Foreword from the Expert Team:
Throughout 2024 and the early months of 2025, the two acronyms “CBAM” and “EUDR” have appeared continuously in the meetings, seminars and partner discussions that we – Carbon Credit Viet Nam Joint Stock Company – have attended alongside Vietnamese exporting businesses. The most common question we receive is: “What exactly are CBAM and EUDR, and how do they affect us?”
The concern is well founded. The EU – Vietnam’s third-largest export market with a turnover of USD 51.7 billion in 2024 – is applying the most stringent environmental regulations in the world. CBAM (the Carbon Border Adjustment Mechanism) requires EU importers to pay a carbon fee on imported steel, aluminium and cement. EUDR (the EU Deforestation Regulation) requires traceability down to each individual plot of production land for coffee, rubber, timber and many other commodities.
This article has been compiled based on our practical experience in supporting exporting businesses to prepare for compliance, combined with research into the EU’s official legal texts and reports from reputable international organizations. The objective is to help your business clearly understand the nature of these two regulations, assess the level of impact, and identify the specific action steps that need to be implemented immediately.
What Are CBAM and EUDR? Two “Green Barriers” in the EU Market
The European Union (EU) is implementing the European Green Deal with the goal of achieving carbon neutrality by 2050. Understanding What Are CBAM and EUDR is increasingly important for businesses exporting to the EU market. Within this framework, the EU has issued a series of regulations to ensure that imported products meet environmental standards equivalent to those applied to domestically produced goods (European Commission, 2023a).
The two most important regulations directly affecting Vietnamese exporting businesses are:
CBAM
EUDR
According to data from the General Department of Customs, Vietnam’s export turnover to the EU reached USD 51.7 billion in 2024, up 18.4% from the previous year thanks to the effective use of the EVFTA Agreement (Vietnam News, 2025). Of this, an estimated USD 5.5 billion in export value is directly affected by CBAM and EUDR.
CBAM: The Carbon Border Adjustment Mechanism
What is CBAM?
CBAM – short for Carbon Border Adjustment Mechanism – is a mechanism that requires EU importers to purchase “CBAM certificates” corresponding to the amount of CO₂ emissions “embedded” in imported goods. The certificate price is calculated based on the weekly auction price in the EU Emissions Trading System (EU ETS), currently ranging from 75-100 EUR/tonne of CO₂ (European Commission, 2023b).
The purpose of CBAM is to prevent the phenomenon of “carbon leakage” – that is, EU businesses relocating production to countries with lower emission standards to avoid carbon costs. Understanding What Are CBAM and EUDR also helps exporters recognize how these EU regulations affect market access and sustainability requirements. CBAM creates a level playing field between goods produced in the EU, which already bear EU ETS costs, and imported goods (EPA Ireland, 2024).
CBAM implementation roadmap
Transitional
10/2023 – 12/2025
Quarterly emissions reporting only, no certificate purchase required yet
Definitive
From 01/01/2026
Importers must register as an “Authorized CBAM Declarant” and purchase certificates
100% application
By 2034
The CBAM factor gradually increases from 2.5% (2026) to 100% when the free EU ETS allowances are fully phased out
During the transitional period, penalties can reach up to 50 EUR/tonne of CO₂ for reporting violations. From 2026, the penalty rises to 100 EUR/tonne for missing certificates, and businesses must still purchase the outstanding certificates (ASUENE, 2025).
Impact on Vietnamese exporting businesses
According to the CBAM Impact Assessment Report for Vietnam by the Energy Transition Partnership (2024), the steel industry bears the heaviest impact, with iron and steel accounting for 90% of CBAM-covered export value to the EU. Vietnam produced 19.2 million tonnes of crude steel in 2023, ranking 13th in the world and first in Southeast Asia.
The EU receives approximately 27% of Vietnam’s steel export turnover, making it one of the top three export markets. Major groups such as Hoa Phat (ranked 58th in the world with 6.7 million tonnes/year) and Formosa Ha Tinh (ranked 65th in the world) control nearly 80% of Vietnam’s steel market (Shanghai Metals Market, 2024).
Iron and steel
Share of CBAM exports to the EU: 90%
CBAM cost/product price: 15-20%
Estimated export decline: ~USD 1.1 billion (by 2030)
Aluminium
Share of CBAM exports to the EU: 8.6%
CBAM cost/product price: 35-40%
Estimated export decline: Significant
Cement
Share of CBAM exports to the EU: <2%
CBAM cost/product price: 20-30%
Estimated export decline: Limited (little export to the EU)
EUDR: The EU Deforestation Regulation
What is EUDR?
