IMPORTANT CONSIDERATIONS REGARDING CBAM FOR VIETNAMESE BUSINESSES

IMPORTANT CONSIDERATIONS REGARDING CBAM FOR VIETNAMESE BUSINESSES

 

One of the most pressing and significant issues currently concerning goods exported to the EU is the Carbon Border Adjustment Mechanism (CBAM)!

So, what is CBAM, and how does it impact Vietnamese enterprises?

 

What is CBAM?

  • CBAM is the Carbon Border Adjustment Mechanism, a policy under the European Green Deal.
  • Essentially, CBAM will levy a carbon tax on goods imported into the EU based on the greenhouse gas emissions produced during manufacturing in the exporting country.
  • While the primary objective of CBAM is to prevent carbon leakage, this regulation also aims to encourage producers from third countries to more effectively control and reduce greenhouse gas emissions.
 

Does CBAM affect Vietnamese businesses?

  • Although Vietnam ranks as the 11th largest partner in terms of goods imported into the EU, in the initial phase, CBAM will focus on goods with the highest risk of carbon leakage: cement, iron, steel, aluminum, fertilizers, hydrogen, and electricity (which account for up to 94% of the EU's industrial emissions).
  • Vietnamese enterprises may face substantial carbon taxes due to high emissions, elevated production energy costs, and low rates of renewable energy utilization.
 

How does CBAM impact Vietnamese businesses?

  • The steel sector is expected to experience a decrease of approximately 4% in export value (a reduction of about 0.8%).
  • The aluminum industry may see a decline of more than 4% in export value (approximately a 0.4% decrease).

According to the Technical Assistance Project for assessing the impacts of the CBAM mechanism, while EU importers are responsible for reporting and incurring CBAM fees, they will also require Vietnamese enterprises to provide information regarding emissions and costs associated with domestic carbon pricing,...

 

What are the solutions for Vietnamese businesses?

CBAM is a crucial policy that could significantly impact the business operations of Vietnamese enterprises exporting to the EU. Companies need to proactively seek information, develop carbon reduction strategies, prepare reports, and effectively manage emissions during production to enhance their competitiveness in the international market. 

 

 

What is the extent of CBAM's impact in the future?

  • In 2025, during the transition phase of the mechanism, CBAM may be expanded to include a wider array of products and services, encompassing "indirect emissions" (carbon emissions resulting from electricity usage in the production of goods).
  • By 2026, importers of goods falling under the scope of CBAM in the EU will be required to purchase CBAM certificates.

 

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