The EU’s Carbon Border Adjustment Mechanism (CBAM) is a carbon tariff that charges imported goods based on their carbon emissions during production, aiming to prevent carbon leakage by discouraging manufacturers from relocating to countries with less stringent standards. The first phase of CBAM targets sectors like cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. While not all Malaysian companies will be affected due to minimal exports in some sectors, there is concern that other countries might adopt similar measures. For those affected, exporters to the EU can reduce these charges by lowering emissions or proving compliance with domestic carbon pricing.

In response, the Malaysian government plans to introduce a new carbon pricing mechanism by 2025 to align with global climate goals and the EU’s CBAM.

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