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A worker at a small-scale charcoal factory in Kota Tinggi, Johor, Malaysia (Ezra Acayan/Getty Images)
Europe’s carbon border will pressure steel and aluminium sectors – but green industries stand to gain if governments act now.
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ASEAN can capture the EU’s “carbon tariff” jobsASEAN can capture the EU’s “carbon tariff” jobs
The European Union’s Carbon Border Adjustment Mechanism (EU CBAM (Opens in new window)) is reshaping global trade. Often described as a “carbon tariff (Opens in new window)”, the mechanism aims to prevent companies from relocating carbon-intensive production outside Europe to avoid paying for emissions under the EU’s carbon pricing system. Since January 2026, importers of products such as steel, aluminium, cement, fertilisers and hydrogen are required to pay a carbon price on imports from countries that do not have an equivalent carbon pricing regime.
Debate over the EU CBAM has largely centred on its effects on trade and climate policy. Critics and supporters alike have questioned whether it will undermine the competitiveness of exporting countries (Opens in new window), reduce global emissions effectively (Opens in new window), reshape global supply chains (Opens in new window), or accelerate the formation of carbon clubs (Opens in new window).
Yet one question has received far less attention: what does the EU CBAM mean for jobs?
This matters especially in the Association of Southeast Asian Nations (ASEAN), a region of more than 350 million workers whose economies are competitive and deeply embedded in global manufacturing and supply chains.
The answer is not straightforward. While the EU CBAM could put some jobs at risk, it could also create new employment opportunities. Ultimately, its impact on employment will depend on how effectively ASEAN economies manage the transition.
The mechanism will not have a uniform impact across ASEAN: exposure varies by export profile and the carbon intensity of individual industries.
The challenge for ASEAN is not whether the EU CBAM is fair, but whether its workforce is prepared for a changing global economy.
Malaysia, Indonesia and Vietnam, for example, are among ASEAN’s largest exporters of iron, steel and aluminium to the EU, sectors covered by the EU CBAM. If firms cannot reduce their emissions or comply with the EU’s reporting requirements, their products may become less competitive in the European market. Companies could lose market share, cut production or divert exports elsewhere, with potential consequences for employment in affected industries.
Compliance itself will also impose costs. Measuring embedded emissions, preparing reports and upgrading production processes require additional investment. Firms may absorb these costs through lower profit margins, pass them on to customers or improve efficiency to remain competitive. For many businesses, particularly those operating on thin margins, these adjustments will not be easy.
The consequences extend well beyond the industries directly covered by the EU CBAM. Steel mills and aluminium producers support extensive networks of transport companies, logistics providers, engineering firms, equipment suppliers and maintenance contractors. If production slows, demand across these linked industries may also be affected
Small and medium-sized enterprises (SMEs) may be particularly vulnerable. Many lack the financial resources and technical expertise needed to measure and report the carbon emissions embedded in their products. New compliance requirements risk widening the gap between large multinational firms – generally those with greater capacity to adapt – and smaller local companies.
Several ASEAN countries have already begun preparing for this transition (Kenzo Tribouillard/AFP via Getty Images)
Yet focusing only on the risks tells only part of the story. Industrial transitions have always changed the types of jobs economies require, and the transition towards low-carbon production is no exception. Companies will need engineers specialising in renewable energy, industrial electrification and energy-efficient manufacturing, alongside experts in carbon accounting, emissions monitoring, environmental auditing and sustainable supply-chain management.
The transition could also strengthen ASEAN’s competitiveness. Multinational companies are now weighing carbon intensity alongside labour costs when deciding where to invest. Countries that develop cleaner energy systems and low-carbon manufacturing capabilities are likely to become more attractive destinations for investment.
ASEAN is well positioned to benefit from this shift. The region has abundant renewable energy resources, expanding manufacturing capacity and a relatively young workforce. If governments invest in clean infrastructure, workforce development and industrial upgrading, ASEAN could reinforce its position as a global manufacturing hub rather than lose competitiveness.
Encouragingly, several ASEAN countries have already begun preparing for this transition. Singapore (Opens in new window) has introduced a carbon tax, while Indonesia (Opens in new window) and Vietnam (Opens in new window) are developing emissions trading systems. Malaysia (Opens in new window) and Thailand (Opens in new window) are expanding their carbon market initiatives. Although these policies are primarily driven by domestic priorities, the EU CBAM strengthens the economic case for accelerating them. Carbon governance is becoming a source of international competitiveness.
The challenge for ASEAN is not whether the EU CBAM is fair, but whether its workforce is prepared for a changing global economy. Governments should invest in reskilling workers, particularly those employed in carbon-intensive industries. Universities and technical institutions should expand training in renewable energy, industrial efficiency, carbon accounting and digital manufacturing. Businesses, especially SMEs, will also require financial and technical support to adopt cleaner technologies and strengthen emissions reporting.
ASEAN itself has work to do. Rather than responding through fragmented national policies, member states should strengthen regional cooperation on green industrial development and workforce transformation. This could include harmonising carbon accounting standards, developing regional certification and skills-recognition frameworks for green jobs, promoting knowledge-sharing on EU CBAM compliance, and expanding regional financing for industrial decarbonisation. By coordinating their response, ASEAN can reduce adjustment costs, improve the competitiveness of regional supply chains, and position itself as a preferred destination for sustainable investment.
The EU has obligations here, too. If the mechanism is genuinely intended to advance global climate action rather than simply protect European industry, it should be accompanied by greater technical assistance, technology transfer and capacity-building for developing countries. Helping ASEAN industries decarbonise would make the mechanism more effective while reducing concerns that it is merely another form of trade protection.
About the author
Melinda Martinus
Melinda Martinus is a Fellow at the ASEAN Studies Centre, ISEAS – Yusof Ishak Institute. Her research focuses on sustainable development, climate governance, and the institutional and policy frameworks needed to advance climate ambition across ASEAN.
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