Reforming the European Union’s Carbon Border Adjustment Mechanism: Stakeholder perspectives from India, Indonesia, and Vietnam

Abstract

The European Union (EU)’s Carbon Border Adjustment Mechanism (CBAM) aims to curb carbon leakage and encourage global decarbonization. Importers of goods to the EU from India, Indonesia, and Vietnam face estimated annual CBAM payments of approximately USD 1.65 billion, USD 234 million, and USD 659 million, respectively. This paper examines the CBAM from a Global South perspective, drawing on 39 interviews with government, industry, and research experts from three key developing Asian exporters of CBAM-covered products: India, Indonesia, and Vietnam. We ask: (1) how do key stakeholders in India, Indonesia, and Vietnam perceive the EU CBAM and its implications?, (2) what policy and industry responses do they anticipate?, and (3) what reforms could enhance its effectiveness and fairness from a Global South perspective? While interviewees acknowledged the CBAM’s role in spurring carbon pricing interest and adoption in their countries, they expressed concerns over their country’s limited involvement in its design, over compliance costs, and over effects on trade. We conclude that a more collaborative CBAM that includes revenue sharing with the Global South may better unlock more ambitious and sustainable decarbonization progress in trade partners. Show more