The Proposed Legal Framework On Responsibility Of Producers And Importers Of Solar Panels From The Perspective Of Environment Regulations

published on 17th November 2021

In recent years, Vietnam aimed to increase the share of renewables in power generation to meet the national electricity demand and ensure sustainable development of the country. As a result, the number of renewable energy projects have increased dramatically, especially for wind power, solar power and rooftop solar projects. According to Electricity Vietnam, up to 31 December 2020, the country has more than 100,000 rooftop solar projects with the total capacity of nearly 9,300 MWp.

The fast development leads to various concerns from the environmental protection perspective. Hence, the new Law on Environmental Protection 2020 passed by the National Assembly of Vietnam on 17 November 2020 („LOEP”) (which will take effect as from 01.01.2022) regulates new obligations for the producer (the producer here also being the importer of products to Vietnam) and the importer of certain products in respect of their recycling („Recycling Obligation”). The Recycling Obligation, as proposed by the Government under a draft Decree, will also apply to producers and importers of solar panels.

Recycling Obligation of the Producers of Solar Panels

In principle, the hazardous substances management (including collection, storage and recycling of the hazardous items) is currently governed by Decree No. 38/2015/ND-CP (as amended). However, technical guidance on treatment and recycling of solar panels after the end of their operational life has still not been officially issued.

Given this, according to the Draft Decree detailing a number of regulations of the Law on Environmental Protection („Draft Decree”), as from 1 January 2024, the importers, the producers of solar panels to be sold in Vietnam must adhere to the Recycling Obligation.

To be specific, they must opt for one of the following options:

To recycle the products by themselves;
To hire a qualified third party service provider for recycling;
To fully authorize the works to a qualified and non-profit third party for recycling;
To make a financial contribution to the Vietnam Environmental Protection Fund („VEPF”).

We note that while the producer can choose between the four possible options, the importer can only choose between options 2, 3 and 4 but not option 1. Option 1, is applicable to producers only and an Environmental License is required perform the recycling process.

In addition, the producers and importers (or the third party in 3) must also register a recycling plan and file the audited recycling result report annually before 31 March to the Office for implementation of responsibility of the producers, importers in Vietnam („EPR Office”), which is the competent authority assigned by the Ministry of Natural Resources and Environment („MONRE”) to implement the legislation. In case producers or importers opt for (iv), they have to submit a declaration form to the EPR Office before 31 March each year.

The recycling rate

The required recycling rate of each type of product will be determined by the MONRE based on the actual recycling rate of each type of product, the national recycling target, environmental protection requirements and the socio-economic conditions of Vietnam.

The actual recycling rate is calculated as follows:

Actual recycling rate (Ra) = Disposal coefficient of product (D) x Collection coefficient of product (T)

MONRE shall further specify the figures for Disposal coefficient of product (D) and Collection coefficient of product (T).

The producers and importers can recycle the products manufactured or imported by them or the products of the same type of other producers or importers to meet the compulsory recycling rate. In case the producers or importers have already reached a recycling rate which is higher than the compulsory rate, the surplus rate can be carried forward to the next year with the maximum carry forweard term of three years.

The compulsory recycling rate is modified every three years or at an earlier term when necessary.

The financial contribution to VEPF

The producers or importers who choose to make financial contributions to the VEPF must do so on an annual basis. The contributed amount will be calculated in accordance with the formula provided in the Draft Decree. The contribution amount to VEPF is calculation as follows:

The contribution amount (F) = Recycling rate (R) x The quantity of products (V) x Cost norm for recycling products (Fs) + Management and organization cost for the recycling activities (Fm)

MONRE shall further specify the figures for Cost norm for recycling products (Fs) and Management and organization cost for the recycling activities (Fm) - currently indicated in the Appendix 55 of the Draft Decree.

The recycling specifications for solar panels

The Draft Decree also sets out the below recycling specifications:

1. Recycling solutions:

To dismantle parts (remove labels, aluminum frames, separate glass, peel silicon and peel off photovoltaic cells) and create scarps usable as raw materials in industrial fields: Cullet glass, aluminum and glass frames, plastic and renewable photovoltaic cells.

2. Requirements:

To recover at least 80percent of the metal, plastic and glass in one product which meet the requirements of scrap usable as raw materials in industrial fields.
To fulfil the requirement on environmental protection (collection, storage and disposal of wastes and hazardous wastes).

Other responsibilities and penalties

Additional responsibilities to the producers/importers

The LOEP introduced the Extended Producer Responsibility („EPR”) concept which extends the responsibilities of producers and importers in regard to the recycling and treating of discarded products (including solar panels) and packaging which contain non-biodegradable microplastics.

In addition to the above, the Draft Decree (Chapter VII) provides additional responsibilities to the producers/importers in terms of recycling as follows:

Producers/importers are responsible for providing information about the products and packaging that they have manufactured/imported. The national recycling symbol on their labels or packaging must be used and registered and announced by the MONRE.

Producers/importers are responsible for annually reporting to the Vietnam's EPR Office on the quantity/volume and classification of the manufactured or imported products/packages sold before March 31 every year.

Hence, the producers/importers of solar panels shall be subject to above regulations in which certain obligations should be taken into account to meet the deadline required by law.

Penalty mechanism

The current regulations on administrative penalties for violations in the field of environmental protection are currently provided at Decree No. 155/2016/ND-CP and Decree 55/2021/ND-CP. However, given the new issuance of LOEP, existing regulations are not consistent with the new legislation. Thus, there are some amendments to the penalties in this regard, to be specific, the second Draft Decree regulating penalties for administrative violations in the environmental protection field dated 5 August 2021 („Draft Decree on penalties”) is expected to supersede the above mentioned Decrees.

Accordingly, the Draft Decree provides that the administrative penalties (with a range from 100 mil VND to 440 mil VND for organizations based on the Draft Decree on penalties) will be applicable to the producers/importers who do not observe these responsibilities include retrospective collection of the amount needed to recycle the products and packaging that have not been recycled as required, plus an additional 30 percent penalty, and then increased by 10 percent if it is not paid in time. The specific amount of administrative penalties will be determined depending on the seriousness of the violation.

Our Conclusions

While the new issuance of the LOEP, which is a key legal framework on environment sectors, is a progressive environmental legislation, the lack of detailed guidance/interpretation from the Government may cause difficulties to the producers/importers in respect of the practical handling of the legislation.

From our point of view, it is crucial that the producers/importers must closely follow up the status of the Draft Decree and prepare necessary steps and procedures to perform the required obligations as well as projecting the change of product price in the future in the light of the additional responsibilities.

The Draft Decree and Draft Decree on penalties are currently published by MONRE and the Government on its website. You may download the full versions (in Vietnamese) from the link below:

Click here for the link Draft Decree on detailing a number of regulations of the Law on Environmental Protection

Click hear for the link Draft Decree on regulating penalties for administrative violations in the environmental protection

We will update this matter once it is officially enacted.