Vietnamese businesses face the EU's "greening" challenge

Exporting to the EU market will face many challenges when businesses must meet the requirements of strict green and sustainable standards.

Challenges from the carbon border adjustment mechanism

The European Union (EU) is a large market for Vietnam's export goods with 500 million people. After 3 years of implementing the Free Trade Agreement between Vietnam and the European Union, Vietnam has exported goods to the EU with a value of nearly 128 billion USD.

However, since the beginning of this year, these advantages have been somewhat affected, because Vietnamese businesses are facing many challenges to meet new regulations, high standards of product quality, and environmental protection. environment, sustainable development... collectively referred to as EU green standards.

Especially from October 1, the European Union (EU) began piloting new regulations. Accordingly, importers will have to buy emission certificates according to the current carbon price in the EU, also known as the carbon border adjustment mechanism (CBAM). This poses a significant challenge due to mandatory standards requirements and huge costs.

 Vietnamese businesses are facing many challenges to meet EU "greening" regulations. Illustration.

The Carbon Border Adjustment Mechanism (CBAM) will carbon tax all goods imported into the EU, based on the intensity of CO2 emissions in the host country. Emissions are calculated during the production of goods as well as from input materials.

CBAM has been piloted since last October and fully implemented from 2026, expected to create significant additional costs for Vietnam's exported goods. In the first phase, CBAM will focus on commodity groups such as iron and steel, aluminum, fertilizer, hydrogen, electricity and cement...

Mr. Do Tien Trinh - General Director of VICEM But Son Cement Company said: "The cost of carbon credits must increase from 10 - 50 Euro per ton of product if CO2 emissions are not truthfully declared. There are many difficulties." challenges. The first is a technological barrier. The second is related to the state's policy mechanisms."

Cement, iron and steel, aluminum, fertilizer, hydrogen, and electricity are the sectors that account for 94% of the EU's industrial emissions. However, CBAM may then expand its scope of application to many other products and services.

New EU environmental standards

According to the European Parliament, the EU is committed to reducing greenhouse gas emissions by 55% by 2030 compared to levels recorded in 1990 and achieving the goal of carbon neutrality by 2050. Carbon tax is considered one of the the most effective tool for regulating annual carbon emissions.

The Carbon Border Adjustment Mechanism (CBAM) allows the European Union to unilaterally impose a carbon price on imports from countries outside the region, but still in accordance with WTO regulations. In addition, a series of new environmental standards will be applied by the EU in the near future.

The EU Green Deal includes a package of actions to reduce greenhouse gas emissions and minimize resource use while achieving economic growth, of which the CBAM mechanism is just one component.

Mr. Valdis Dombrovskis - Executive Vice President of the European Commission, European Union Trade Commissioner said: "We develop regulations to move towards green production transformation, but also ensure that regulations That will not become a barrier to trade. For example, the CBAM mechanism is not discriminatory. Goods produced in the EU or imported into the EU will all be subject to the same carbon price. CBAM will also deduct the carbon price paid by manufacturers in other countries. It is clearly designed to protect the environment without becoming a trade barrier."

Also within the framework of the green agreement, last June, the EU issued the EUDR anti-deforestation regulation, effective from December 30, 2024, preventing the import of goods that cause deforestation and forest degradation. Companies trading in wood, coffee, cocoa, rubber, soybeans, cattle, palm oil... in the EU must prove that the goods are not related to deforestation or contribute to forest degradation.

Mr. Valdis Dombrovskis - Executive Vice President of the European Commission, European Union Trade Commissioner said: "The social community in the European Union wishes that trade activities related to the EU will not lead to to negative consequences such as deforestation in other countries. But in developing this regulation, we also paid special attention to small and medium-sized enterprises and agricultural producers, by providing guidance The guidelines and roadmap are very clear and ensure that anti-subversion regulations will not create unnecessary burdens."

Businesses adapt

As the 11th largest partner in imported goods to the EU, Vietnam currently has 4 main export commodity groups to the EU market: aluminum, steel, cement and fertilizer. In particular, iron and steel products alone account for 96% of the value of these 4 export items.

Many industries belonging to the high-emission industrial production group such as textiles, garments, footwear... will also have to adapt to these regulations. The good news is that currently, many Vietnamese industries have been greening and many EU regulations are being implemented.

Use sewage sludge as a substitute for clay; burning kilns with garbage, to reduce coal burning... recently, VICEM But Son Cement Company has reduced the amount of carbon released into the environment by about 20%. But to export to the EU smoothly, businesses said, they still have to reduce it even more.

Vietnam's coffee industry, with mainly small and fragmented cultivation areas, is expected to be most affected by the EU's anti-deforestation regulations. Enterprises in this industry said they are ready for green transformation but need a common basis from state management agencies.

Mr. Nguyen Nam Hai - Chairman of the Vietnam Coffee and Cocoa Association said: "State management agencies as well as local ministries and branches must build a common database for us to deploy." .

EU green standards cover most products that are considered Vietnam's strengths. After the EU, many other markets will also change.

Although the EU's green transition creates a step-by-step roadmap for gradual adaptation, time is running out as regulations will apply as early as 2024 or 2025. Therefore, businesses Businesses should not wait until the EU starts applying them to rush to respond, but should proactively convert to green production right now.

The increasing demands and standards of consumers and the market will be long-term and irreversible. Vietnamese businesses need to understand new changes to manage and adapt. The Government also needs to soon issue clear criteria and guidelines to quantify green standards, as well as have preferential policies so businesses have the motivation to convert to green production.

According to vtv.vn