How will the new emission regulations in Vietnam affect businesses?

The new decree on environmental protection fees for emissions marks a significant milestone in Vietnam's journey toward sustainable development. Beyond encouraging businesses to invest in green technologies, the decree presents a golden opportunity for pioneering leaders in innovation while posing considerable challenges in balancing costs and efficiency. How can businesses overcome obstacles and fully capitalize on the potential of this new policy?

1. A legal turning point: New legislation ushers in an era of sustainable development for Vietnam

On November 21, 2024, the Government of Vietnam issued Decree 153/2024/N?-CP on environmental protection fees for gas emissions [1]. This marks a significant step forward in efforts to reduce air pollution and protect the environment, particularly in monitoring and mitigating air pollution from industrial and production facilities.

Under the decree, production, business, and service facilities that emit emissions into the environment and require environmental permits are obligated to pay environmental protection fees. Entities subject to these fees include heavy industries such as steel production, chemicals, cement, and thermal power plants, in addition to recycling and waste treatment facilities.

The fee calculation is clearly defined, comprising a fixed fee and a variable fee based on the volume of emissions and the pollutant levels of substances such as particulate matter, NOx, SOx, and CO. For facilities equipped with automated or periodic emission monitoring systems, the variable fee will be calculated based on actual monitoring data. Notably, facilities with pollutant concentrations below the prescribed standards will be eligible for fee reductions, thereby encouraging businesses to invest in modern emission treatment technologies.

The collection of fees will be delegated to the Department of Natural Resources and Environment or the Local Department of Natural Resources and Environment, ensuring transparency and efficiency in revenue management. The collected fees will be utilized to support environmental protection activities, improve air quality, and promote sustainable development. This approach not only helps mitigate the negative impacts of air pollution but also enhances corporate awareness of their responsibilities in environmental protection.

This new decree marks a significant milestone in realizing Vietnam's commitment to emissions reduction and environmental protection. With decisive and synchronized implementation, the decree is expected to strongly encourage businesses to invest in green technologies, paving the way toward a sustainable and environmentally friendly future. However, how will this decree impact businesses?

2. Opportunities for pioneering leaders in green innovation

The new decree has unlocked unprecedented opportunities for businesses ready to lead in the field of green innovation. For corporate leaders, this represents a chance to assert their pioneering role, not only in legal compliance but also in driving environmentally friendly initiatives. According to the Ministry of Industry and Trade, the demand for green products in Vietnam grew by an average of 15% annually during the 2021–2023 period [2], reflecting an increasing domestic consumer focus on and preference for sustainable consumption trends.

Furthermore, astute leaders can leverage this decree to access international markets. Stringent emission regulations in Europe and the United States have placed significant pressure on global suppliers. For instance, in the EU market, the European Green Deal mandates that businesses meet strict criteria for net-zero emissions and sustainable production. This has prompted competitors in countries such as China, Bangladesh, and Turkey to make substantial investments in green transformation within the textile and garment industry. While posing significant challenges, these developments also present a major opportunity for Vietnamese enterprises to innovate and enhance their competitive position [3].

Moreover, adopting green innovation enables businesses to attract international investment, especially as green loans and, notably, Sustainability-Linked Loans (SLLs) are becoming increasingly popular worldwide. First introduced in 2017, quickly emerged as a vital financial tool for sustainable projects due to their flexible applicability across all sectors. Designed to encourage businesses to achieve Sustainability Performance Targets (SPTs), these loans typically offer interest rates approximately 20% lower than standard loans, providing significant financial advantages for green projects [4].

Currently, SLLs remain the second-largest ESG debt category worldwide, with an outstanding balance of approximately USD 1.2 trillion as of mid-2023. This debt is primarily held by high-credit-rated companies in Europe [5], underscoring the long-term appeal of SLLs for businesses pursuing sustainable development.

The decree also promotes transparency in environmental management for businesses through regulations on reporting and fee payments. Compliance with these requirements not only ensures adherence to legal obligations but also builds trust among communities and partners. Today, transparency and clear commitments in environmental activities have become critical factors in establishing corporate reputation.

However, to fully capitalize on this opportunity, business leaders must develop specific and long-term strategies. Green innovation is not merely a trend but the sole pathway to sustainable development in today’s context. Investing in research and development (R&D) and workforce training is the key for Vietnamese enterprises to advance further on the global economic map.

BambuUP is proud to be Vietnam's leading innovation platform, supporting businesses in accessing green innovation solutions tailored to both domestic and international needs. Connect with BambuUP for detailed consultation on applying innovative solutions and learning from global green transformation leaders.

3. Challenges for businesses still struggling to find a path to sustainable development

Although the new decree brings many opportunities, it undeniably poses significant challenges for businesses lacking a clear strategy for sustainable development.

One of the primary challenges lies in the high initial investment costs for green technologies and production processes. Upgrading production lines and adopting emission-reduction technologies require substantial capital, creating a financial burden for many production facilities, especially small and medium-sized enterprises (SMEs). More than 60% of SMEs face difficulties in mobilizing funds to upgrade their production systems [6].

In addition, meeting the requirements for emission monitoring and paying variable fees adds significant financial pressure. The fixed fee of 3 million VND per year may not be a small expense for small and medium-sized enterprises, while facilities with higher pollution levels face much larger variable fees. Furthermore, the cost of investing in emission monitoring systems, along with regular supervision and reporting, is considerable, requiring businesses to carefully assess their financial plans.

Additionally, many businesses still lack a clear understanding of environmental standards and how to integrate technology into production processes. A survey by the Organisation for Economic Co-operation and Development (OECD) revealed that only 35% of businesses in Vietnam are familiar with the concept of a circular economy, compared to 75% in developed countries.

Moreover, enhancing management processes presents another significant challenge. Businesses must establish emission monitoring systems and ensure timely, comprehensive reporting as required by regulatory authorities. This demands investment in advanced measurement technologies and a focus on training personnel with the necessary expertise. However, the reality is that many businesses in Vietnam lack qualified professionals capable of implementing effective emission reduction strategies.

Moreover, legal risks also represent a significant concern. Failure to fully comply with fee obligations or violations of environmental regulations can result in severe penalties, which may seriously impact business operations and corporate reputation. In addition, new regulations could lead to increased production costs, thereby affecting product pricing and the competitiveness of businesses in the market, particularly when facing international competitors who are already accustomed to stricter emission standards.

To overcome this challenge, businesses need to establish a clear roadmap and collaborate closely with supporting entities such as banks, government agencies, and international organizations. Additionally, participating in training programs and workshops on sustainable development can enhance their internal capacities. This is a critical time for businesses to demonstrate unity and adaptability, enabling them not only to survive but also to thrive in this challenging green era.

Ph??ng Lê.