The International Institute for Sustainable Development explores the concept of a border carbon adjustment as a tool to drive the decarbonization of trading partner countries. BCAs are designed to raise the costs of imported goods to account for the actual environmental impact and to align with national ecological standards. They can be used to protect the environmental competitive advantage of domestic goods compelling other countries to scale up their climate policies so as not to get evicted from the international market. BCAs typically target emission-intensive sectors such as steel, iron, aluminum, cement, or fertilizers.
As a country that relies heavily on steel, aluminum, and cement exports, Vietnam was significantly affected by the implementation of the European Union’s BCA. As it was the first region to introduce such an innovative regulation, the Vietnamese government will need to assist companies in understanding this specific carbon adjustment mechanism and provide guidance on how to actively reduce their emissions. Failure to do so could result in substantial losses due to decreased demand, potentially leading to layoffs.
The carbon adjustment mechanisms imposed by trading partners present a new policy challenge for the government as they require adaptation measures. The Vietnamese government may face pressure to develop corresponding mechanisms to reduce emissions, affecting the trade dynamics in the entire region. This could lead to the emergence of new advanced technologies and a transition to clean energy. Eventually, workers will encounter new job opportunities in greener sectors if they benefit from proper education and training programs.
