Default values ​​for CBAM transition period: A useful tool for Vietnamese enterprises exporting goods to the EU

CBAM, or Carbon Border Adjustment Mechanism, is becoming a major challenge for Vietnamese businesses exporting goods to the EU. With the goal of reducing greenhouse gas emissions, the EU has implemented CBAM as part of its environmental protection strategy, applying default values ​​in the transition period from 2023 to 2025. This article will analyze in detail CBAM, its impact on Vietnam's key export sectors, and solutions for Vietnamese businesses to adapt to these new requirements.

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One of the most concerning issues for goods exported to the EU today is the Carbon Border Adjustment Mechanism (CBAM). CBAM is a new environmental policy of the European Union (EU) under which the EU will impose a fee on certain goods imported into the EU based on the amount of greenhouse gases (mainly carbon dioxide). CBAM gradually replaces the EU's Emissions Trading System (ETS). The EU is concerned that EU businesses may move their carbon-intensive production activities abroad to take advantage of lax standards, also known as "carbon leakage" by transferring emissions outside Europe and seriously weakening the EU's and the world's climate neutrality ambitions. 

The CBAM implementation roadmap is as follows: CBAM is divided into two phases: a transitional phase from 2 October 01 to 10 December 2023 and a definitive phase from 31 onwards. During the transitional phase, importers of CBAM-regulated goods must declare the quantity of CBAM goods imported, the emission levels of the imported goods, both direct and indirect, and any emission value paid for these goods, if any. During the definitive phase, EU importers will have to purchase and present CBAM certificates for the net emissions of the imported goods corresponding to the price and the free quota schedule of the ETS (Emissions Trading System) within the EU. 

In the first phase, CBAM will focus on commodity groups with the highest risk of carbon leakage: cement, iron and steel, aluminum, fertilizer, hydrogen and electricity.  

During the transition period, the EU has issued “Default values ​​for the transitional period of the CBAM between 1 October 2023 and 31 December 2025” to help businesses assess their emissions while implementing CBAM during the transition period. These default values ​​represent how many tonnes of CO2e are emitted per tonne of goods for the iron and steel, cement, fertilisers, aluminium, hydrogen and electricity sectors, which together account for 94% of EU industrial emissions.  

In this document Default values, the EU has proposed 5 product lines: iron and steel (75 items), cement (6 items), fertilizers (19 items), aluminum (17 items) and hydrogen (1 item). For details, see the link: https://taxationcustoms.ec.europa.eu/system/files/202312/Default%20values%20transitional%20period.pdf 

The purpose of these default values: 

• Calculating indirect emissions: Businesses importing goods into the EU can use these default values ​​to report the CO₂ emissions associated with their goods, instead of having to provide specific measurement data, which many businesses do not yet have. 

• Simplifying reporting: During the transition period, businesses that do not yet have detailed emissions data available can use these values ​​to comply with CBAM regulations without implementing a full measurement system. 

• Supporting CBAM adoption before full implementation: The transition period is a time for businesses to adapt to CBAM before it becomes fully mandatory in 2026. 

The default values ​​in this phase only apply until the end of the transition period on 31 December 12. From 2025 onwards, a different set of default values ​​will apply. 

According to Vietnamese experts, there are currently four significant export sectors to the EU market: aluminum, steel, cement and fertilizer. In terms of the entire economy, the impact of CBAM is not large, but for each industry and each enterprise, the decrease in export value is a significant number, increasing pressure on enterprises. For the steel industry, it is likely to reduce export value by about 4%. Decreased demand leads to a decrease in output of about 4%, along with the adverse impact on reduced competitiveness in the market. The export value of the aluminum industry also decreased by more than 0,8% and output decreased by about 4%. For the cement and fertilizer industries, the impact is insignificant. 

Experts also recommend that, in response to this EU regulation, Vietnam should choose to accept the CBAM mechanism and find ways to minimize the positive impacts of this mechanism. Currently, the Government has issued a number of documents on greenhouse gas emission reduction such as Decision No. 13/2024/QD-TTg promulgating regulations on the list of sectors and facilities emitting greenhouse gases that must conduct greenhouse gas inventories. However, the Government and state management agencies need to soon issue guidelines, enterprises prepare to respond, enhance technical and institutional capacity to adapt to CBAM, participate in constructive dialogues with the EU and negotiate with the EU to create favorable conditions for Vietnam; improve the policy framework on decarbonization such as phasing out coal power, promoting renewable energy, and energy saving.  

Enterprises that are directly affected and regulated by the CBAM mechanism have high risks such as steel, aluminum, oil refining, cement, paper, fertilizer, etc. exporting to the EU market, so they should have plans to reduce carbon emissions in the production process. In the immediate future, enterprises need to develop emission reports and must control emissions well throughout the entire production chain, reducing emissions in each stage of their production. 

The default values ​​for the CBAM transition period issued by the EU are a useful tool for Vietnamese businesses exporting goods to the EU in the fight against climate change towards a new era for Vietnam.