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EU CBAM Has Long-term Implications for APAC

The EU’s Carbon Border Adjustment Mechanism (CBAM) has cost implications for APAC-based exporters of raw materials and industrial products, but it will also accelerate the adoption of low-carbon technologies and carbon pricing schemes in the region, said Sustainable Fitch, the ESG arm of credit ratings agency Fitch Ratings. CBAM is set to launch in October and will be fully operational by 2026, with Sustainable Fitch noting in its report that levies posed under the mechanism will increase supply chain costs, which “are likely to be passed to downstream sectors and consumers”. This is particularly pertinent for APAC commodity exporters (such as India, South Korea and Japan) that have gained more business in the EU as a direct result of the bloc seeking to diversify away from Russia and Belarus. Cost pressures for exporters of raw materials and industrial products should be short-term, the report said, adding that CBAM is “likely to encourage APAC exporters to adopt clean technologies to minimise carbon tariff costs in production”. Further, regulators across APAC may be “more inclined” to set up domestic carbon-pricing mechanisms in response.  

 

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