EU opens door to CBAM deductions, but Vietnam exporters may see little relief

Although the EU’s CBAM draft allows importers to deduct carbon prices paid in third countries, Vietnam’s current ETS is unlikely to generate meaningful offsets during its first three years. (Photo: iStock)

The EU released on May 13, 2026 a long awaited draft proposal on carbon price deductions under the Carbon Border Adjustment Mechanism (CBAM). The document confirms that companies will be allowed to deduct carbon costs already paid by suppliers in exporting countries under the CBAM framework. The proposal has now entered a public consultation phase, with discussions focused on issues including payment certificate requirements, exchange rate conversion methods, and the accreditation standards for qualified third-party verifiers.

At first glance, the development appears to be good news for manufacturers operating in Vietnam. The country officially launched a pilot emissions trading system (ETS) in 2025, and its regulatory framework is gradually taking shape. But a closer look at the numbers reveals a harsher reality. Under the EU’s current framework, Vietnam’s ETS is unlikely to generate meaningful CBAM deductions during its first three years, precisely the period when CBAM costs are expected to rise most rapidly.

Vietnam has launched its ETS, but CBAM relief is still years away

Compared with its Southeast Asian peers, Vietnam has moved aggressively to establish the legal framework for its carbon market. Under Decree No. 06/2022/ND-CP and its amended version, Decree No. 119/2025/ND-CP, Vietnam’s pilot ETS officially launched in August 2025, initially covering the power, steel, and cement sectors. In February 2026, the Vietnamese prime minister approved emissions allowance caps for 2025 and 2026 under Decision No. 263/QD-TTg, setting the totals at 243 million and 268 million tonnes of CO2 equivalent, respectively.

However, two key design features of the system deserve closer attention. During the pilot phase from 2025 to 2028, companies will receive 100% free allocation of emissions allowances, meaning they are not required to pay the government for their emissions permits. The regulations also allow companies to use carbon offsets to meet up to 30% of their compliance obligations. This means local manufacturers are likely to pay close to zero in domestic carbon costs during the first three years of CBAM implementation.

Unlock the full article to explore three key takeaways:

1. Under the CBAM framework, exporters that fail to submit verified emissions data will be charged based on default values set by the EU, with additional markups increasing over time. Companies unprepared for emissions reporting could therefore face CBAM costs that exceed their actual carbon footprint.
2. Taking a Vietnamese steel shipment with 10,000 tonnes of CO2 equivalent emissions as an example, the estimated CBAM payment for a single order could reach EUR 1.24 million in 2029 under a no-deduction scenario.
3. Companies should not wait for Vietnam’s ETS to deliver offset benefits. Instead, they are advised to build a proactive compliance strategy, including confirming whether they fall under mandatory GHG reporting requirements and determining whether their exports are classified within CBAM’s six covered sectors under EU customs codes.