Challenges and adaptation strategies for Vietnam’s wood export industry in the face of EU carbon border regulations

Abstract

Vietnam’s wood export industry, while crucial to the national economy, faces significant challenges from the European Union’s Carbon Border Adjustment Mechanism (CBAM). With small and medium enterprises (SMEs) comprising 90% of the sector, the industry must address high carbon emissions, external market dependence, and evolving environmental regulations to maintain competitiveness. This research analyses CBAM’s impact on Vietnam’s wood industry and identifies effective adaptation strategies under new environmental standards. Using an inductive theory-building approach, the study integrates economic theories on carbon pricing and international trade with empirical assessments of production emissions. Findings reveal the sector’s current emissions of 220-280 kg CO2e per cubic meter, highlighting the urgent need for technological innovation and sustainable practices. The research identifies key adaptation strategies: implementing heat pump kilns that reduce emissions by 45%, developing blockchain-based supply chain traceability, diversifying markets, and strengthening EU partnerships. These measures support the industry’s commitment to reduce emissions by 45% by 2030 compared to 2020 levels. Recommendations focus on three pillars: technology adoption through cooperative frameworks for resource-limited SMEs, market diversification, and enhanced policy support for green transitions. The study contributes to understanding how developing economies’ traditional industries can adapt to evolving global environmental standards while maintaining economic viability. The findings underline the importance of proactive adaptation to international environmental regulations for sustaining economic viability in developing economies. By adopting innovative technologies and diversifying markets, Vietnam’s wood export industry can mitigate the adverse impacts of CBAM, ensuring long-term competitiveness and contributing to global sustainability goals.