CBAM (Carbon Border Adjustment Mechanism) is the European Union's carbon border adjustment mechanism: importers into the EU must declare and pay for the emissions embedded in goods, equivalent to the carbon price that EU producers have to pay. From 2026, CBAM moves from a reporting-only phase to its financial phase.
Key takeaways
- Goods initially covered by CBAM: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen (including some downstream products).
- The transitional phase (October 2023 – 2025) only requires reporting; from 2026 authorised importers must buy CBAM certificates.
- Vietnamese businesses do not pay the charge directly, but must provide actual emissions data to importers — missing data means unfavourable default values are applied.
How does CBAM work?
CBAM is linked to the EU Emissions Trading System (EU ETS). Importers declare the "embedded emissions" in goods and then buy CBAM certificates at the EU carbon price. If the producer has already paid a carbon price in the exporting country, this may be deducted as provided for in the rules.
What do embedded emissions include?
They include direct emissions from the production process and, for some product groups, indirect emissions from the electricity consumed. The calculation method is based on actual data at the production site; where no data is available, default values are usually higher than the actual figures.
Impact on Vietnamese businesses
Steel and aluminium are significant Vietnamese exports to the EU. Once CBAM charges apply, importers will favour suppliers with transparent emissions data and low emissions intensity. CBAM is also a signal that other markets may pursue similar mechanisms.
With CBAM, emissions data becomes part of the selling price.
CBAM preparation checklist for businesses
- Identify whether your product codes (CN codes) fall within the scope of CBAM.
- Conduct a product-level emissions inventory: process boundaries, fuels, input materials, electricity. See the greenhouse gas inventory guide.
- Standardise supporting records: invoices, meters and production logs so that data can be verified.
- Set up a data exchange channel with importers using the EU templates.
- Plan to reduce emissions intensity: energy efficiency, renewable electricity, changes in raw materials.
CBAM and ESG ratings
The facility-level and product-level emissions data prepared for CBAM is also the core data in assessing the Environmental pillar. Businesses that invest properly in CBAM also improve the quality of their ESG rating file.
Frequently asked questions
Does CBAM apply to textiles and agricultural products?
The initial scope does not include textiles or agricultural products; however, the EU may extend the scope in future, so businesses should follow updated EU legislation.
Who pays the CBAM charge?
The authorised importer in the EU is the party that buys CBAM certificates; Vietnamese exporters are affected indirectly through prices, contract terms and data requirements.
What if there is no emissions data?
Where reliable actual data is not available, default values are applied. These are usually higher than the actual figures, increasing costs and reducing the competitiveness of the goods.
VietESG — Independent ESG rating organisation. Ratings based on disclosed data, supporting evidence and a public methodology aligned with GRI and the SDGs.
