On 10th May 2023, the European Parliament and the Council of the European Union (EU) issued Regulation (EU) No. 2023/956 on Establishing a Carbon Border Adjustment Mechanism (CBAM) (“the Regulation”) as a key instrument to advance the EU’s goal of climate neutrality by 2050. The implementation of CBAM has far-reaching impacts on exporting countries to the EU, including Vietnam. This article provides a preliminary analysis of CBAM, its impact on Vietnam’s export goods and both local and foreign-invested enterprises operating in affected sectors.
CBAM is an EU policy that places a carbon fee on certain imported goods. It is designed to prevent companies from moving production to countries with weaker climate rules (a practice called “carbon leakage”) and to encourage global reductions in carbon emissions. CBAM requires importers to report the carbon emissions linked to their products and pay a fee if those emissions exceed EU standards.[1]
CBAM calculates the carbon fee based on the emissions generated during the production of imported goods. Importers must report these emissions and purchase CBAM certificates[2], priced according to the EU Emissions Trading System (EU ETS). If the exporting country has its own carbon pricing system, the paid amount can be deducted from the CBAM fee.[3]
Vietnam is currently the 11th largest trading partner in terms of goods imported into the EU market. According to Vietnamese experts, in the current phase, CBAM directly affects 4 key industries in the country: steel, aluminum, cement, and fertilizers. However, these are not Vietnam’s major export sectors to the EU. In the short term, Vietnam’s overall exports to the EU are not expected to face significant disruptions.
That said, CBAM will increase export costs, making Vietnamese goods less competitive in the EU market. As a result, the projected decline in export value and production volume for affected industries is as follows:
| Goods | Estimated Decline Rate | |
| Export Value | Production Volume | |
| Steel | 4% | 0.8% |
| Aluminum | 4% | 0.4% |
| Cement | (insignificant impact) | |
| Fertilizers | (insignificant impact) | |
In the long run, CBAM’s scope may expand to include additional industries and carbon-intensive goods such as organic chemicals and polymers (plastics)[5], which could lead to a significant impact on Vietnam’s exports. Additionally, enterprises recently have found carbon emission reporting complex, posing a significant barrier to export procedures.
From 2023 to 2025, Vietnamese businesses exporting goods to the EU will be required to report the carbon emissions associated with their exported products as part of the CBAM. This transitional phase is focused on carbon emissions reporting, where businesses must provide details on the level of carbon emissions generated during the production of their goods. However, during this period, there is no obligation to purchase CBAM certificates.
Key Obligations for Businesses are:
Although there is no official enforcement or specific penalties for non-compliance yet, businesses that fail to prepare during this transitional period will face challenges in meeting the more stringent requirements in 2026. This could result in higher costs and fail to comply with the regulation at that time shall be held liable for the payment of a penalty[7].
In summary, ensuring accurate and timely reporting of carbon emissions between 2023 and 2025 is a critical step to prepare for the full implementation of CBAM in 2026, where the businesses will be required to purchase certificates and fully comply with the regulations[8].
Addressing CBAM compliance also requires coordinated support and cooperation from Vietnam’s regulatory bodies and relevant organizations.
In response to CBAM, Vietnamese government assigned the Ministry of Industry and Trade to lead the CBAM response efforts, in coordination with other ministries and agencies, including international negotiations, business support initiatives, carbon pricing policy research, and developing a carbon market and green finance solutions[10].
To further support businesses, the Institute for European Studies and TNF Vietnam Organization hosted the seminar “CBAM and Vietnamese Enterprises: Adapting to the Green Economy” in October 2024 in Hanoi, providing Vietnamese businesses with insights and practical guidance to navigate and comply with CBAM requirements[11].
Thus, Vietnam has been actively adapting to CBAM and now continues to accelerate policy development and solutions to help businesses adapt while ensuring sustainable exports to the EU market.
CBAM poses a challenge but also an opportunity for Vietnamese exporters to adopt sustainable production. CBAM is a relatively new and evolving regulation. Specific implementation details, including the scope and calculation methods, are subject to change. To maintain their market share in the EU, enterprises must proactively understand the regulations, establish carbon emission measurement systems, and adopt cleaner production technologies.
In D’Andrea & Partners Legal Counsel we have authored innovative publications exploring Vietnam, produced in order to provide foreign investors and businesses with more practical guidance on how to do business in Vietnam, as it requires a specific context of the economic and legal framework of the country, including tailor-made consultancy for import and export activity in Vietnam.
The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D’Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.
[1] Source:
– Regulation (EU) 2023/956
– https://tapchicongthuong.vn/cbam-va-moi-lien-he-voi-xuat-khau-xanh–doanh-nghiep-viet-buoc-phai-thich-ung-130045.htm
[2] Importers need to buy enough certificates to match the carbon emissions linked to the goods they are bringing into the EU
[3] Article 4,6,7 Regulation (EU) No. 2023/956
[4] Source:
[5] Source: https://dangcongsan.vn/khoa-hoc/co-che-dieu-chinh-bien-gioi-carbon-thach-thuc-va-co-hoi-cho-doanh-nghiep-viet-nam-651711.html#:~:text=Nh%C6%B0ng%20sau%20n%C4%83m%202026%2C%20ph%E1%BA%A1m,%C4%91%E1%BA%BFn%20h%C3%A0ng%20h%C3%B3a%20xu%E1%BA%A5t%20kh%E1%BA%A9u
[6] Source:
[7] Article 26 of Regulation (EU) 2023/956
[8] Article 36 of Regulation (EU) 2023/956
[9] Source:
– https://consosukien.vn/viet-nam-xay-dung-chinh-sach-ung-pho-co-che-dieu-chinh-bien-gioi-carbon.htm
[10] Official Letter No. 6082/VPCP-NN
[11] https://dangcongsan.vn/thoi-su/cbam-va-doanh-nghiep-viet-nam-thich-ung-nen-kinh-te-xanh-681512.html
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