What Is CBAM? A Compliance Guide for Vietnamese SMEs Exporting to the EU

What is CBAM — and why can't SME exporters ignore it?

CBAM (the Carbon Border Adjustment Mechanism) is a European Union instrument established by Regulation (EU) 2023/956, adopted on 10 May 2023. Its goal: to price the greenhouse-gas emissions "embedded" in goods imported into the EU, so imports do not gain a price advantage over EU-made goods that already pay a carbon cost through the EU ETS.

For Vietnamese businesses, the key is the timeline: the transitional period (1 Oct 2023 – 31 Dec 2025) required reporting only, with no payment. But from 1 January 2026, CBAM enters its definitive phase — EU importers must declare embedded emissions and surrender CBAM certificates annually. That is why 2026 is the pivotal year for every Vietnamese SME exporting to the EU.

The six goods groups covered by CBAM

In its initial scope (Annex I of the Regulation), CBAM applies to six groups:

• Cement
• Iron and steel
• Aluminium
• Fertilisers
• Electricity
• Hydrogen

For Vietnam, the most exposed group is iron & steel, followed by aluminium; cement and fertilisers barely reach the EU, so their impact is negligible. Per VP Carbon's estimate based on General Department of Customs data, iron & steel accounts for the overwhelming share of the value of Vietnam's CBAM-covered exports to the EU (this is a private-organisation estimate, not officially published customs data).

Table 2 — The six goods groups within CBAM's scope (Annex I, Regulation (EU) 2023/956) and their relevance to Vietnamese exports

Goods group	Relevance to Vietnam's exports to the EU
Iron and steel	Vietnam's most exposed group
Aluminium	Second most exposed group
Cement	Barely exported to the EU — negligible impact
Fertilisers	Barely exported to the EU — negligible impact
Electricity	50-tonne exemption does not apply; little relevance to SME goods exports
Hydrogen	50-tonne exemption does not apply; little relevance to SME goods exports

What are "embedded emissions" and who is responsible?

CBAM is based on embedded emissions — direct emissions from production plus indirect emissions from consumed electricity, converted to CO₂e per tonne of product. The calculation methodology is set out in Commission Implementing Regulation (EU) 2023/1773.

One point to state precisely to avoid misleading claims: during the transitional period, indirect emissions must be reported for all goods groups; but in the definitive period, indirect emissions apply only to the groups listed in Annex II (in practice cement and fertilisers). It is inaccurate to say CBAM "always covers both direct and indirect".

On legal responsibility: the obligation to declare and surrender certificates sits with the EU importer (the "authorised CBAM declarant"), NOT the Vietnamese producer. But this is where SMEs often misunderstand: under Article 10 of the consolidated Regulation, for the EU buyer to use actual emission values (rather than the usually higher default values), the third-country producer must generate installation-level emissions data, verified by an independent third party. That is the real burden on the exporter, even though the certificate is surrendered by the importer.

The new 50-tonne exemption (Omnibus 2025) — good news for small SMEs

In October 2025 the EU adopted Regulation (EU) 2025/2083 (the "Omnibus" CBAM simplification package), in force from 20 October 2025. The most important change for SMEs: a single mass-based de minimis threshold of 50 tonnes of CBAM goods per importer per year. Below this threshold, the importer is exempt from CBAM obligations.

Note the threshold is cumulative across all CBAM goods types (e.g. 30 t steel + 25 t aluminium = 55 t → above the threshold), and it does not apply to electricity or hydrogen. The EU estimates this exempts about 90% of importers (mostly small consignments/individuals) while still covering roughly 99% of embedded emissions. For Vietnamese SMEs shipping small lots through multiple channels, this is worth reviewing together with the importer.

Table: what must Vietnamese SME exporters actually do?

Task	Direct / de-facto	Framework applied
Organization-level emissions inventory (Scope 1 + Scope 2)	De-facto (buyer-required)	GHG Protocol; ISO 14064-1:2018
Per-product embedded emissions (CO₂e/tonne)	De-facto (to use actual values)	ISO 14067:2018; CBAM method (EU) 2023/1773
Third-party independent verification	De-facto (Article 10)	Accredited verifiers
Provide installation data to EU importer	De-facto	CBAM registry (third-country installation)
Declare & surrender CBAM certificates	NO — the EU importer's job	Authorised CBAM declarant

In short: Vietnamese SMEs do not surrender certificates, but without verified emissions data the EU buyer must fall back on default values — usually higher than reality, raising costs and eroding the competitiveness of Vietnamese goods.

