Proposal for Ho Chi Minh City to impose a carbon fee.

In response to Europe's cross-border carbon tax, the University of Economics Ho Chi Minh City proposed that the city collect a carbon fee to fund support for businesses.

The European Union implemented the Carbon Border Adjustment Mechanism (CBAM) in October 2023 to ensure fairness in international trade competition and promote the reduction of greenhouse gas emissions.

CBAM will be applied to products imported into the EU based on the amount of greenhouse gas emissions (direct and indirect) generated during the production process.

A recent study by the University of Economics Ho Chi Minh City (UEH) predicts that this will have many impacts on businesses. Specifically, businesses exporting to the EU will be affected in the short term as the competitiveness of their goods decreases due to the increased carbon costs.

A steel and plastic pipe manufacturing plant in An Giang. Photo: Phuong Dong — A steel and plastic pipe manufacturing plant in An Giang . Photo: *Phuong Dong*

Therefore, the research team proposes that Ho Chi Minh City collect a carbon fee and use the revenue to support businesses exporting to Europe (with funding for technological solutions to reduce emissions), as well as local environmental initiatives. This fee would apply to businesses affected by CBAM, could be implemented by the end of 2024, piloted in 2025, and officially launched in 2026.

On the plus side, this is a way to increase self-generated revenue, used entirely for environmental purposes and supporting businesses. The solution does not create additional tax burdens, while being very beneficial to businesses. Because even if they don't pay carbon fees in Ho Chi Minh City, businesses still have to pay equivalent CBAM taxes in Europe.

Currently, CBAM allows for a deduction if the carbon price has already been paid in the producing country. This means Ho Chi Minh City can implement carbon pricing tools and collect fees. Meanwhile, businesses also receive support when locating in Ho Chi Minh City.

However, the research team noted that for the solution to be feasible, further practical analyses from businesses are needed to determine appropriate carbon pricing, reporting timing, fee payment, and verification mechanisms in line with CBAM. Additionally, how to effectively reallocate budget from carbon fees also needs detailed discussion.

Besides carbon fees, the research team proposed two other scenarios for responding to CBAM. One is to provide financial support to businesses for technological transformation, but this requires securing resources. The second is to become a provider of carbon credits by investing in reducing electricity emissions at public assets, but this also requires initial capital and technical investment.

As the country's economic powerhouse, Ho Chi Minh City is also facing environmental challenges, particularly air pollution. It emits over 60 million tons of CO2 annually, accounting for 18-23% of the national total.

Currently, the city has 140 businesses required to conduct greenhouse gas inventories, with 106 of them in the manufacturing sector. The number of businesses requiring inventories may increase as the Ministry of Natural Resources and Environment submits an updated list to the government .

According to the CBAM implementation roadmap, during the transition period from October 1, 2023 to January 31, 2024, cement, fertilizers, iron, steel, and aluminum imported into the EU will declare emissions quarterly and will not be subject to tariffs. From 2026 onwards, CBAM will officially come into effect and be applied to many other sectors.

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