Why prepare for compliance with the UK's CBAM
Preparing for compliance with CBAM regulations when this mechanism is officially applied in the United Kingdom is not only important and urgent for businesses producing related products for export to this market but also has broader significance:
- Firstly, in terms of the market, the United Kingdom is not the first market to implement CBAM (the European Union preceded it), nor is it the last market expected to implement CBAM (besides the UK, many other important or potentially large markets for Vietnamese exports such as the United States, Australia, Canada... are also considering implementing CBAM for imported goods). Therefore, being prepared for CBAM (whether the EU's or the UK's) will also help businesses become familiar with it and enable sustainable exports to similar markets.
- Secondly, in the longer-term orientation, with increasingly pressing greenhouse gas emission neutrality targets, it is likely that mechanisms like the UK or EU CBAM will be expanded to many other product types that these countries classify as high-emission, including Vietnam's key export products (such as textiles, footwear, building materials...). Thus, learning about CBAM can be an important preparatory step for other export production sectors in Vietnam to continue sustainable exports to markets like the EU, the UK, or other developed markets.
In the more distant future, green transition to respond to CBAM or similar regulations, which are predicted to continue to be enacted and enforced in Vietnam's key export markets, will be a constant and ongoing requirement for export businesses not only in CBAM sectors but also in industries with high emission levels.
In reality, for businesses producing CBAM goods in particular and export production businesses in general in Vietnam, green transition is a major challenge in terms of cost, technology, and human resources. Such a challenge cannot be overcome overnight but requires long-term preparation and investment by businesses along with policy support from relevant state management agencies.
However, in the long term, effective green transition can help CBAM goods export businesses gain certain market opportunities, for example:
- Opportunities to expand market share in the UK, EU, and other markets through advantages in "net emissions competition," attracting importers with low CBAM fees and better control over CBAM goods prices (due to not being significantly affected by CBAM fees, which fluctuate with market prices).
- Opportunities for sustainable access to markets likely to apply CBAM in the near future (USA, Canada, Australia...).
- Opportunities to reduce costs and improve the business production efficiency of the businesses themselves after green transition (especially reductions related to energy costs, production chain control, maximizing business performance).
Source: Center for WTO and International Trade - VCCI