The EU's Carbon Border Adjustment Mechanism (CBAM) entered a transition period in 2023 and officially began charging fees in 2026. The core logic of this mechanism is that products imported into the EU must pay for the carbon emissions generated during their production process, thus preventing EU companies from being disadvantaged in global competition due to higher carbon costs.

For manufacturing plants in Southeast Asia, this isn't "Europe's own business." If your products are exported to Europe, or if you're a supplier in some part of the supply chain, CBAM's requirements will eventually reach you along the supply chain. The following three steps will help you clarify your current exposure position.

Step 1: Confirm whether your product is within the CBAM coverage area.

The first phase of CBAM covers six product categories: steel, aluminum, cement, fertilizer, electricity, and hydrogen. These six categories were not randomly selected, but rather represent the industries within the EU with the strongest carbon emission controls and the greatest risk of "carbon leakage" due to import substitution.

The starting point for judgment is the Customs Tariff Code (HS Code). The EU has published a list of HS Codes applicable to CBAM. You can check the HS Codes on your export declaration to confirm whether your product falls within the list. It is important to note that CBAM covers not only the final product but also the intermediate materials. If you are producing aluminum parts, even if the final use is not steel building materials, it may still be within the scope of application.

If your product is not currently within the six categories, it doesn't mean you can completely exclude it. The EU has clearly stated that the product scope of CBAM will be gradually expanded by 2030 to include more manufactured products with high carbon emission density. Therefore, establishing a basic understanding now is to prepare for the future expansion of the EU's carbon tax scope.

Step 2: Do you have the data foundation for "embedded carbon emissions"?

CBAM requires the declaration of "embedded carbon emissions" rather than overall factory carbon emissions. This means the total amount of greenhouse gases emitted during the entire manufacturing process of a specific product, from raw materials to finished product, calculated per metric ton of product.

How are these figures obtained? The current requirement is that manufacturers provide actual measurement data. If they cannot provide such data, the EU will use preset values for calculation. These preset values are usually higher than actual emissions, which is disadvantageous to exporters. This means that factories that do not conduct carbon audits have reduced bargaining power at the negotiating table.

For Southeast Asian factories, the challenges in establishing this data lie in three aspects: First, the electricity emission factor. The carbon emission intensity of the power grid in Vietnam, Thailand, and Malaysia differs from that in the EU, and the calculation method needs to be specifically confirmed. Second, the completeness of process data. The energy consumption records of many factories are scattered across different departments and are not systematically compiled. Third, the carbon footprint of upstream raw materials. In theory, embedded carbon emissions should be traced back to the emissions of suppliers, but if suppliers do not have data, industry averages need to be used as a substitute.

You don't need to gather all the data today, but you do need to know what data gaps exist and how long it will take to fill them.

Step 3: What demands will your EU importer make of you?

The legal obligor under CBAM is the EU importer, not the exporting manufacturer in Southeast Asia. However, in order to fulfill their reporting obligations, importers must obtain embedded carbon emissions data from suppliers, a requirement that will be explicitly stated in the purchase contract or supplier qualification clause.

In practice, some European buyers have already started inquiring about carbon emission data from suppliers as early as 2025, and have included this in their annual supplier review process. If your products are exported to Europe, you can proactively inquire with importers about the status of their CBAM (Consumer Rights and Interests Assessment) declarations and when they expect to begin requesting data from suppliers.

If your current exports are mainly to markets outside Europe, this requirement may not directly affect you for the time being. However, the transmission effect of the supply chain is worth noting: if your customers are assembly plants, and the final products of the assembly plants are exported to Europe, the carbon emission requirements may also reach you through layers of procurement relationships.

The special situation of factories in Southeast Asia

Compared to markets like China and India, where there is already considerable discussion and adaptation to CBAM, major manufacturing markets in Southeast Asia, such as Vietnam and Thailand, started preparing for CBAM relatively late. There are two main reasons for this: firstly, the carbon pricing mechanisms in Southeast Asian countries are not yet mature (the carbon trading markets in Vietnam and Thailand are still in the pilot or planning stages); secondly, many Taiwanese-owned factories' demand for ESG information disclosure stems primarily from the listing requirements of their Taiwanese parent companies, rather than directly from regulatory pressures in their export destinations.

The opportunity presented by this "time lag" is that starting to build the data foundation now and gaining the ability to provide embedded carbon emissions data earlier than competitors will be a plus for European buyers when selecting suppliers.

CBAM is not a one-off compliance list, but a long-term mechanism that requires continuous maintenance of carbon emissions data. The three things you can do now are clarify whether your products are within the scope, what data gaps you currently have, and when your European customers will most likely make requests. Subsequent carbon audit implementation and data system construction will require collaboration with local consultants and system tools.

Further Reading

The following articles can be used in conjunction with this one:

From Compliance to Competitiveness: The S-15 Supply Chain Cybersecurity Offense and Defense

A Brief Discussion on ISO 27001: The Dual-Track Approach of Systems and Technologies

AI Era Production Capacity Forecast 2026-2028: The First Year of Hardware Classification and the Disappearance of the Right to Maintain It