SEC eager to develop carbon credit trade

Tokens to be allowed on exchanges

The Securities and Exchange Commission (SEC) is preparing to allow tokenised carbon credits to be traded via digital asset exchanges as well as brokers and dealers, in a bid to promote Thailand as a carbon credit trading hub.

Earlier this month the SEC approved regulatory amendments to allow digital asset exchanges, brokers and dealers to offer services for tokenised carbon credits, tokenised renewable energy certificates (RECs), and tokenised carbon allowances.

The move aims to expand investment options and position Thailand as a regional hub for carbon credit trading. The SEC will seek public consultation on the proposed changes, the regulator said in a statement.

In August 2024, the SEC revised its regulatory framework for utility tokens, exempting consumption-based utility tokens (Utility Token Group 1) from regulatory oversight. This restriction also prevented digital asset businesses from offering tokens related to carbon reduction efforts, such as carbon credits, RECs, and carbon allowances.

“Recognising the potential of blockchain technology to support the carbon credit market and promote green economy initiatives, the SEC has proposed a regulatory amendment that would enable digital asset businesses to facilitate the trading of these tokens,” the statement noted.

This aligns with Thailand’s carbon neutrality and net-zero commitments, reinforcing the country’s role as a leader in sustainable finance, said the SEC.

“The SEC will continue to gather stakeholder feedback before finalising the updated regulations. This marks a significant step in integrating blockchain-based carbon credit trading into Thailand’s financial ecosystem,” noted the regulator.

A carbon credit refers to a market-based mechanism designed to reduce greenhouse gas (GHG) emissions. The carbon pricing system imposes a cost on emitters to encourage lower emissions.

If an organisation successfully reduces its emissions below a standard level or enhances its ability to absorb GHG beyond the normal rate, the reduced emissions or additional absorption are quantified as carbon credits. These credits can then be traded or used to offset emissions elsewhere.

The Thailand Greenhouse Gas Management Organization said the carbon credit market in Thailand is undergoing significant changes.

At the COP26 summit in 2021, Thailand committed to achieving carbon neutrality by 2050 and net-zero emissions by 2065. The government has offered policy support to position Thailand as a carbon credit trading centre in Southeast Asia via the Thai bourse and enforcement of climate change laws.

Bangkok Bank (BBL) data suggests RECs can offer the right to be a producer or a user of electricity from renewable energy, with the international REC standard of the Netherlands as a certification body. The Electricity Generating Authority of Thailand is the only certifier in Thailand at the moment.

REC is a mechanism that can allow Thailand to achieve its Paris Agreement pledge to reduce GHG emissions by 20-25% by 2030, according to BBL.

In the past, leading businesses around the world have used RECs to show their commitment towards renewable energy, such as sustainability efforts or environmental data, which should become more visible, noted the bank.

RECs are used in various forms to reflect intentions, according to BBL.

Tokenised carbon allowances are converted from various assets into digital token form to be moved, stored, or recorded with blockchain technology.