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Beyond Borders: Indonesia’s Policies in Anticipating the European Union’s Carbon Border Adjustment Mechanism
Carbon Border Adjustment Mechanism (CBAM) aims to reduce the risk of carbon leakage. CBAM works beyond borders by imposing a tax on imported goods from third countries if their CO2 emission standards are lower than those in the EU. CBAM has the potential to reduce the competitiveness of Indonesian products in the EU due to the added carbon tax. Against these risks, Indonesia i.e. Kemlu RI should anticipate CBAM and other similar mechanisms in the future to ensure that Indonesian products are still competitive in the EU and global market.
This paper has two objectives. First, to provide detailed analysis on i) the nature of CBAM and ii) CBAM impacts on developing countries and Indonesia. Second, to identify possible policy options and suggest a policy recommendation that can be taken by Indonesia i.e. Kemlu RI to anticipate CBAM.
This paper aims to answer the central question: What policies should be taken by Kemlu RI in anticipating the CBAM?. In answering the question, this paper elaborates the details of CBAM, its impacts on the developing countries and Indonesia and offer policy choices for Indonesia. This paper further recommends the best policy choice and possible ways to implement it.
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