EUDR – short for EU Deforestation Regulation – is a regulation prohibiting the placing on the EU market of products linked to deforestation occurring after 31/12/2020. The regulation was adopted on 31/05/2023 under Regulation (EU) 2023/1115 (World Resources Institute, 2024).
The seven commodity groups covered include: cattle (beef, leather), cocoa, coffee, palm oil, rubber, soy, and timber – together with derived products such as chocolate, tyres, furniture, paper and leather goods.
Due diligence and traceability requirements
EUDR establishes a strict three-step due diligence framework (Global Traceability, 2024):
- Step 1 - Information collection: Collect GPS coordinates of all production plots. For areas <4 ha: 1 coordinate point; ≥4 ha: a polygon of the plot boundary is required. Information on suppliers, production/harvest dates, and country of origin.
- Step 2 - Risk assessment: Analyze deforestation risk based on: country classification (low/standard/high), the deforestation situation in the area, supply chain complexity, and satellite imagery verification.
- Step 3 - Risk mitigation: If the risk is not negligible: implement additional measures such as independent audits, gathering additional documentation, or excluding high-risk suppliers.
The country classification system and Vietnam’s position
On 22/05/2025, the European Commission published its list of country classifications by deforestation risk level. Vietnam was classified in the “low-risk” group – a significant competitive advantage over rival exporters (VietnamPlus, 2025).
| Risk level | Test Rate | Representative Countries |
|---|---|---|
| Low | 1% of the shipment | Vietnam, EU, US, Australia, Japan, South Korea |
| Standard | 3% of the shipment | Brazil, Indonesia, Malaysia, Thailand |
| High | 9% of the shipment | Belarus, Myanmar, North Korea, Russia |
Source: Preferred by Nature (2025); The Acta Group (2025)
The “low-risk” classification delivers a significant advantage to Vietnamese exporting businesses: simpler due diligence requirements and an inspection rate of only 1%, compared with 3-9% for higher-risk countries. However, this does not mean businesses are fully exempt – all requirements regarding traceability and GPS coordinates must still be met (Vietnam.vn, 2025).
Impact on Vietnam’s key export industries
The coffee industry
Vietnam is the world’s second-largest coffee exporter, with the EU consuming 40-41% of its total export volume. In 2024, Vietnam’s coffee exports reached a record USD 5.62 billion, with the average price rising 59% to USD 4,177/tonne. By Q1/2025, prices had exceeded USD 5,600/tonne due to tightening global supply (EEAS, 2024).
For Vietnamese coffee exporters, understanding What Are CBAM and EUDR is particularly important because EUDR introduces strict traceability and geolocation requirements. The greatest challenge lies in the structure of the supply chain. More than 95% of Vietnamese coffee comes from smallholder farmers cultivating areas of under 2 ha, mainly in the Central Highlands. This region has 676,500 ha producing 92.4% of the country’s output. The supply chain can involve up to 10 intermediaries from farm to exporter, with many purchasing agents operating without business registration (Specialty Coffee Association, 2025).
The Vietnam Coffee-Cocoa Association (VICOFA) reports that many smallholder farmers lack GPS tools and digitized records. Some also lack the basic mobile devices needed to collect geolocation data (Vietnam News, 2024).The rubber industry
Vietnam has 910,000 ha of rubber, with smallholder households managing 54% of the planted area but producing 63% of the output. Total export turnover of rubber and rubber products reached USD 8.5-10.2 billion in 2024, of which the EU received 6-7% – equivalent to around USD 600 million. The Vietnam Rubber Group (VRG) has responded proactively by certifying 120,000 ha under sustainable forest management standards and obtaining compliance certification for 38 factories producing over 100,000 tonnes of certified rubber annually. Notably, EUDR-compliant natural rubber is currently priced USD 150-300/tonne higher than standard products.
The timber and furniture industry
As Southeast Asia’s largest furniture exporter and the world’s 6th largest, Vietnam exported USD 15.7-16.25 billion of wood products in 2024, with furniture accounting for 40.5% of total value. The EU receives approximately USD 500 million annually. The Vietnam Timber and Forest Products Association (VIFORES) considers EUDR both a challenge and an opportunity – if Vietnam achieves compliance while regional rivals lag in implementation, Vietnamese exporters can consolidate and expand their market share in the EU.
