As the EU Carbon Border Adjustment Mechanism (CBAM) takes effect on 1 January 2026, it matters deeply for Asia. The region is a major exporter of carbon-intensive goods, such as steel, aluminum, and cement, to the EU. Countries like China, India, Indonesia and Vietnam face rising carbon costs, as their production remains more emissions-intensive than in Europe.
This is where climate finance becomes critical. Climate and transition finance create the synergy between carbon regulation and industrial competitiveness by channeling capital toward cleaner production, energy efficiency, and technological upgrading. Instruments such as green and transition bonds, sustainability-linked loans, and blended finance allow firms to meet CBAM requirements while sustaining exports.
This policy brief is authored by our Chief Economist Dr. Farhad Taghizadeh-Hesary, Prof. Nawazish Mirza, and Prof. Amir Hasnaoui (Excelia Business School, France). It highlights how credible climate-finance frameworks can transform CBAM from a trade challenge into a catalyst for industrial upgrading and long-term resilience across Asia.
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