| Article 1: Will wood industry businesses be affected by the carbon border adjustment mechanism? Wood businesses leverage EVFTA to penetrate deeper into the EU market. |
As the market becomes increasingly demanding and discerning.
The EU's Carbon Border Adjustment Mechanism (CBAM) officially entered its transition phase (from October 1, 2023). According to Ms. Pham Thi Ngoc Thuy, Director of the Office of the Private Economic Development Research Board (Board IV, under the Advisory Council on Administrative Procedure Reform of the Prime Minister), this means that products exported to the EU market will be subject to certain "KPIs" regarding emission regulations.
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| Vietnam has significant potential for exporting timber and wood products. |
If they fail to meet the criteria, businesses will have to pay a tax, which is a carbon tax. In other cases, they will be required to purchase carbon certificates to offset their emissions. Thus, the EU is the first trading region in the world to apply carbon pricing to imported goods.
However, according to Ms. Thuy, it's not just the EU; the US is also currently drafting regulations that are considered even stricter than the CBAM regulations introduced by the EU. "In nature, it's a similar regulation, but the number of affected industries is much larger. There are even regulations that we believe will have a significant impact on businesses," Ms. Thuy shared, adding that other markets are still in the process of encouraging green transitions.
Clearly, a global trend towards green shopping is emerging, spreading from the EU to the US and other markets. The wood industry will face similar challenges to the textile industry; without green certifications, wood businesses will gradually be restricted in their buying, selling, and trading activities.
Mr. Nguyen Duy Minh, General Secretary of the Vietnam Logistics Services Business Association, stated that the requirements for greening the supply chain process are now very clear and impact the competitiveness and order opportunities of exporters, rather than just being a "strive" to achieve them.
The textile industry and lessons for businesses in the wood industry.
In 2023, Bangladesh had 153 factories that met LEED standards (Leadership in Energy and Environmental Design, a certification body of the U.S. Green Building Council), and they also had 500 factories currently applying for this certification.
Currently, LEED standards are assessed based on six main factors including: materials and resources, indoor environmental quality, energy and atmosphere, water efficiency, sustainability aspects, operational innovation, and regional priorities.
Citing the example of the textile industry as a lesson for the wood industry, Ms. Pham Thi Ngoc Thuy said that throughout the past year, Bangladesh's green textile story has received a lot of attention because it has helped them secure very large orders, while Vietnamese textile businesses have had meager orders.
"According to information from Vietnam's diplomatic mission in the United States, Bangladesh's textile industry grew by 54% in a very short period; a representative from Vietnam's diplomatic mission in Canada stated that at the international textile trade fair, hundreds of Bangladeshi businesses presented their LEED certifications and secured numerous orders, while Vietnam only had a few participating businesses and did not possess these certifications," Ms. Thuy cited as evidence.
According to Ms. Thuy, the most important issue remains the awareness of the businesses themselves. In 2022, a quick assessment and survey by Committee IV showed that businesses' awareness of emission reduction and green transition was still very low.
After more than a year of traveling, researching, and exploring new avenues, a comparison of the three major sectors—agriculture, forestry, and fisheries; manufacturing; and logistics—shows that the agriculture, forestry, and fisheries sector is progressing faster than other models. Some models have been internationally validated and awarded carbon credits, such as low-emission rice farming, low-emission coffee farming, and the success of the shrimp industry.
Among the low-emission sectors of agriculture, forestry, and fisheries, the timber industry is conspicuously absent. For over a year, the timber industry has only been in a state of awareness regarding the new regulations, concerns about challenges, and a sense of opportunity. However, the question remains: what can we do to overcome the challenges, how can we capitalize on the opportunities, and how can we obtain carbon credits? There has yet to be any concrete progress.
"Green" is about protecting competitiveness and maintaining opportunities for production and international sales.
According to economist Vo Tri Thanh, "green" and "digital" are the two most important words that businesses are pursuing if they want to adapt to the demands of the international market. While previously pursuing "green" meant sacrificing costs, now it's about protecting competitiveness and maintaining opportunities for production and sales internationally.
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"Green" is about protecting competitiveness and maintaining opportunities for production and international sales. |
Returning to the story of the wood industry, Ms. Pham Thi Ngoc Thuy stated that Ho Guom Garment Company is a bright spot in the textile and garment export landscape, recording positive export growth last year and having the right to choose partners. This is the result of the company's own efforts in researching LEED standards and its determination to implement them.
The question is: what should wood industry businesses do to adapt to current regulations in the domestic and international markets, as well as future forecasts? Mr. Vu Tan Phuong – Director of the Vietnam Forest Certification Office – noted that currently, all businesses face the risk of emissions. In the current context, those businesses that take the lead will seize opportunities first. Therefore, businesses need to carefully consider each stage of their production process, focusing on areas where emissions can be reduced, such as improving input efficiency.
In fact, some wood industry businesses have grasped the information and proactively adapted. Mr. Trinh Duc Kien, Deputy Director of Ke Go Co., Ltd., shared that as a company specializing in exporting goods to the EU market, in 2019 the company invested in FSC forest certification.
Recently, some customers have raised concerns about the origin of wood and emissions in the supply chain. Questions businesses have received include: How is electricity used in wood product manufacturing? Are there ways to reduce electricity consumption in production? What is the origin of the wood used? What is its carbon absorption capacity?
The issues that customers are concerned about force businesses to find ways to meet them, in addition to issues of price, quality, and design. Switching to biomass fuel in production, proactively investing in FSC-certified plantations, etc., are some of the ways businesses are currently doing this.
Lesson 3: Overcoming challenges in green transition to accelerate the wood industry's growth.
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