Vietnam is at a major turning point in its green energy transition. The electric vehicle (EV) industry not only plays a role in direct emission reduction but also serves as a spearhead for promoting the circular economy (CE) model [1]. Implementing appropriate incentive policies will help optimize resources and protect the environment sustainably.
The circular economy in the EV sector focuses on extending the lifecycle of vehicles and batteries. Instead of the "extract - produce - dispose" model, we are moving toward reusing, refurbishing, and recycling valuable components such as Lithium, Cobalt, and Nickel [3].
Foundational Legal Framework for the Circular Economy
The 2020 Law on Environmental Protection, particularly Article 142, has officially institutionalized the concept of the circular economy [4]. This serves as a vital legal basis for EV manufacturers to build closed-loop environmental management systems. The Vietnamese government has also issued Decree 08/2022/NĐ-CP to specify criteria for waste reduction and resource recycling.
Enterprises applying circular technologies currently enjoy many state incentives. These supports include corporate income tax exemptions and reductions, import tax incentives for recycling machinery, and access to loans from the Vietnam Environment Protection Fund. This creates a strong motivation for investors within the EV supply chain.
Extended Producer Responsibility (EPR)
Extended Producer Responsibility (EPR) is a pillar of waste management policy in Vietnam [2]. According to Articles 54 and 55 of the Law on Environmental Protection, EV manufacturers must take responsibility for collecting and treating waste batteries. The roadmap for applying EPR to batteries and accumulators began on January 1, 2024.
By 2025, this regulation will expand to cover entire end-of-life vehicles. Businesses can choose to self-organize recycling or make financial contributions to the national recycling support fund. Complying with EPR regulations not only helps businesses avoid penalties but also enhances brand reputation in the eyes of consumers.
Financial Policies to Promote Electric Vehicles
The Vietnamese government has implemented various financial tools to stimulate the EV market. Decree 10/2022/NĐ-CP stipulates a 100% registration fee exemption for battery-powered electric vehicles from 2022 to February 2025. This is a significant lever helping users access green technology more easily [1].
Additionally, Law No. 03/2022/QH15 adjusted the special consumption tax for electric vehicles with fewer than 9 seats down to 3% until the end of February 2027. This policy creates a significant competitive advantage over traditional internal combustion engine vehicles. You can learn more about electric vehicles and government incentive policies to seize investment opportunities.
Circular Lifecycle of EV Batteries
EV batteries are the most critical component and also the greatest challenge in the circular economy. When battery capacity drops below the 70-80% threshold, they are no longer suitable for vehicle operation but remain very useful for Battery Energy Storage Systems (BESS) [5]. Reusing batteries in a second life helps optimize economic value before they enter the metal recycling process.
Current recycling technologies, such as hydrometallurgy or pyrometallurgy, allow for the extraction of rare metals like Lithium and Cobalt. This helps reduce reliance on newly mined resources. To better understand these techniques, refer to the article on recycling precious metals from new EV battery technology and challenges in Vietnam.
Challenges and Directions for Policy Improvement
Despite significant progress, the EV industry still faces policy gaps. Vietnam currently lacks specialized national technical standards for testing "second-life" batteries. Furthermore, hazardous waste collection infrastructure remains fragmented, requiring closer coordination between industry associations and regulatory agencies [3].
In the future, establishing a separate electricity pricing mechanism for charging stations integrated with renewable energy storage batteries will be key. The government needs to continue perfecting the legal framework to encourage businesses to invest in modern recycling technology. This will consolidate Vietnam's position in the global EV supply chain.
Conclusion
Policies encouraging a circular economy for the EV industry are a long-term, vital strategy. The combination of EPR regulations, tax incentives, and investment in recycling infrastructure will create a sustainable ecosystem. Regulatory agencies and associations need to work together to remove technical obstacles, thereby realizing the goal of a green transition by 2050 [4].
More Information
- Circular Economy [1]: An economic model designed to extend product lifecycles, optimize reuse, and recycle resources to minimize waste released into the environment.
- Extended Producer Responsibility (EPR) [2]: A policy mechanism requiring manufacturers and importers to take responsibility for collecting and recycling discarded products according to specified rates.
- EV Battery [3]: The main energy storage component of an electric vehicle, containing precious metals that must be strictly managed and recycled after their service life.
- Special Consumption Tax [4]: An indirect tax applied to special goods and services, for which electric vehicles receive tax reductions to encourage green consumption.
- Battery Energy Storage System (BESS) [5]: A system that uses old batteries from electric vehicles to store electricity from renewable sources, helping to stabilize the power grid and optimize energy usage.