Effective 2026, the European Union will implement the Carbon Border Adjustment Mechanism (CBAM) on imports of steel, cement, aluminum, electricity, and fertilizer—key export products for Vietnam When emission costs become a financial risk For businesses, CBAM is more than a new tax; it serves as a significant financial test: carbon emissions are now being assessed in actual monetary terms. Even more importantly, many companies still see this as just a tax policy, failing to understand the impending “carbon trap,” where those who delay their transition will see their valuation decline, lose capital, and ultimately be barred from the market. CBAM is designed to ensure “climate equity” between goods produced within and outside the bloc. Essentially, it works by taxing the carbon emissions embedded in imported products, preventing companies from relocating production to countries with weaker environmental regulations and then exporting those goods back to Europe. In effect, CBAM transforms emissions into a tangible cost within international trade. The “carbon trap,” also known as carbon lock-in, occurs when businesses heavily invest in high-emission production models or technologies, making it increasingly expensive to switch to green alternatives. Once companies become entrenched in outdated production lines, equipment, or energy sources, they face risks […]
To read more, please click here.
