A Vietnamese steel exporter can now hold two documents that look related and are not. The first is a free allocation of emission allowances under Vietnam pilot carbon market, covering its plant for 2025 and 2026 at no purchase cost. The second is a request from a European customer for verified, product level emissions data under the EU Carbon Border Adjustment Mechanism, which has applied in full since January 1, 2026. Treating the first document as an answer to the second is the compliance gap this article is about, and closing it is now a data project, not a trading project.
Two systems, two different questions
Vietnam domestic scheme asks a facility level question: did this plant emit more or less than its allocated quota? The pilot covers 110 facilities across 92 companies in thermal power, iron and steel and cement, with first verified inventory reports due before December 1, 2027 and surrender for the 2025 to 2026 period before December 31, 2027. Allowances were allocated free during the pilot, which runs through 2028, with auctions planned from 2029.
CBAM asks a product level question: how much carbon is embedded in this tonne of steel, cement, aluminum, fertiliser, electricity or hydrogen arriving at an EU border? The legal obligation sits with the EU importer, not the Vietnamese supplier, as Vietnam Briefing explains in its September 2026 compliance analysis. But the obligation travels upstream through the customer, because the importer must declare either default emissions values or actual emissions confirmed by a verifier accredited in the EU. A factory that cannot supply verified actual data leaves its customer with the default, and defaults ignore how efficient that factory actually is.
Why a free allowance earns no deduction
The deduction rule is narrow and widely misunderstood. An importer can claim a reduction where a carbon price has actually been paid in the country of production. A free Vietnamese allowance is, by definition, not a payment. Vietnam Briefing states the point plainly in paraphrase: a domestic carbon position does not help, voluntary credit purchases do not automatically qualify, and buying allowances or credits does not change a product embedded emissions. Each part of that sentence kills a common shortcut. Holding surplus allowances does not lower the CBAM charge. Buying voluntary credits does not lower it either, because credits offset emissions elsewhere rather than reducing the emissions inside the shipped product. Even a future Vietnamese auction price would only help to the extent a price was actually paid on the relevant production, and the pilot has no auctions until 2029.
What the default value can cost
The price of missing data is measurable. An IISD exporter guide published in July 2026 calculated that in the first quarter of 2026, a Vietnamese exporter of flat rolled steel using default values faced a CBAM cost of roughly EUR 87 to EUR 155 per tonne of product, equivalent to about 12 to 22 percent of value, while some of the least emitting production routes using actual values could face costs near EUR 40 per tonne. The Ministry of Industry and Trade Belgium and EU trade office made a similar point from the price side: at an average export price near EUR 650 per tonne, carbon costs could raise the cost of exporting steel to the EU by about 23 percent if businesses take no effective reduction measures. There is a phased relief, and it should not breed complacency. Exporters initially pay on only about 2.5 percent of covered emissions in 2026, rising to 5 percent in 2027, 10 percent in 2028 and 22.5 percent in 2029, before reaching full coverage by 2034. The window is for building measurement systems while the bill is small, not for waiting until the bill is large.
The data system factories now need
Closing the gap means producing numbers a verifier can trace. Vietnam Briefing advises covered facilities to retain fuel invoices, meter readings, production records and emissions factors, and to complete verification in time for the December 2027 deadlines. For CBAM supply, the same records must be organized at product level, so emissions can be assigned to a specific output rather than averaged across a whole complex. Exporters should also agree with each EU customer how verification will be arranged and who pays for it, and write into contracts what happens to the price when verified emissions or revised EU requirements change the charge. None of this is glamorous. It is metering, record keeping and contract drafting. It is also, increasingly, the difference between keeping and losing a European order, because a customer choosing between two suppliers will prefer the one whose verified data lowers the declared charge.
A separate warning from Europe early years
Vietnam own rules offer one more reason to take the data seriously now. Vietnam Briefing notes that the EU first caps were set on estimates because reliable emissions data did not yet exist, and once verified figures arrived, the cap for the following phase was reduced on the basis of actual emissions. Vietnam has not said it will do the same. But the figures a facility reports in this pilot become the evidence base for later allocation decisions at home as well as border charges abroad. Under reporting hurts twice, inflating a CBAM declaration today and inviting a tighter domestic allocation tomorrow. Over reporting is no safer, since a verifier must be able to trace every figure to a source record.
The work, in order
The sequence for an exporter is now clear. First, build a product level emissions record for 2026, the year CBAM calculations require. Second, contract verification early, because accredited verifier capacity will tighten as the 2027 deadlines approach across 110 domestic facilities and many more CBAM suppliers. Third, fix the contract language with EU customers on data duties, verification costs and price adjustment. Fourth, evaluate reduction investments under several carbon price scenarios, favoring projects such as waste heat recovery that save money even if allowance prices stay low. Free allowances were a reasonable way to start a domestic market gently. They were never a shield at the European border, and exporters who understand that distinction earliest will pay the least for the lesson.
Related reading
- Seven Trades and 1,310 Allowances: Vietnam’s Carbon Exchange Finds Its First Price
- CBAM Is Now a Bill, Not a Warning: What EU Carbon Charges Mean for Vietnamese Steel
- Hoa Phat’s Green Steel Bet, Explained
Sources
Vietnam Briefing, September 2026, compliance analysis of Vietnam carbon market and EU CBAM, on free allowances earning no CBAM deduction, verification duties and the December 2027 deadlines. IISD, July 2026, exporter technical guide to the EU Carbon Border Adjustment Mechanism, on default value CBAM costs of EUR 87 to EUR 155 per tonne for Vietnamese flat rolled steel and near EUR 40 per tonne for low emission routes using actual values. Ministry of Industry and Trade, Vietnam Trade Office in Belgium and the EU, reported August 2026, on CBAM phase in shares from 2.5 percent in 2026 to full coverage by 2034 and a possible 23 percent export cost increase for steel. Ministry of Agriculture and Environment briefing, September 16, 2026, on the 110 covered facilities in the domestic pilot.