A quantitative case study: a Vietnamese steel workshop preparing for CBAM

Consider a mid-sized steel SME exporting to the EU. Its starting disadvantage is documented: Vietnamese steel carbon intensity is high, about 2.51 tCO₂/tonne (cited via VP Carbon), above the global steel-sector average — which is commonly estimated in the range of ~1.9–2.0 tCO₂/tonne, depending on the source and methodology. The intensity above that average is precisely the portion "penalised" when converted to the EU ETS carbon price.

Illustrative math (assumed, to show the mechanism — not a real company's figures): assuming the intensity above the average is 0.5 tCO₂/tonne, for a 500-tonne steel shipment the "excess" emissions ≈ 500 × 0.5 = 250 tCO₂e. If the firm has no verified data, the importer must use higher default values — meaning CBAM cost is charged on a larger number than reality. Conversely, an ISO 14064-1 inventory plus ISO 14067 CO₂e/tonne calculation lets the firm prove its true intensity, and any carbon price already paid in Vietnam (once the domestic carbon market operates) can be deducted from the CBAM obligation.

At the macro level, according to a forecasting model in a study in the Fulbright Review of Economics and Policy (2024), CBAM alone could reduce Vietnam's steel export value by about −3.8% and aluminium by about −4.5% by 2030, with CBAM-covered goods representing roughly 3.2% of GDP. These are scenario-modelled figures from the research team, not realised outcomes. The economy-wide impact is assessed as modest (around US$0.1 billion in 2030) — CBAM is a sector/firm-level risk rather than a "national disaster", and it is fully manageable with early preparation.

CBAM does not penalise Vietnamese goods for being "not green" — it penalises goods that cannot prove how green they are. Verified data is the shield.

Frameworks to measure — and a common misconception to correct

• GHG Protocol — the most widely used emissions accounting standard, defining Scope 1 (direct), Scope 2 (purchased electricity/heat), Scope 3 (value chain, 15 categories).
• ISO 14064-1:2018 — organization-level GHG inventory.
• ISO 14067:2018 — the carbon footprint of a product (CO₂e/product), directly matching how CBAM measures embedded emissions per tonne of goods.

Correcting a common misconception: there is NO separate "simplified GRI for SMEs" standard. GRI applies one modular set of standards (GRI 1 – Foundation, GRI 2 – General Disclosures, GRI 3 – Material Topics) to organizations of all sizes, complemented by SME training programmes and guidance materials — not a distinct "GRI for SMEs" standard. Getting this right avoids misciting the framework.

The Vietnam context: law and support finance

Vietnam has committed to Net Zero by 2050 (Prime Minister Pham Minh Chinh's pledge at COP26, Glasgow, November 2021). Domestically, Decree 06/2022/ND-CP (issued 7 January 2022, amended by Decree 119/2025/ND-CP) establishes an MRV system and mandatory GHG inventories for large emitters — the foundation that leaves firms with data ready when CBAM demands it.

On finance: IFC disbursed a record US$310 million in climate financing for Vietnam in 2024, alongside a US$30 million SME supply-chain facility via VPBank. The State Bank of Vietnam (Decision 1408/QD-NHNN) sets the green-credit framework, with green-credit outstanding around VND 750 trillion. A draft 2%-per-year interest-rate support scheme for green/circular/ESG projects is also under submission — note this is a draft, not yet an enacted, broadly applied policy, and firms should not treat it as a guaranteed fixed rate.

A 6-step roadmap to make your SME CBAM-ready in 2026

1. Determine exposure: are your goods in the six CBAM groups? Do you export to the EU? Does total volume through each importer exceed the 50-tonne/year threshold?
2. Inventory Scope 1 + Scope 2 under ISO 14064-1 to establish a baseline.
3. Calculate CO₂e/tonne of product under ISO 14067 for the exact goods exported to the EU.
4. Get third-party verification so the data is accepted by the EU in place of default values.
5. Coordinate with the EU importer to provide installation data and register installation details where needed.
6. Genuinely reduce emissions intensity (energy, process) — because every portion above the average is a CBAM cost.

GROW helps SMEs clear the CBAM hurdle

Through the Green Transition Advisory pillar, GROW helps SMEs run ISO 14064-1 emissions inventories, calculate product carbon footprints under ISO 14067, prepare installation-level data for CBAM, and connect to green finance such as IFC. Read more about the Net Zero roadmap for SMEs, learn what ESG for SMEs is, or book a free CBAM exposure assessment.