Thai energy companies urged to adopt 'circular economy': PwC

Thai energy companies should transition to a "circular economy" to address the adverse effects of non-renewable resources and join a global race to commit to net-zero climate emissions, PwC Thailand says.

Firms should also start trading in carbon credits, which could generate millions of baht in income per year as the COVID-19 pandemic accelerates the reduction of carbon emissions and diminishes demand for fossil fuels.

Amornrat Pearmpoonvatanasuk, Energy Leader and Assurance Partner for PwC Thailand, said energy companies around the world, including those in Thailand, are facing mounting challenges to address climate change in the wake of COVID-19.

The pandemic has brought attention to the need to reduce greenhouse gas (GHG) emissions, resulting in changes in product demand, market characteristics and business models. A growing list of governments and corporations have committed to tackling climate change through achieving net-zero carbon dioxide (CO2) emissions by 2050[1].

"A global movement to achieve a net-zero future by replacing fossil fuels—the major contributors to global warming such as oil, natural gas and coal—with renewable energy sources will lead to shrinking demand of these markets. Business leaders will increasingly transition out of traditional business models to a circular economy prioritising renewables and low-carbon energy sources that have less impact on the environment.

"Against this backdrop, we expect more oil giants and other energy businesses to profoundly shift the way they do business to boost competitiveness and efficiency, including offsetting the risk from a fall of non-renewables demand globally," Amornrat said.

Recently major economies such as China, the US, Japan and South Korea set targets to achieve net-zero emissions by 2050. The European Commission also unveiled the European Green Deal[2], a roadmap for Europe to become a climate-neutral continent by mid-century.

More than 400 leading organisations, including PwC, have signed the United Nations Global Impact's 'Business Ambition for 1.5?C[3]' commitment to limit the rise in average global temperature to 1.5?C and reduce net-zero global emissions by 2050.

The circular economy in the energy, utilities and resources industry

Growing concerns over climate change will likely accelerate a transition to a circular-economy model aimed at recycling renewables to ensure maximum benefits and release zero or the least-possible waste across all industries, Amonrat said.

This shift will transform business models by using integrated technology to add value to an organisation's supply chain, from production systems and raw material management to applying renewable energy and resources principles to expand new markets such as producing green hydrogen from waste.

Companies in the energy sector have a crucial role in the development of a circular economy, according to PwC's "Taking on tomorrow: The rise of circularity in energy, utilities and resources[4]" report. There are six steps companies can take to build a more sustainable future including:

1. Map your circular opportunities;
2. Be clear about your strategy and vision;
3. Plan your circular transformation route;
4. Develop circular collaborations and frameworks;
5. Measure, review and communicate your progress; and
6. Move before your competitors, customers and regulators do.

Thailand's commitment to the Paris Agreement[5] to reduce GHG emissions by 20% to 25% by 2030 in the area of energy, transport, industrial processes and waste management has prompted Thai energy, utilities and resources companies to shift their business models towards clean energy to ensure their financial performance is sustainable, Amornrat said.

Such efforts also help to win trust from clients, communities, investors and stakeholders who increasingly pay more attention to Environmental, Social and Governance (ESG) reporting, she continued.

Another option for the sector to reduce GHG emissions is through trading carbon credits. This tool is increasingly becoming popular abroad, where regulatory allowances for emissions can be bought or sold, she said. A few Thai energy companies generated up to THB10mn per year from selling carbon credits to other companies, Amornrat added.

Combining this approach with the transition toward renewable energy would add value to business operations and create new revenue streams.

"Energy businesses should revisit their business and cost structures in the aftermath of COVID-19.

"This includes rethinking how to make the most of available natural resources and using this crisis as an opportunity to do more socially responsible business in order to build long-term sustainability and competitiveness," she said. 

[1] The race to zero emissions, and why the world depends on it, United Nations

[2] A European Green Deal, European Commission

[3] Business Leaders Taking Action, United Nations Global Impact

[4] Taking on tomorrow: The rise of circularity in energy, utilities and resources, PwC

[5] Paris Agreement, Department of International Organization, Ministry of Foreign Affairs, Thailand