BOT circumspect about carbon credit

The central bank has not yet allowed banks to be brokers or traders of carbon credit, Niramon Asavamanee, BOT's director of the financial institutions application department, said yesterday.

Commercial banks have to improve risk management before the central bank could allow them to do this new business. Moreover, banks have to take into account consumer protection and fully inform investors about the risks of buying carbon credits from them.

She was speaking at a seminar: "Preparing Fiscal and Financial Policies for Carbon Trading in Thailand", hosted by Team Thailand, the Royal Thai Embassy in Tokyo.

She conceded that there was low awareness in Thailand about carbon trading.

Carbon trading is part of international efforts to reduce the emission of greenhouse gases that cause global warming. In a carbon trading market, firms that can reduce emissions of greenhouse gases can sell carbon credits to those producers with unacceptable emission rates.

However, the disadvantage for private firms to be awarded carbon credits, also known as certified emission reduction, from the United Nations is the high cost of investment.

Currently commercial banks are allowed to lend or act as financial advisers to private firms that want to participate in a carbontrading project, she said. They can also act as matchmakers between investors, she said.

The BOT is also considering providing soft loans to banks by seeking cooperation from the World Bank.

The BOT may also reduce the risk weight for bank loans to finance carboncredit projects if the loans will be guaranteed by the government or other institutions such as World Bank, she said.

Meanwhile, Somchai Sujjapongse, directorgeneral of the Fiscal Policy Office, said the Finance Ministry is currently drafting laws that will impose a higher tax rate on polluters and well as give tax incentives to encourage firms to use clean technology.

He admitted that Thailand lags behind China and Vietnam in government role in supporting carboncredit trading.

Nat Pinnoi, technical specialist on carbon finance of the World Bank, suggested that several small swine farmers could join together to produce electricity from biogas by using wastes from farms.

Bringing together several operators would reduce the cost of investment, he said. Cost is higher due to the investment needed for new equipment and clean technology. However, operators cannot rely on income generated from trading of carbon credits, but their cash flow would depend much on their core businesses, he said.

Among local banks, Kasikornbank and TMB are active in providing loans to support private firms that want to participate in carboncredit projects.