The 20th Session of the VIOIT Dialogue titled "How should Viet Nam take best advantage of Carbon Border Adjustment Mechanism (CBAM)” was recently held, shedding light on crucial strategies to tackle this emerging challenge. The workshop, monitored by Mr. Ayumi Konishi, Coordinator and Senior Advisor at the Institute of Strategy and Policy of Industry and Trade (VIOIT) and Senior Advisor to the General Director at the Center for Multilateral Cooperation on Development Finance (MCDF), saw the participation of esteemed keynote speakers, including Mr. John Cotton, Senior Program Manager and Energy Transition Partnership at UNOPS, and representatives from the Ministry of Industry and Trade, as well as leaders, researchers, and industry experts.
Climate change, particularly the escalating threat of global warming caused by human activities, has emerged as one of the most pressing issues of the 21st century. In response, countries worldwide have been actively striving to reduce carbon and greenhouse gas (GHG) emissions. Several global agreements, programs, initiatives, and actions, such as the Kyoto Protocol (1997), Clean Development Mechanism (CDM), and Paris Agreement (2015), have been established to address this issue. Notably, at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in Glasgow, United Kingdom, in 2021, countries committed to achieving net zero emissions by 2050, ensuring that the global temperature rise does not exceed 1.5°C by 2100.
Recognizing the significance of environmental preservation, the Vietnamese government has introduced various policies to combat climate change. Decree No. 06/2022/ND-CP outlines emission reduction roadmaps and the timeline for implementing the domestic carbon market, while Resolution No. 24-NQ/TW, issued in 2013, emphasizes proactive climate change response, resource management, and environmental protection. Additionally, laws such as the Environmental Protection Tax Law (No. 57/2010/QH12) and the Environmental Protection Law (No. 72/2020/QH14) have been enacted. Furthermore, Decision No. 01/2022/QD-TTg, released in January 2022, designates 1,662 industrial and commercial establishments emitting greenhouse gases for greenhouse gas testing, providing detailed information on location, business type, and energy consumption.
In line with the commitment to low-carbon standards, achieving net zero emissions has become an international trade trend. Many countries worldwide have implemented measures to reduce carbon emissions in economic and commercial activities, including carbon labeling and carbon taxes on imported goods. Notably, the European Union (EU) has introduced the "Carbon Border Adjustment Mechanism" (CBAM), imposing import taxes based on emissions produced during manufacturing. Starting with products such as steel, cement, fertilizer, aluminum, electricity, and hydrogen, the CBAM is expected to extend its coverage to additional sectors, including ceramics and pulp and paper. While specific regulations of the CBAM are being finalized, the mechanism is poised to impact various industries.
During the conference, insightful presentations were delivered on the topic "What Vietnam Needs to Do to Most Effectively Respond to the Carbon Border Adjustment Mechanism." Key themes included improving low-carbon requirements for Vietnamese exports, understanding the CBAM's overview and regulations, assessing the mechanism's impact on high carbon intensity exports from Vietnam, and proposing viable solutions.
Following the presentations, the conference transitioned into an engaging discussion session, focusing on three key topics:
Can CBAM also be an opportunity for Viet Nam? While it is clear that CBAM can possibly pose significant challenges to Vietnamese industries, are there any positive aspects for Viet Nam? Is it not possible to take advantage of CBAM to accelerate Viet Nam’s decarbonization efforts as called for under the Law on Environmental Protection 2020? What is the anticipated impact of CBAM on Vietnamese trade and industry in general? What will be the direct impact on carbon-intensive industries, and how will that affect other industries?
What should Viet Nam do in discussing the implementation of CBAM in the context of Viet Nam-EU trade-related negotiations? Given that CBAM will directly impact trade between Viet Nam and Europe, and the introduction of CBAM is expected to be gradual through further discussions, what should Viet Nam say, or request the EU to consider in the context of trade negotiations? Should Viet Nam request for delayed application of CBAM to Viet Nam-EU trade or other kinds of concession, such as the provision of financial support to Vietnamese industries to fully comply with CBAM requirements?
What should Viet Nam do in its industrial development policies, the introduction of the Emission Trading System (ETS) (as we discussed in April), and other domestic initiatives? With the possible expansion of CBAM to much broader industrial sectors to trace the “carbon footprint” of all production activities, as well as the introduction of similar schemes by many other trade partners of Viet Nam, it is considered essential for Viet Nam to consider its medium-term responses to CBAM in the context of its industrial development strategies and policies. It is also necessary to think how such industrial policies can be harmonized with the introduction of the Emission Trading System (ETS) in Viet Nam. What should Viet Nam do to take best advantage of CBAM?
The workshop generated valuable ideas and contributions from experts such as Mr. Ayumi Konishi, Mr. John Cotton, government representatives, industry professionals, and experts both inside and outside the Institute. Based on the presentations, discussions, and recommendations put forth by the attendees, the conference organizing committee synthesized the proposals and suggestions, aiming to present them to relevant authorities in future industrial and commercial development strategies.
The conference not only fostered knowledge exchange but also served as a platform to build a collective understanding and devise strategies to navigate the evolving landscape of the Carbon Border Adjustment Mechanism in Vietnam.
Written and photos by Le Anh Tu Department of Information and Trade Promotion - VIOIT