset roughly 40 million Mt of CO2 abroad through 2030 to fulfill its climate objectives.

Despite their utility, carbon offsets have faced criticism from some environmental advocates who argue that they promote pollution instead of focusing on eradication. They doubt the integrity of the credits, claiming that they are not additional, meaning the project would still proceed without the offsets. However, an independent carbon market consultant, Mischa Classen, disputes this claim. Classen notes that Thailand lacks a specific policy directive supporting private bus operators in transitioning to electric vehicles. Additionally, a spokesperson representing the KliK Foundation stated that the additionality issue is purely speculative. They further noted that Energy Absolute relies on the financial backing provided through the purchase of credits to ensure the project’s viability. The Swiss Federal Office of the Environment (FOEN) also emphasized that only offsets leading to additional emissions reductions would receive approval. They highlighted the thorough verifications conducted in collaboration with the environmental authority of the host country.

Switzerland continues to advance these agreements despite ongoing uncertainties regarding the regulatory framework governing this mechanism. Discussions about article 6.2 of the Paris Agreement faced a deadlock during COP28 due to a contentious disagreement over carbon offset integrity. The European Union advocated for stringent regulations, while the USA pushed for greater flexibility. Although negotiators aim to broker an agreement during COP29 in November, countries have the freedom to proceed with their agreements under the initial rulebook formulated in Glasgow. Classen emphasizes that Switzerland’s inaugural transaction contributes positively to the growing consensus among nations with a genuine interest in Article 6. He added, “It is the final result of a long, hard process and it is not a decision you can just switch on or off. You need well-designed bilateral agreements setting minimum standards and a lot of political labor to establish carbon market regulations. The case of Thailand shows that it’s possible.”

The Swiss government continues its efforts in this direction, anticipating a substantial portion of its emission reductions by 2030 to be achieved through overseas projects.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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