The Impact of the EU Carbon Border Adjustment Mechanism on Indonesia
Trade Competitiveness, Economic Stability, and Policy Adaptation
DOI:
https://doi.org/10.33116/ije.v9i1.285Keywords:
Carbon Border Adjustment Mechanism (CBAM), economic impact, green transition, policy adaptation, trade competitivenessAbstract
The European Union (EU) introduced the Carbon Border Adjustment Mechanism (CBAM) to impose carbon price on imported goods based on their carbon footprint, aiming to mitigate carbon leakage and accelerate global decarbonization. While designed to promote sustainable industrial practices, CBAM poses significant challenges for emerging markets and developing economies (EMDEs), including Indonesia, which depends heavily on carbon-intensive industries for export revenues. This study investigates CBAM’s potential impact on Indonesia’s trade competitiveness, economic stability, and policy landscape by comparing its projected consequences in Indonesia with its implementation in the EU. This research employs a qualitative approach through a literature review, analyzing academic studies, policy reports from organizations such as the OECD, WTO, and IMF, and case studies from Indonesia and EU member states. The findings reveal that implementing CBAM in Indonesia would elevate production costs, weaken export competitiveness, and heighten economic risks for industries reliant on high-emission production, particularly in the manufacturing and energy sectors. Moreover, CBAM could intensify social challenges, including job losses and inflationary pressures. However, a comparative analysis with the EU’s experience highlights potential opportunities for Indonesia, such as incentives for a green economic transition, increased investment in renewable energy, and alignment with global sustainability standards. These findings underscore the urgency for Indonesia to formulate strategic policy responses, including trade diversification, technological innovation, and active participation in international climate negotiations. By providing a comparative perspective, this study advances the discourse on climate and trade policies, emphasizing the need for an equitable and adaptive regulatory framework that enables developing economies to navigate the global transition toward sustainability.
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