Is the EU carbon tax a concern in Vietnam? 

From 1 October 2023, 27 European Union (EU) member countries will begin piloting carbon taxation on exported goods under the Carbon Border Adjustment Mechanism (CBAM). In a dialogue with Business Forum Magazine by the Vietnam Chamber of Commerce and Industry, Mr. Nguyen Viet Dung, Country Chief Executive of BV Vietnam, shares his perspective on CBAM as a policy tool for businesses in Vietnam.  

Question: With the EU being Vietnam's largest source for imports, could you tell us the impact of the Carbon Border Adjustment Mechanism on Vietnam? 

Viet Dung: The EU provided a compliance roadmap but has not required immediate implementation of CBAM. Meanwhile, the transition period takes effect from 1st October 2023 and importers are obliged to report their exported goods according to CBAM regulations at the end of each quarter without having to pay for the newly reflected costs.  

After the pilot phase where CBAM will be fully implemented from 2026, enterprises will be obliged to report their carbon emissions and pay the applicable carbon tax accordingly. The EU requires importers to pay for carbon certificates or taxes on products whose level of greenhouse gas emissions exceeds regulations. Specific goods such as products that use a high amount of carbon and carry the highest risk of carbon leakage (cement, iron, steel, aluminium, fertiliser, etc) are listed by the EU, and this list will be continuously updated until 2025. Thus, not all products exported to the EU will be subject to carbon tax. 

Question: It seems that CBAM has not had a major impact on Vietnam's export enterprises. Would this be an important time for enterprises to gradually change production methods and go green? 

Viet Dung: This is highly recommended. Exports using high amounts of energy and carbon such as coal would need to look at their current production processes and place more attention and importance on climate change to abide by CBAM regulations. Otherwise, buyers would have to pay more for Vietnamese products compared to products made in Europe. Therefore, to maintain a competitive advantage, the enterprises need to consider converting to green production and reducing greenhouse gas emissions. 

The CBAM clearly presents challenges but from another perspective, it also creates direct incentives for manufacturers. I think that the motivations and opportunities outweigh the challenges, and it is time for enterprises to adapt and change to gain more access to large markets. The shift towards sustainable processes will also be seen and felt in the local market.  

Question: How would enterprises adjust to meet these new requirements? 

Viet Dung: The enterprises need to exercise accountability with their importers and consumers about the energy used to create their products, the sources of energy, etc. To do that, the enterprises need to cooperate and discuss with recognised assessment consultants to plan an appropriate roadmap based on the enterprises’ operating model and business lines. The most important thing is to build effective accountability methods. This requirement is fast becoming essential in addition to CBAM and is effective as a risk management tool.  

Question: How do you evaluate the transformation of Vietnamese enterprises to meet the above requirements? 

Viet Dung: The enterprises that export the products that are directly affected must recalculate prices and actively convert production to be greener and more sustainable. We notice that many enterprises are making efforts to transform and position themselves with the general global trend, increasing their value and branding. Thus, there are many motivations for the enterprises to transform – it's not necessarily because of CBAM's pressure but rather the need to quickly seize development opportunities that will give Vietnamese businesses the head start they need.