Compliance costs and penalties for violations
CBAM compliance costs
Exporting businesses need to establish a greenhouse gas emissions Measurement, Reporting and Verification (MRV) system. Initial investment costs range from USD 10,000-30,000 for small enterprises to USD 100,000-500,000 for large enterprises, with annual operating costs of USD 5,000-200,000 depending on scale (WTO Center VCCI, 2024). The more significant cost lies in CBAM certificates, currently priced at 75-100 EUR/tonne of CO₂. Given the high emission intensity of Vietnam’s steel industry (mainly using electric arc furnace - EAF technology powered by coal-fired electricity), CBAM costs could account for 15-20% of the cost of steel products and 35-40% of the cost of aluminium.
EUDR compliance costs
EUDR compliance costs are concentrated in traceability systems and geographic data collection. Estimated per-hectare costs for coffee include: USD 5-15 for geospatial mapping, USD 10-25 for data collection and verification, and USD 5-10/year for ongoing monitoring. A key finding from pilot projects by IDH (The Sustainable Trade Initiative) shows that shared traceability systems cost up to 3 times less than individual company-specific systems, making a strong case for industry-level platforms rather than a fragmented approach.
Penalties for violations
Reporting violations
CBAM: 50-100 EUR/tonne of CO₂
EUDR: A minimum of 4% of EU-wide global turnover
Additional consequences
CBAM: Outstanding certificates must still be purchased
EUDR: Confiscation of goods, marketing bans, public posting of the list of violators
Recommended actions for exporting businesses
For businesses affected by CBAM
Priority 1: Complete the MRV system – Understanding What Are CBAM and EUDR helps businesses identify the emissions data required for EU compliance. Establish processes to measure Scope 1 and Scope 2 emissions according to international standards (GHG Protocol, ISO 14064). Ensure emissions data can be verified by a third party. Priority 2: Coordinate with EU importers – Ensure your importing partner has registered as an “Authorized CBAM Declarant”. Establish a channel for regular exchange of emissions data. Priority 3: Develop a long-term decarbonization strategy – Assess the feasibility of switching to renewable energy and upgrading production technology. Businesses should also consider opportunities arising from Vietnam’s domestic carbon market.
For businesses affected by EUDR
Priority 1: Collect GPS coordinates for all source plots – Immediately implement geolocation for raw material areas. Use mobile applications or handheld GPS devices for smallholder farmers. Priority 2: Map and simplify the supply chain – Identify all intermediaries from farm to exporter. Reduce the number of intermediaries where possible to increase control. Priority 3: Register with the EU’s TRACES system – Prepare to submit Due Diligence Statements through the EU’s electronic system. Priority 4: Join industry-level traceability platforms – Leverage the National Database System on Forest and Coffee Areas developed by the Ministry of Agriculture and Rural Development in collaboration with IDH, rather than investing in a standalone system.
Conclusion
CBAM and EUDR mark a turning point in trade relations between Vietnam and the EU. Understanding What Are CBAM and EUDR helps businesses recognize how sustainability requirements are becoming mandatory conditions for accessing the EU market.
However, Vietnam’s circumstances are far from unfavorable. The “low-risk” classification under EUDR, active Government engagement, well-organized industry associations, and strong trade relations with the EU through the EVFTA all create a solid foundation for successful adaptation.
The key point is this: compliance is not merely a cost but a strategic investment in green transition. Early movers can strengthen their relationships with EU importers seeking stable and compliant supply sources. They may also command higher prices for certified sustainable products, such as the USD 150-300/tonne premium for EUDR-compliant rubber, and capture market share as non-compliant competitors lose market access.
With export turnover to the EU rising 18.4% in 2024 to USD 51.7 billion, maintaining and expanding access to this market is well worth the required compliance investment.
A message from the ESG Expert Team – Carbon Credit Viet Nam Joint Stock Company
In the course of accompanying many exporting businesses preparing for CBAM and EUDR, we have noticed an interesting paradox: the businesses that worry the most are often the ones that prepare the best. This “positive anxiety” drives them to act early, while many other businesses are still waiting for “someone else to go first”.
