Carbon pricing in Vietnam: Options for adoption

Abstract

This paper investigates options for carbon price adoption in Vietnam, with a focus on model designs capable of meeting the country's updated Nationally Determined Contribution (NDC). We employ an ex-ante policy evaluation across environmental, economic, social, and political dimensions, drawing on interviews with key stakeholders. A multi-criteria analysis is also pursued to provide an overall comparison across policy options. The findings indicate that a relatively low but increasing carbon price could play an important role in steering Vietnam toward meeting its emission reduction targets. A carbon tax has the advantage of simplicity, while an emissions trading scheme would likely be politically easier to introduce. If an emissions trading scheme is established, permit auctioning would be preferable to free allocations on account of revenue benefits and relative simplicity. A key risk is that an overgenerous cap would be set, which would undermine environmental impact.