Amid rising oil prices and the need to slow down global warming from fossil fuels, the government’s vow to give electric vehicles a big policy push is more than welcome. The road ahead will not be easy, however.
Last year, the National Electric Vehicle Policy Committee announced that 30% of vehicles made in Thailand will be zero-emission vehicles (ZEV) by 2030. Dubbed the “30@30” policy, it aims to move Thailand into a low-carbon society and to make the country the manufacturing hub of electric vehicles and auto parts in this region.
To achieve this ambitious goal, the government will use tax and non-tax incentives to reinvigorate the automobile industry. Yet, the 30@30 policy has raised many questions about policy direction and its repercussions.
For starters, the state incentive programmes benefit only battery electric vehicles, leaving out other types of low-carbon vehicles such as those using biofuel to struggle on their own. But shouldn’t they receive policy support too?
True, Thailand must shift to a more environmentally friendly society and become the regional hub of electric vehicle manufacturing. But the change will cause disruptions in many sectors. Is the government ready to help soften the blow for those affected? Does it have any measures to curb any possible economic hiccups?
Many also question the government’s claims on the environmental benefits of the 30@30 policy. Since only a small proportion of Thailand’s electricity comes from low-carbon sources, the electric vehicles policy alone may not be very effective in cutting down on carbon dioxide.
The country also expects to need 26% more electricity than the projection in the revised Power Development Plan (2019-2037). So more electricity needs to be generated to reserve it for vehicle use.
Furthermore, there is still no clear policy on how to regulate EV charging stations and how to eliminate obsolete cars and dead batteries through environmentally-friendly methods. Despite these challenges, electric vehicles for public transportation remain cost-effective and worthwhile to reduce emissions.
The government also needs to address the immediate social and economic repercussions of the low-carbon policy. For example, the use of biofuels will significantly drop in the next decade, which will hit the agricultural sector and palm oil farmers hard. Also, about 20% of the workers in the automobile and auto parts industry risk losing their jobs because they cannot be reskilled.
The tax reduction incentives for electric vehicles also mean less revenue from excise tax, local government tax, and the annual motor vehicle tax. The environmental benefits, when calculated financially, are still not worthwhile considering the loss of tax income.
Besides, Thailand’s economic production structure is still heavily dependent on the imports of electric car parts and components from other countries, particularly electric accumulators and batteries. The 30@30 policy to support electric vehicles, therefore, will significantly affect the country’s gross domestic product (GDP) and slow down economic growth.
So how should Thailand navigate the transitional period towards becoming a lowcarbon society?
Amid the constraints from the country’s electricity generating structure, the government should support the use of vehicles that run on biofuels in parallel with electric cars to soften the immediate adverse impacts on the economy.
When the country is ready to produce electricity with clean energy, then it can give full support to zero-emission vehicles. By then the technology of the future will make fuel cell vehicles (FCEV) and solar electric vehicles (SEV) already possible.
In addition, the state support for electric vehicles should start with public transportation to maximise public benefits.
To make the country ready for the production of zero-emission vehicles, the government should first focus on creating consumer demand for electric and biofuel vehicles through tax incentives and other measures.
Local auto manufacturers should also receive investment support so they can improve their production capacity and competitiveness.
Equally important are the rules and regulations on EV charging stations. Since the number of these stations will soon rise, the government should quickly develop rules and regulations to set EV charging industry protocols and standards.
For environmental protection and a smooth transition towards clean energy, the government should also have concrete and environmentally-friendly measures to manage obsolete cars and dead batteries.
Furthermore, the government must have comprehensive plans to get all sectors of society ready for the era of clean energy. The plans and policies to reduce production costs should be based on extensive research so that they can still support future technologies.
The disruptions will affect vulnerable groups in society the most. The government should, therefore, have some financial mechanisms to assist oil palm farmers and workers in the automobile manufacturing industry.
The world needs to shift to clean energy. It is a matter of global survival. Thailand must chip in to cut down the use of fossil fuels. The 30@30 policy is part of the country’s journey towards zero emissions.
For the policy to be fully effective, the electricity generating system must provide clean energy for electric vehicles. State intervention is also necessary to help the auto industry go electric. Those who are affected by the energy transition must receive state assistance.
With a comprehensive plan to address the repercussions, the country will enjoy a smooth energy transition and the public will fully benefit from the 30@30 policy.
Article by Nichamon Thongphat is a Senior Researcher and Jitlakha Sukruay is a Researcher at the Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.
More in TDRI insight
- Time to ease Thai bond market rules
- TDRI Quarterly Review (December 2023)
- Soft landing likely for this dragon year
- Reconsidering unclaimed dividends
- Braving hurdles for green transport