Proactively responding, carbon tax policy creates motivation for green transformation

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CBAM's initial regulatory subjects in the EU are 6 products including iron and steel, cement, fertilizer, aluminum, electricity and hydrogen. Photo: Internet

Increasing "green and sustainable" standards

Under the Carbon Border Adjustment Mechanism (CBAM), the European Union (EU) will impose a carbon tax on imported goods based on the intensity of greenhouse gas emissions in the production process in the exporting country. CBAM has been applied from October 1, 2023 with a transition period and from January 2026 it will be fully implemented.

Besides the EU, the British government has also announced that it will apply its own CBAM mechanism from 2027. The United States has been considering a carbon tax on imported goods. Japan also plans to apply a carbon tax on fossil fuel importers such as energy companies, oil refineries, and steel manufacturers starting from the 2028-2029 fiscal year.

For Vietnam, the immediate impact will be on products exported to the EU. Currently, the initial subjects of CBAM regulation in the EU are 6 items including iron and steel, cement, fertilizer, aluminum, electricity and hydrogen, of which the top 4 items Vietnam can export. Businesses that are not regulated by CBAM but are at high risk still need to monitor updates to this policy of the EU as well as other countries.

According to Master Phan Minh Hoa, lecturer in Economics, Faculty of Business, RMIT University, in general, carbon tax tools will increasingly attract more support in developed countries, so for international trade, this tax will increase the price of imported goods and impact the supply chain.

Ms. Nguyen Thi Thu Trang, Director of the Center for WTO and Integration (VCCI), said that the EU's green policies affect Vietnam's exports in different ways, the most common being increasing "green, sustainable" standards for exported goods; At the same time, increasing the financial responsibility of manufacturers for "green and sustainable" goals.

Experts also emphasized that, in addition to short-term challenges, carbon taxes on imported goods will create more innovation for Vietnamese businesses and policymakers, aiming for Zero net emissions target in 2050.

Proactively respond early and review the supply chain

However, a quick survey conducted by the Vietnam Confederation of Commerce and Industry (VCCI) in August 2023 showed that up to 88-93% of respondents had never heard of or had only briefly heard of outstanding green policies of the EU related to Vietnam's exports.

Therefore, according to experts, what needs to be done is that businesses must proactively learn to identify, accurately grasp and regularly update specific EU green policies related to each type of export product.

Ms. Phan Minh Hoa recommended that businesses need to plan early responses, review product supply chains, and convert green production such as using solar energy and wind energy, which Vietnam still has a lot of potential. Businesses also need to strictly control and develop emissions reports, prepare adequate data, and share information with the Government to develop Vietnam's national emissions data system, ready for requirements for greenhouse gas inventory reports.

In addition, businesses need to cooperate with importers, suppliers and the Government to form networks, helping to add competitive advantages and new opportunities. Businesses should also actively consult with the Government in developing policies such as carbon pricing and promoting the use of renewable energy, etc.

On the policy side, according to representatives from VCCI, state management agencies need to work, discuss and consult with competent EU agencies to find the best solution as well as create favorable conditions and effective for Vietnamese businesses in adapting to EU requirements.

Sharing the same opinion, the expert from RMIT University also stated that Vietnam should actively participate in dialogue with partners such as the EU and promote cooperation with other exporting countries to strengthen its position in negotiations.

In terms of domestic policy framework, this person said that Vietnam has had a special consumption tax, environmental protection tax and environmental fees for mineral exploitation since 2011, so Vietnam needs to update, develop and promulgate a carbon tax and develop the domestic carbon credit market so that businesses can buy and sell, creating revenue to encourage businesses to produce green.

The government also needs to provide incentives for new investment by businesses in research and development of new environmentally friendly technologies, encouraging investment in renewable energy and fuel efficiency. In addition, to support businesses in raising awareness, the Government can build a coordination focal point between ministries and branches to provide specific information to guide businesses in complying with new regulations and further train businesses to boosttheir capacity and social awareness of this issue.