The EU Carbon Border Adjustment Mechanism: What DACH and Vietnamese Manufacturers Need to Know

The EU Carbon Border Adjustment Mechanism (CBAM) places a carbon price on specific goods imported into the EU, and it directly affects Vietnamese manufacturers exporting steel or aluminum to Europe and DACH manufacturers sourcing those goods from non-EU countries. Vietnamese exporters must calculate and document the embedded carbon emissions in their production. EU importers must purchase CBAM certificates and surrender them annually. Manufacturers on both sides who are not yet preparing risk compliance costs and market access disruption from 2026 onward.

Why Was CBAM Introduced?

EU manufacturers pay for carbon emissions through the EU Emissions Trading System (ETS). A manufacturer outside the EU producing the same goods without a carbon cost has a price advantage. The EU considers this a carbon leakage risk: production shifts to lower-regulation countries, and global emissions do not fall.

CBAM closes this gap. It requires importers of covered goods to purchase certificates equivalent to the carbon price that would have applied under the EU ETS. If the exporting country has its own carbon pricing scheme, that amount can be deducted from the CBAM obligation.

Which Goods Does CBAM Cover?

CBAM currently covers six sectors: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The mechanism applies to finished products and, in some categories, to the embedded emissions in inputs used to produce those finished goods.

For Vietnamese manufacturers, the most directly affected categories are iron and steel and aluminum. Manufacturers who use steel or aluminum as inputs in goods exported to the EU may face indirect cost increases as upstream suppliers pass through CBAM costs.

The European Commission has confirmed that CBAM coverage will expand beyond the initial six sectors. Manufacturers in adjacent sectors should track the expansion schedule and assess exposure now.

What Are the CBAM Reporting and Payment Deadlines?

Transition period: October 2023 to December 2025

During the transition period, CBAM importers must report the embedded emissions in their imports each quarter. No certificate purchases are required yet. The purpose is to give importers and their suppliers time to build accurate emissions data collection processes.

Full implementation: January 2026 onward

From January 2026, CBAM is fully binding. Importers must purchase CBAM certificates covering the embedded emissions in their covered imports and surrender them annually to EU competent authorities.

The certificate price tracks the EU ETS carbon price, which fluctuates with the market. Importers who cannot provide verified emissions data for their goods must use default values set by the European Commission. Default values are set conservatively above average actual emissions. This creates a direct financial incentive for suppliers to provide verified data.

What Do Vietnamese Manufacturers Need to Do for CBAM?

Calculate and document embedded emissions

Vietnamese manufacturers exporting covered goods to EU buyers must calculate the embedded carbon emissions in their production. This covers direct emissions from production processes (scope 1) and, for some categories, indirect emissions from electricity consumption (scope 2).

The calculation methodology is defined in EU CBAM implementing regulations. Manufacturers without internal capability to perform this calculation should engage a qualified emissions consultant. Establishing verified emissions data is a market access requirement, not an optional quality improvement.

Understand the competitive impact on EU pricing

Manufacturers with lower actual emissions than the EU ETS default values benefit from providing verified data. They pay CBAM costs proportional to their actual carbon intensity rather than a conservative estimate. Manufacturers with higher emissions than the default pay more under verified reporting.

In both cases, the competitive direction is clear. Lower production carbon intensity means lower CBAM costs and a stronger price position in EU markets. Verified data is the mechanism that captures this advantage.

Prepare for buyer data requests

EU importers are legally responsible for CBAM compliance. They will request embedded emissions data from non-EU suppliers as part of their quarterly reporting obligations. Vietnamese manufacturers who cannot provide accurate, verifiable data create compliance risk for their EU buyers. This will factor into supplier selection and pricing negotiations.

What Do DACH Manufacturers Need to Do for CBAM?

Understand your obligations as the importer of record

DACH manufacturers importing covered goods from Vietnam are the liable party under CBAM. The obligation does not rest with the Vietnamese supplier. Importers must obtain verified emissions data from their suppliers, calculate the certificate requirement, purchase the certificates, and surrender them annually. Non-compliance carries financial penalties.

Build a supplier emissions data process

DACH manufacturers need a defined process for collecting embedded emissions data from non-EU suppliers on every covered shipment. This requires supplier engagement, a consistent data format, a submission cadence, and internal verification capability.

