Overall goal of Fit For 55
The overall goal of the European Union (EU) in its efforts to control climate change is to achieve climate neutrality by 2050. To achieve this goal, the Climate Law has been enacted to ensure ensure that all EU policies aim at climate neutrality. This law was implemented in July 2021 through the ‘Fit for 55 Package’. The number 55 symbolizes the goal of reducing greenhouse gas emissions by 55% by 2030. This package includes legal tools to implement this goal in the fields of climate, energy, land use, traffic and taxes.
One of the key points is the Carbon Border Adjustment Mechanism (CBAM). Last December, the EU announced the implementation of CBAM. Accordingly, the EU will apply a carbon tax on all export goods imported into this market, based on the intensity of greenhouse gas emissions in the production process in the country of origin. Initially, CBAM will apply to imported goods with a high risk of pollution such as cement, steel, fertilizer, aluminum, electricity and hydrogen, which are sectors that account for 94% of Vietnam’s industrial emissions. Europe. The mechanism will be gradually introduced to the entire EU until the end of 2025 and will then be fully implemented in 2026.
In practice, this means that European Union (EU) importers will have to purchase certificates and declare the amount of emissions contained in imported products. If they can provide verified information from non-EU manufacturers that a carbon price has been paid during production, this cost can be deducted from the final invoice.
Businesses should monitor the impact of CBAM and the possibility of expanding this mechanism to other products. The EU Green Deal makes sustainable products the norm, and many initiatives in sustainable product policy are being proposed in the near future. Businesses need to pay attention to this area to assess whether and how they affect their business.
What industries does Fit For 55 affect?
In the food sector, products from Europe are renowned for their safety, nutrition and high quality, and the European Union (EU) is working to make its food system a global standard through via Farm to Fork Strategy. This strategy covers the entire food supply chain and will place responsibility on all stakeholders. The regulatory framework for sustainable food systems is expected to be launched by 2023, including general definitions, principles, requirements, certification and labeling schemes, thereby making sustainable food standards for all products placed on the EU market.
The EU Green Deal may affect a number of Vietnamese industries, depending on the characteristics of each industry and the specific measures implemented under the agreement. For example, in the textile and footwear industries, the agreement requires products to be made from environmentally friendly materials and processes, meet sustainability standards and carry labels. clearly state the ecological origin. Vietnamese businesses in this sector will need to adjust production processes and invest in new technology to remain competitive.
In the field of packaging, Vietnamese businesses will have to produce packaging from environmentally friendly and fully recyclable materials, to comply with the requirements of the EU Green Deal.
In addition, the agricultural and fisheries sectors may also be affected by the EU Green Deal, as this agreement sets new standards for sustainable and environmentally friendly agriculture. This requires Vietnamese businesses to comply with new standards of sustainable farming and food production practices, as well as invest in new technology and change production processes to minimize waste. and use toxic chemicals.
The iron and steel industry also faces the risk of impact from the EU’s Green Deal, which aims to reduce the use of energy-consuming materials and instead use more sustainable materials.
In short, the EU Green Deal poses many challenges for Vietnamese businesses, but at the same time opens up new development opportunities. Businesses need to be clearly aware of the changes that this agreement brings and be willing to adapt to those challenges to maintain and improve competitiveness in the EU market. At the same time, they also need to pioneer in promoting new trends to create sustainable and environmentally friendly products, thereby attracting long-term benefits.
What factors need to be kept in mind to meet Fit For 55:
To prepare for the impact of the European Green Deal, Vietnamese businesses can take the following steps:
Follow and stay informed about the latest developments in the European Green Deal, as well as any new regulations, policies, strategies or plans to implement it.
Assess the potential impact of the European Green Deal on business operations and exports. Identify areas that may need to be improved to meet new sustainability standards.
Consider adopting more sustainable and environmentally friendly practices, such as reducing greenhouse gas emissions, increasing energy efficiency and using recycled materials. For example, under the Carbon Regulation Mechanism, instead of purchasing EU carbon certificates, businesses can start taking measures to reduce carbon emissions during production.
Moving from a production and export model that only focuses on output to a modern production model that focuses on environmental factors and sustainable development. At the same time, seize opportunities from digital transformation and apply new technologies in production activities.
Invest in research and development to create new technologies and products that meet sustainability standards set by the European Green Deal.
In the context of “Fit For 55” affecting the global economy, Vietnamese businesses need to be cautious and flexible in adjusting their business and production strategies. Adapting and applying sustainable measures not only helps businesses maintain competitiveness in the international market but also creates new opportunities to develop and expand the market. At the same time, investing in research and development is also a key factor to help businesses adapt well to the challenges and opportunities posed by new agreements and policies of the European Union. In the age of sustainability and digital transformation, positioning yourself as a pioneer and being willing to adapt to changes is the key to success in today’s and tomorrow’s business environment.