Our message is very clear: time is running out. CBAM officially takes effect from 01/01/2026 – less than 11 months away. EUDR applies from 30/12/2026 for large and medium enterprises. Building an emissions MRV system, collecting GPS coordinates for hundreds of thousands of hectares, and training the supply chain cannot be completed in just a few months.
Carbon Credit Vietnam Joint Stock Company is committed to accompanying Vietnamese businesses on this journey. We provide comprehensive consulting services from greenhouse gas inventories and MRV system development to traceability support and international-standard ESG reporting. Don’t let “waiting” turn into “missing out”.
Respectfully,
Reference List
ASUENE (2025) ‘CBAM Enters Its Definitive Phase on January 1, 2026: What Companies Must Be Ready For’, ASUENE Blog. Available at: https://asuene.com/us/blog/ (Accessed: February 2025).
EEAS (2024) ‘Conference: Deforestation-free coffee production and supply in compliance with European Union regulation’, European External Action Service. Available at: https://www.eeas.europa.eu/ (Accessed: February 2025).
Energy Transition Partnership (2024) Carbon Border Adjustment Mechanism Impact Assessment Report for Vietnam. Available at: https://www.energytransitionpartnership.org/ (Accessed: February 2025).
EPA Ireland (2024) ‘EU Carbon Border Adjustment Mechanism’, Environmental Protection Agency Ireland. Available at: https://www.epa.ie/ (Accessed: February 2025).
European Commission (2023a) The European Green Deal. Brussels: European Commission.
European Commission (2023b) ‘Carbon Border Adjustment Mechanism’, Taxation and Customs Union. Available at: https://taxation-customs.ec.europa.eu/ (Accessed: February 2025).
Global Traceability (2024) ‘FAQs Explained: EUDR Traceability & Geolocation’, Global Traceability. Available at: https://www.global-traceability.com/ (Accessed: February 2025).
Lexology (2024) ‘How Vietnamese exporters to Europe can meet the EU’s requirements for CBAM’, Lexology. Available at: https://www.lexology.com/ (Accessed: February 2025).
LiveEO (2025) ‘EUDR FAQ: Everything You Need to Know’, LiveEO Blog. Available at: https://www.live-eo.com/ (Accessed: February 2025).
Preferred by Nature (2025) ‘European Commission publishes first list of Country Benchmarks under the EU Deforestation Regulation’, Preferred by Nature News. Available at: https://www.preferredbynature.org/ (Accessed: February 2025).
Shanghai Metals Market (2024) ‘Detailed Analysis of Vietnam’s Steel Industry’, Shanghai Metal Market. Available at: https://www.metal.com/ (Accessed: February 2025).
Specialty Coffee Association (2025) ‘Cracking Coffee Regulation: The Coffee Supply Chain Challenges with EUDR Compliance’, SCA News. Available at: https://sca.coffee/ (Accessed: February 2025).
The Acta Group (2025) ‘EC Announces Low- and High-Risk Countries under the EUDR’, The Acta Group. Available at: https://www.actagroup.com/ (Accessed: February 2025).
Vietnam News (2024) ‘EU’s new regulation on deforestation-linked products head-scratcher for Vietnamese producers’, Vietnam News. Available at: https://vietnamnews.vn/ (Accessed: February 2025).
Vietnam News (2025) ‘Vietnam’s exports to EU see impressive recovery in 2024’, Vietnam News. Available at: https://vietnamnews.vn/ (Accessed: February 2025).
Vietnam.vn (2025) ‘Vietnam is classified as low risk under the EU Anti-Deforestation Regulation’, Vietnam.vn. Available at: https://www.vietnam.vn/ (Accessed: February 2025).
VietnamPlus (2025) ‘Vietnam classified as low risk under EU anti-deforestation regulation’, VietnamPlus. Available at: https://en.vietnamplus.vn/ (Accessed: February 2025).
World Resources Institute (2024) ‘What Is the EU Deforestation Regulation (EUDR)?’, World Resources Institute Insights. Available at: https://www.wri.org/ (Accessed: February 2025).
WTO Center VCCI (2024) ‘Challenges for Vietnam’s exports when the EU CBAM is implemented’, TTWTO VCCI. Available at: https://wtocenter.vn/ (Accessed: February 2025).
Disclaimer:
This article has been compiled for the purpose of providing general informational overview and does not constitute legal advice. EU regulations may change, and their specific application depends on the circumstances of each business. Businesses should consult legal experts and ESG advisors before making compliance decisions.