Manufacturers with large or diverse supply chains should assess whether this process can be managed manually or requires digital supply chain emissions tracking. The volume of data involved in annual CBAM reporting scales with the number of covered suppliers and shipments.

Factor carbon intensity into procurement decisions

CBAM makes the carbon footprint of imported goods a direct procurement cost variable. Sourcing from suppliers with lower embedded emissions produces lower CBAM certificate costs. This creates a financial incentive to favor suppliers with documented low-carbon production processes in every covered category.

What Steps Should Manufacturers Take Now?

• Confirm whether your products fall within CBAM-covered categories and which emissions scope applies.
• Establish internal data collection processes for embedded emissions: energy consumption records, fuel use, and production volumes by product category.
• Engage a qualified emissions consultant to verify your calculation methodology against EU CBAM implementing regulations.
• If you are an EU importer, contact non-EU suppliers now to request embedded emissions data and establish a regular submission cadence.
• Monitor European Commission announcements on CBAM expansion to identify whether additional product categories relevant to your operations will be included in future phases.

FAQ

What is CBAM and how does it affect manufacturers?

CBAM is the EU Carbon Border Adjustment Mechanism. It requires importers of specific goods into the EU to purchase carbon certificates equivalent to the EU ETS carbon price that would have applied if those goods had been produced inside the EU. It affects two groups: non-EU manufacturers exporting covered goods to Europe face a carbon cost that depends on their production emissions intensity, and EU importers of those goods are legally responsible for purchasing, holding, and surrendering the certificates. Full financial obligations began in January 2026. The covered sectors are cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.

Which Vietnamese manufacturers are directly affected by CBAM?

Vietnamese manufacturers directly affected by CBAM are those producing and exporting goods in the six covered categories to EU markets: iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen. Manufacturers who use steel or aluminum as inputs in products exported to the EU may face indirect cost increases as upstream suppliers pass through CBAM costs. The European Commission has confirmed that coverage will expand beyond the initial six sectors, so manufacturers in adjacent categories should track the expansion schedule and assess their exposure now rather than waiting for formal notification.

What emissions data do Vietnamese manufacturers need to report for CBAM?

Vietnamese manufacturers exporting covered goods to EU buyers must calculate and document the embedded carbon emissions in their production processes. This covers direct emissions from production (scope 1) and, for some categories, indirect emissions from electricity consumption (scope 2). The calculation methodology is defined in EU CBAM implementing regulations. Manufacturers who cannot provide verified emissions data will be subject to default values set by the European Commission, which are typically set above average actual emissions. Verified data is both a compliance requirement and a competitive advantage for manufacturers with lower actual carbon intensity.

What are the CBAM obligations for DACH manufacturers importing from Vietnam?

DACH manufacturers importing covered goods from Vietnam are the liable party under CBAM. The obligation rests with the EU importer, not the non-EU supplier. Importers must obtain verified embedded emissions data from their Vietnamese suppliers, calculate the number of CBAM certificates required based on that data, purchase those certificates at the prevailing EU ETS-linked price, and surrender them to EU competent authorities annually. Failure to comply carries financial penalties. Importers who cannot obtain verified supplier data must use conservative default values, which typically exceed actual emissions and result in higher certificate costs.

When did CBAM become financially binding?

CBAM entered its transition period in October 2023. During the transition period, which ran through December 2025, EU importers of covered goods were required to submit quarterly emissions reports but did not yet need to purchase or surrender certificates. Full financial implementation began in January 2026. From that point, importers must purchase CBAM certificates covering the embedded emissions in their covered imports and surrender them annually. The certificate price is linked to the weekly average EU ETS carbon price, so the financial exposure varies with the carbon market.

How should manufacturers prepare for CBAM now?

Manufacturers should take five actions now. First, confirm whether your products fall within covered CBAM categories and which emissions scope applies to your production. Second, establish internal data collection processes for embedded emissions, covering energy consumption, fuel use, and production volumes by product category. Third, engage a qualified emissions consultant to verify your calculation methodology against EU CBAM implementing regulations. Fourth, if you are an EU importer, contact non-EU suppliers to establish a regular emissions data submission process. Fifth, monitor European Commission announcements on CBAM expansion to identify whether additional categories relevant to your operations will be included in future phases.