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EU carbon rules hurt ASEAN exporters but could benefit them later: ADB
The European Union’s Carbon Border Adjustment Mechanism (CBAM), some say, could push the ASEAN region toward cleaner energy by eliminating carbon emissions in goods sent to Europe.
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Steam evaporates at the site of Supreme Energy’s Muara Laboh Geothermal Power project in a photograph taken on Nov. 20, 2017. (ADB/ADB)
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SEAN countries, especially Malaysia and Indonesia, are bracing for measures aimed at keeping some of their export goods out of the European Union unless manufacturers can prove their products’ environmental credentials.
Some deride the EU policy as a trade barrier, while others say it may force origin countries to move faster toward more sustainable production practices.
The policy, known as the Carbon Border Adjustment Mechanism (CBAM), is set to take effect gradually, starting in 2026.
The EU argues it aimed to prevent “carbon leakage”, or domestic industries moving overseas to evade costly emission standards, and thereby ensure a level playing field to keep EU products competitive.
Noncompliant goods shipped to the EU will be subject to a special tax. Initially, the policy only targets cement, electricity, fertilizers (such as nitric acid, ammonia and potassium), as well as iron, steel and aluminum products.
Among ASEAN member states, Indonesia and Malaysia would be the two most-heavily impacted by the import restrictions due to their considerable exports of iron, steel and aluminum to the EU, according to Singapore-based think tank ISEAS–Yusof Ishak Institute.
Malaysian Minister of International Trade and Industry YB Tengku Zafrul Aziz told The Jakarta Post on March 20 he deemed the policy unfair, arguing European countries could not expect ASEAN countries to follow their transition timeline.
