(Luận văn thạc sĩ) assessment of the eus carbon border adjustment mechanism (cbam) impacts on vietnams iron and steel sector

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN VIET CAN ASSESSMENT OF THE EU’S CARBON BORDER ADJUSTMENT MECHANISM (CBAM) IMPACTS ON VIETNAM’S IRON AND STEEL SECTOR MASTER’S THESIS VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN VIET CAN ASSESSMENT OF THE EU’S CARBON BORDER ADJUSTMENT MECHANISM (CBAM) IMPACTS ON VIETNAM’S IRON AND STEEL SECTOR MAJOR: CLIMATE CHANGE AND DEVELOPMENT CODE: 8900201.02QTD RESEARCH SUPERVISOR: PROF DR TAMURA MAKOTO Hanoi, 2023 PLEDGE I assure that this thesis is the result of my own research and has not been published The use of other research’s results and other documents must comply with the regulations The citations and references to documents, books, research paper, and websites must be in the list of references of the thesis Author of the thesis Nguyen Viet Can ACKNOWLEDGEMENT First, I would like to express my sincere gratitude and appreciation to my supervisor Prof Dr Makoto Tamura for his invaluable guidance, support, and encouragement during my study in the Master’s Program in Climate Change and Development (MCCD) at Vietnam-Japan University and the completion of the thesis His expertise, deep insights, and constructive feedback have greatly contributed to the success of my research project Second, I would like to thank my colleagues at Energy and Environment Consultancy Joint Stock Company for their valuable support, cooperation, and inspiration during my study, especially their permission to use the data for this thesis Their professionalism, dedication, and contribution in greenhouse gas emission reduction in Vietnam have motivated me to pursue a career in this field Furthermore, I am also grateful to my classmates in MCCD6 for their collaboration, friendship, and sharing of ideas and experiences Their diverse perspectives and contributions have widened my horizons and enriched my learning experience Last but not least, I would like to acknowledge the immense support and love from my family and friends who have always been there for me and cheered me up through ups and downs Thank you all for your kindness and generosity! TABLE OF CONTENTS List of tables i List of figures ii List of abbreviations iii Chapter : Introduction 1.1 Climate change and carbon pricing and CBAM 1.2 The rationale of the research 1.3 Research questions and objectives 1.4 Structure of the thesis Chapter : Literature review 2.1 Overview of the EU’s CBAM 2.1.1 What is CBAM? 2.1.2 CBAM scope 2.1.3 CBAM implementation timeline 2.1.4 How CBAM works 10 2.2 Research on the impacts of CBAM 11 2.1.5 Research on the impacts of CBAM in the world 11 2.1.6 Research on the impacts of CBAM in Vietnam 13 2.3 Overview of Vietnam’s carbon pricing policies 14 2.4 Iron and steel sector in Vietnam 15 2.4.1 Production 15 2.4.2 Import/export 16 2.4.3 Technology and GHG emissions by the sector 17 2.4.4 GHG emission mitigation for iron and steel production in Vietnam’s updated NDC in 2022 18 2.4.5 Challenges faced by the steel sector in Vietnam on its decarbonization pathway 21 Chapter : Methodology and data 23 3.1 Methodology 23 3.1.1 Overall methodology 23 3.1.2 Methodology for the calculation of carbon intensity of the iron and steel sector in Vietnam 24 3.1.3 Methodology for scenario establishment 26 3.2 Data collection process 30 3.2.1 Data on energy consumption and production output of the steel sector in Vietnam 30 3.2.2 Data on production, export and carbon price in the EU and other countries 33 Chapter : Results and discussion 34 4.1 Results the calculation of carbon intensity of the iron and steel sector in Vietnam 34 4.2 Comparison of Vietnam’s iron and steel sector’s carbon intensity with others 36 4.2.1 Comparison with the world average 36 4.2.2 Comparison with EU average 36 4.2.3 Comparison with EU prominent trading partners for iron and steel products 37 4.3 CBAM cost and