Vietnam is the 11th largest exporter of products to the EU, which accounts for 1.8 percent of total import turnover of the market. The three EU countries which import the most from Vietnam are the Netherlands (7.849 billion euros), Germany (7.68 billion euros) and Italia (3.529 billion euros).

The EU, which aims to be the first climate-neutral (zero carbon) continent has set up a lot of mechanisms, including the Carbon Border Adjustment Mechanism (CBAM), a climate measure that prevents the risk of carbon leakage (enterprises in the EU try to move carbon-intensive production abroad to exploit the lax standards in the countries).

According to Rasmus Nedergaard, a renewable energy expert of Act Renewable, CBMA will impose a kind of import tax on the imports to the EU. The tax rates will depend on the emission content in production as well as the carbon price gap according to ETS (EU Emissions Trading System) between the EU and manufacturing countries.

With the mechanism, the post-CBAM products, when entering the EU market, would be more expensive, unless enterprises cut greenhouse gas emissions.

At present, CBAM is applied to electric products, steel, fertilizer, aluminum and cement. Enterprises have the transitional period of two years (from January 1, 2023 to December 31, 2024) to do the stocktaking of greenhouse gas as well as the emissions of the units of supply chains.

The spheres to be covered by CBAM will be expanded in the future. Therefore, the mechanism would have big impacts on the Vietnamese businesses which export products to the EU.

Shailesh Telang and Thanh Mai, the experts on emission cut, said that the companies that export products to the EU need to thoroughly consider the mechanism, while stressing that reducing greenhouse gas emissions is an irreversible trend.

The other markets such as the US, Japan and South Korea have also been building similar mechanisms in order to implement their commitments on greenhouse gas emissions, balance the carbon prices of domestic and import products.

Nguyen Thi Hien Trang from Act Renewable noted that Vietnam’s businesses still don’t pay high attention to the issue, especially SMEs. 

Meanwhile, Vietnam has set very ambitious goals for greenhouse gas emission cuts.

The 2020 amended Law on Environment comprises the Article 91 on greenhouse gas emission reduction and Article 139 on the organization and development of carbon market. 

Most recently, Vietnam issued Decree 06 on mitigating greenhouse gas emissions and protecting the ozone layer this January.

Tran Thuy