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Low carbon prices can create a misleading sense that decarbonization is not urgent, leading companies to continue investing in high-emission processes. (Image：iStock）
The EU’s Carbon Border Adjustment Mechanism (CBAM) will come into force in 2026, placing unprecedented compliance pressure on export-oriented companies across Asia. Carbon pricing mechanisms are already in place in markets such as Taiwan, South Korea, and Japan, while Southeast Asian countries including Vietnam and Malaysia are also advancing the development of carbon markets.
However, compared with the EU carbon price range of EUR 70 to 90/tonne, carbon prices across Asia remain relatively low. As pressure for low-carbon transition intensifies, the adoption of internal carbon pricing (ICP) is emerging as a key strategy for companies to move beyond passive compliance and proactively strengthen their green competitiveness.
CBAM in place, but limited momentum for carbon price growth in Asia
Although Vietnam is a key export-oriented economy in Southeast Asia, its carbon market pilot has been delayed to the end of 2026. Alex Loo, professor for business and sustainability at York St John University, noted that the country continues to face bottlenecks in institutional development, data systems, and professional capacity.
Despite Vietnam’s commitment to achieving net-zero emissions by 2050, high-emission sectors covered under CBAM, such as power, steel, and cement, still account for nearly half of the country’s total emissions. Loo warned that without an effective domestic carbon pricing mechanism, exporters may be required to bear the full cost of EU carbon charges.
A similar pattern can be observed across other Southeast Asian economies. The International Institute for Sustainable Development (IISD) highlights that, despite developments such as Indonesia’s carbon exchange, Vietnam’s pilot emissions trading system (ETS), and the Philippines’ ongoing carbon market assessment, carbon price signals across the region remain weak.
Unlock the full article to explore three key takeaways:
- The EU’s CBAM will take effect in 2026, requiring Asian exporters without an effective domestic carbon price to bear higher carbon costs in the EU.
- Carbon markets across Southeast Asia rely heavily on free allowance allocations, keeping carbon prices low and weakening incentives for corporate decarbonization.
- Companies can mitigate CBAM cost exposure by adopting internal carbon pricing (ICP), using a six-step approach to align investment decisions in advance.
