(Source ：Bangkok Post，2025-12-08)

With CBAM set to cost the region billions from 2026, an Asia-led carbon corridor could turn that threat into a lasting climate and strategic advantage.

When the EU's Carbon Border Adjustment Mechanism (CBAM) enters full force in 2026, it will hit China and Asean harder than almost anyone else: together they ship more than a quarter of all goods entering Europe. China's steel and aluminium sectors alone face an embedded carbon bill of roughly US$300–400 million (9.5–12.7 billion baht) a year. Once CBAM extends to downstream products -- battery precursors, chemicals and other value-added goods the EC has signalled for inclusion by 2030 -- the financial exposure could surge dramatically, especially for China and the four Asean manufacturing powerhouses: Indonesia, Malaysia, Thailand and Vietnam.

Yet the same pressure is creating a rare strategic opportunity. China and Southeast Asia now have an urgent common interest to build an integrated regional carbon market that starts small, stays pragmatic, shields their exporters from the full bite of CBAM and hands Asia -- and the entire Global South -- a powerful new lever in the fight against climate change.

China now operates the world's largest carbon market. Since its national emissions trading scheme expanded in March to include steel, cement and aluminium alongside power generation, it now covers three greenhouse gases and roughly half of China's total CO2 output. Meanwhile, its voluntary offset mechanism, restarted in January 2024, has seen a surge in new methodologies this year and is on track to blanket every major mitigation sectors by 2027. By the end of August, CCERs had traded 2.71 million tonnes worth 229 million yuan. Momentum is no longer the question.

Crucially, Beijing dropped the clearest signal yet to internationalise its carbon market. A May directive from Beijing explicitly called for the internationalisation of China's carbon market and demanded "international mutual recognition of technologies, methodologies, standards and data" -- the clearest policy green light yet for carbon-market diplomacy.

Asean is moving faster on carbon markets than many outsiders appreciate, with its members now stratified into four tiers. Singapore sits alone at the top: a carbon tax since 2019 and the Climate Impact X platform make it the region's undisputed hub.

Indonesia and Vietnam form a fast-following Tier 2. Jakarta's IDXCarbon, launched for coal-fired power in 2023 and opened to global participants this year, stands out for its inclusivity and embraces a wide range of domestic and foreign methodologies, making it one of the most partnership-ready platforms in emerging Asia. Hanoi begins nationwide ETS pilots in August, backed by a cascade of enabling legislation that has moved at breakneck speed.

Thailand and Malaysia form Tier 3, each boasting mature voluntary markets -- Thailand's T-VER and Malaysia's Bursa Carbon Exchange -- while actively drafting carbon taxes and compliance schemes in the coming years. The rest sit in Tier 4, remain credit suppliers, mostly forestry and REDD+, but increasingly tied in through bilateral Article 6 agreements. Additionally, the private-sector-led Asean Carbon Market Alliance, launched in 2023 by Singapore, Indonesia, Malaysia and Thailand, is explicitly committed to accelerating regional carbon-market integration, and completed its first cross-border auction of 2.48 million credits in Indonesia earlier this year.

Moreover, Japan's Joint Crediting Mechanism and Singapore's carbon-credit agreements with Vietnam and Thailand have established frameworks under Article 6 of the Paris Agreement, and are beginning to enable cross-border transfers in partner countries. This hands-on experimentation has given Southeast Asian governments and firms their first real taste of shared mitigation outcomes -- precisely the building blocks that could one day bridge to China's CCER system without starting from scratch. The pieces for a meaningful China-Asean linkage are now squarely in place.

To turn this vision into reality, China and Asean can take four practical steps: First, launch voluntary-market bilateral pilots with Indonesia, Malaysia and Thailand -- countries that already have mature platforms, surging momentum and substantial reduction potential. Second, embed cooperation inside existing frameworks and establish a formal China-Asean Carbon Market Dialogue. Third, fast-track mutual recognition of MRV rules, starting with the three sectors that both CBAM and emerging Southeast Asian compliance markets are laser-focused on: power, steel and cement.

Fourth, allow Chinese-funded decarbonisation projects in Southeast Asia to register under CCER methodologies and, once authorised under Article 6 rules, share the resulting credits with host countries -- turning every new solar farm, wind park or factory retrofit into a genuine win-win asset.

The payoff from integration would be immediate and hard to ignore. Chinese investors would instantly gain a new, tradable asset class in Southeast Asia. Under Article 6, once carbon credits can flow freely across borders, every dollar Chinese investors pour into Southeast Asian solar farms, wind parks or factory retrofits will generate tradable credits that count towards China's 2030 peak and 2060 neutrality targets, while giving Southeast Asia the funding and know-how to confront climate change on the ground.

Xue Song is an Associate Professor at the Institute of International Studies, Fudan University, Shanghai.

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