competitiveness of steel sector in Vietnam under BAU scenario 38 4.4 CBAM cost and impacts on steel sector in Vietnam under NDC and Ambitious scenarios 40 4.5 Strategies for steel companies in Vietnam 43 4.6 Recommendations for the steel sector and policymakers in Vietnam 44 Chapter : Conclusion 46 5.1 Summary of main findings 46 5.2 Limitations and suggestions for further studies 48 References 50 Appendix 1: Questionnaire form (English translation) 57 Appendix 2: Interface of the calculation tool 60 Appendix 3: List of emission factors 62 Appendix 4: Calculation of the potential CBAM payments and impacts 64 Appendix 5: Matrix of learning results and outcomes for the master’s thesis 66 [TNN1] LIST OF TABLES Table 1-1: Research objectives, tasks, corresponding outputs and outcomes Table 2-1: Vietnam’s steel production outputs period 2017-2021 15 Table 2-2: Mitigation measures for the steel sector in Vietnam’s updated NDC 2022 19 Table 3-1: Summary of parameters in scenarios 29 Table 3-2: List of companies answering the survey questionnaires .31 Table 3-3: Coverage of the returned questionnaires 33 Table 4-1: Results of the GHG accounting for companies providing full data 34 Table 4-2: Comparison of the carbon intensities between Vietnam’s steel and the world average values 36 Table 4-3: Comparison of emission intensities between Vietnam and EU 37 Table 4-4: Comparison of emission intensities between Vietnam and EU’s main trading partners for steel products 38 i LIST OF FIGURES Figure 2-1: CBAM scopes (covered products, emissions, and types of GHGs) Figure 2-2: Phase-out of free EUA and phase-in of CBAM and its implementation timeline Figure 2-3: Share of export markets of Vietnam’s steel products in 2022 16 Figure 2-4: Export of steel products from Vietnam to the EU by volume (million tons) and value (billion USD) 17 Figure 3-1: Logical framework of the thesis 24 Figure 3-2: Carbon intensity of Vietnam's power grid period 2017-2021 26 Figure 3-3: Determinants of CBAM certificate price 27 Figure 4-1: Competitiveness loss index of Vietnam's steel products under CBAM (2026-2034) 39 Figure 4-2: Current carbon prices in China, South Korea, and Japan 39 Figure 4-3: Competitiveness loss index of EU’s main trading partners for steel products under CBAM (2026-2034) 40 Figure 4-4: Competitiveness loss indices of Vietnam's steel products under different scenarios and other countries (2026-2034) 41 Figure 4-5: Share of total CBAM payments to total export value of steel to the EU 42 Figure 4-6: Share of total CBAM payments to total export value of Vietnam's steel sector 42 ii LIST OF ABBREVIATIONS ASEAN AR BAU BF-BOF CAGR CBA CBAM CCR CGE CO2 Co., Ltd COP EAF EF ERCST ETS EU EU ETS EUA EVFTA GDP GHG GSO HRC IF IPCC ISO JSC LDC LEP MOF MOIT MONRE N2 O NDC OECD PFCs Association of Southeast Asian Nations Assessment Report Business-As-Usual Blast furnace-basic oxygen furnace Compound Annual Growth Rate Carbon border adjustment Carbon Border Adjustment Mechanism Climate change response Computable General Equilibrium Carbon dioxide Company limited Conference of the parties Electric arc furnace Emission factor European Roundtable on Climate Change and Sustainable Transition Emission trading scheme European Union EU's Emission Trading scheme EU ETS allowances EU-Vietnam Free Trade Agreement Gross domestic product Greenhouse gas General Statistics Office Hot rolled coil Induction furnace Intergovernmental Panel on Climate Change International Organization for Standardization Joint stock company Least developed country Law on Environmental Protection Ministry of Finance Ministry of Industry and Trade Ministry of Natural Resources and Environment Nitrous oxide Nationally Determined Contribution Organisation for Economic Co-operation and Development Perfluorocarbons iii UNFCCC USA VGGS VNEEP United Nations Framework Convention on Climate Change United States of America National Green Growth Strategy National Energy Efficiency Program iv