What is CBAM? Essential Information for Vietnamese Exporters to the EU

01 | OVERVIEW What is CBAM, and why has the EU introduced it?

CBAM stands for Carbon Border Adjustment Mechanism, the EU's carbon border adjustment framework. It is a European Union (EU) mechanism that places a carbon cost on greenhouse gas emissions generated during the production of certain goods imported into the EU.

In the EU, many production installations face emissions costs under the EU Emissions Trading System (EU ETS). Differences in carbon costs and the stringency of climate policies can lead to production moving to countries with less stringent requirements, or allow imports with higher emissions to replace EU-made goods. This is known as “carbon leakage”: emissions may move outside the EU instead of falling globally. CBAM aims to limit this risk and encourage lower-emission production.

CBAM is often called a “carbon border tax”. However, it operates through emissions declarations and the purchase and surrender of CBAM certificates. The cost depends on emissions calculated under the rules, certificate prices and applicable adjustments; it is not a fixed tax rate applied to the value of the goods.

02 | SCOPE Which of your products fall within the scope of CBAM?

CBAM currently covers certain goods in the six groups below. To determine whether a product is covered, businesses need to check the CN (Combined Nomenclature) code and goods description in Annex I to the applicable CBAM Regulation, together with the conditions of application and exemptions.

Not every product in these six groups falls within CBAM's scope. The specific goods covered are identified by their CN codes and descriptions.

Vietnamese businesses should prioritise reviewing the iron and steel, aluminium, cement and fertiliser products they export to the EU. Installations that only process materials, without carrying out primary metal production, still need to check: their processed products may be listed under CBAM.

A CN code is an EU goods classification code comprising 8 digits, with the first 6 corresponding to the HS code. Businesses should work with the importer to identify the correct CN code and goods description, rather than relying solely on a product's commercial name.

How is the 50-tonne exemption threshold calculated?

For the four groups of iron and steel, aluminium, cement and fertilisers, an importer is exempt from CBAM obligations under the mass threshold if the total net mass of listed CBAM goods imported in a calendar year does not exceed 50 tonnes.

This mass is aggregated across all four groups for each importer, covering all shipments and suppliers. It is not a separate threshold for each group, shipment or exporter. The threshold does not apply to electricity or hydrogen.

A note on customer requirements: For products not currently listed under CBAM, EU customers may still request emissions data for supply chain management. This commercial requirement should be distinguished from obligations under the CBAM rules.

03 | TIMELINE Key dates businesses need to remember

Businesses need to collect and retain data during 2026. Records should be updated throughout production, including data on raw materials, fuels, electricity, output and supporting documents. Waiting until 2027 to collect them may leave gaps in the data or evidence needed to calculate and verify emissions for the CBAM declaration.

04 | RESPONSIBILITIES What do EU importers and Vietnamese businesses need to do?

Vietnamese businesses and their EU partners should agree in their contracts on the data to be supplied, delivery deadlines, verification requirements and responsibility for the associated costs.

The parties may agree to share data collection, verification and CBAM certificate costs. However, such arrangements do not change the legal responsibility of the authorised declarant in the EU for meeting CBAM obligations.

05 | DATA What are “embedded emissions”?

Embedded emissions are the greenhouse gas emissions generated during the production of goods, determined within the scope and using the calculation methodology specified by CBAM. “Embedded” refers to emissions associated with producing the goods; it does not mean greenhouse gases are physically contained in the product. The greenhouse gases covered by the calculation are converted into CO₂ equivalent (CO₂e) for aggregation.

Depending on the goods, the calculation may cover direct production emissions, indirect emissions from electricity consumed, and emissions associated with producing precursors. Under CBAM, precursors are input materials whose production emissions must be included in the product's emissions under the rules. Not every input material is a precursor.

For example, an installation making steel products from purchased billets may need emissions data for billet production at the supplying installation. Emissions from electricity consumed are also included only for goods for which CBAM requires them.

Actual emissions data and default values

For goods other than electricity, the declarant may use verified actual emissions data or default values under the CBAM rules.

• Actual emissions data are determined from the installation's production and emissions data using the CBAM methodology.
• Default values are published by the European Commission. The correct values and prescribed adjustment factors must be applied; businesses cannot choose an arbitrary alternative emission factor.

Electricity has its own calculation methodology and conditions for using actual data.

When supplying actual data for CBAM declarations, manufacturers need to arrange verification by a verifier accredited by a competent EU national accreditation body, with an appropriate CBAM accreditation scope. The verifier must be registered in the CBAM Registry.

