Asian economies must go green to keep their competitive edge

Many Asian countries have relatively more lenient carbon emission rules compared to stricter standards in Western nations, making Asia generally more attractive to manufacturing industries seeking lower operational costs, including those related to environmental compliance.

Asian countries which are unable to comply with such regulations may struggle to partake in international trade. At worst, this could impede their gross domestic product growth and economic trajectory.

Bangladesh’s textile and garment exports may come under pressure due to the CBAM, which comprises an imposed tax on imports that generate greenhouse gases during their production. This measure will increase the cost of selling textiles and garments in the EU market for exporters like Bangladesh that will need to cover the tax associated with carbon emissions.

Having started last October, the CBAM will be gradually phased in over the next several years. The transitional phase currently applies to certain sectors including iron, steel, cement, aluminium and electricity. But the coverage of goods subject to the border tax is likely to expand progressively upon review.

CBAM’s ultimate objective is to protect EU industries from competition by foreign entities with higher pollution levels and ensure a competitive environment for European businesses. Asian exporters, like those from Bangladesh, will face a tougher market amid likely lower demand for their goods in the EU, especially if they have to ramp up prices to compensate for the tax on associated carbon emissions.

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