Actual data reflect the production installation's emissions and emissions reductions. However, using actual data does not automatically result in lower CBAM costs than using default values; comparisons must be made on the same calculation basis.

06 | COSTS How are CBAM costs determined?

The cost of purchasing CBAM certificates depends on the number to be surrendered and the applicable certificate price. The number of certificates to surrender is determined from the quantity of imported goods, their embedded emissions and the prescribed adjustments.

The CBAM certificate price is calculated from the auction prices of EU Emissions Trading System (EU ETS) allowances:

• For goods imported in 2026: the average price for the quarter in which the goods were imported into the EU applies, even though certificates are purchased in 2027.
• From 2027: certificate prices are calculated and published as weekly averages, except for certificates covering the 2026 imports described above.

The number of certificates to surrender is adjusted to account for emission allowances still allocated free of charge to equivalent production activities in the EU. The adjustment is determined under CBAM rules for each type of goods. A single “CBAM tax rate” therefore cannot be applied to every product, nor can costs be determined simply by multiplying total emissions by the EU ETS price.

The carbon price effectively paid in the country of origin for the declared emissions may qualify for a deduction, provided the conditions and supporting evidence requirements are met. Any relevant rebates or compensation must be considered when determining the deduction. Not every environmental protection expense can be deducted when calculating CBAM obligations.

When budgeting, businesses should distinguish two cost categories:

• CBAM certificate purchase costs: incurred by the authorised declarant in the EU; the parties may agree how to share these costs within the transaction.
• Data preparation costs at the production installation: monitoring, measurement, emissions calculations, record management and verification when actual data are used.

Separating these cost categories helps businesses prepare more accurate budgets and agree payment responsibilities with customers.

07 | BUSINESS How could CBAM affect Vietnamese businesses?

Businesses should consider CBAM's impact in three main areas:

• Selling prices and margins: EU customers may factor in carbon costs when comparing suppliers and negotiating purchase prices. This may put pressure on businesses' selling prices and profit margins.
• Ability to meet customer requirements: Incomplete or late emissions data, or data lacking supporting records, can complicate CBAM declarations and affect customers' assessments of suppliers.
• Investment decisions: Identifying the main emission sources helps businesses select energy-saving measures, technology improvements and lower-emission materials.

The level of impact varies between businesses, depending on their share of exports to the EU, types of goods, production technology, input materials and contract terms. Sector-wide forecasts can provide context, but businesses need to assess impacts using their actual production and business data.

Businesses that do not export directly to the EU may still receive requests for emissions data. This may happen when they supply precursors used to produce CBAM goods or sell through trading companies that export to the EU. Businesses should therefore discuss with customers the destination market, their product's role in the supply chain and the relevant data requirements.

08 | ACTION Six steps businesses should start now

Businesses can organise their CBAM preparations around the following six steps:

1. Review products and EU customers

   List products, commodity codes, production installations, export quantities and EU importers. Work with customers to identify CN codes, check the CBAM list and assess exemption conditions. For the 50-tonne threshold, consider each importer's total quantity of goods counted towards the threshold, not just the quantity supplied by your business.

2. Appoint a coordinator and agree customer requirements

   Assign someone to coordinate production, environmental, accounting, purchasing and export teams. Agree with customers on the required data, templates, reporting period, deadlines and verification requirements.

3. Review and complete installation data

   Compile fuel, electricity, raw material and output data, together with invoices, production logs, technology records and measuring equipment records. Identify missing or unreliable data, assign responsibility and set deadlines for corrective action.

4. Engage raw material suppliers early

   Identify which input materials are precursors to be included under CBAM. Work with suppliers to obtain emissions data for the correct precursor-producing installation; check the reporting period, calculation methodology and accompanying supporting records.

5. Run trial emissions calculations and prepare for verification

   Select a product group for a trial calculation using the CBAM methodology to identify missing or inconsistent data. If actual emissions data will be used for declarations, select a verifier with the appropriate CBAM accreditation scope and allow time to review, supplement and finalise the records.

6. Incorporate the results into business planning

   Work with customers to assess cost scenarios, select emissions reduction measures and agree contract terms. Maintain data collection, checking and retention throughout the year, and update estimates when output, materials or technology change.

These six steps provide a suggested way to organise the work. Emissions monitoring, calculation and verification must follow the CBAM rules applicable to each type of goods and production process.

A tool for sharing data: Operators of production installations outside the EU can use O3CI, a module of the CBAM Registry, to upload and share installation information and emissions data with declarants. This reduces repeated data submissions to individual partners, particularly for businesses with multiple EU customers.