Vietnam Plan to start Carbon Pricing in 2022

Emissions directly contribute to a severe influence on the environment. Vietnam Carbon pricing is used to address this issue. Find out!

To address climate change threats, Vietnam and many other countries have committed to reducing toxic fumes by attempting to reduce and neutralize carbon footprints by 2050. This is directly reflected in the countries’ aggressive investment in alternative energy sources, especially wind and solar. 

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Vietnam will embark on a roadmap to reduce coal-fired power generation and aims to double the installed wind and solar power generation capacity to 31-38 gigawatts by 2030. There are several other measures Vietnam’s government has taken to consolidate its goals of carbon neutrality, like carbon pricing and ETS.

However, the country has reached out to developed nations requesting that it needs funds, technology, and expertise from global investors to achieve the ambitious clean energy targets, according to Reuters. In this article, we will see in detail what carbon pricing is and how it can help reduce carbon emissions. 

Carbon Pricing Brings Vietnam Closer to Decarbonization

Vietnam’s quick economic expansion and rising energy consumption have resulted in an exponential increase in GHG (Greenhouse Gases) emissions, with the country ranking second in Southeast Asia in terms of air pollution in 2019. 

The new domestic carbon emission trading scheme authorized by Vietnam’s updated Law on Environmental Protection aims to construct a carbon pricing mechanism that would punish GHG emitters based on the principle of “polluter pays” in order to satisfy the country’s development and climate change goals.

Moreover, the carbon emission trading scheme (ETS) aimed to create a market mechanism via which companies, cities, and nations wishing to cut their GHG emissions could buy credits to offset their actual emissions.

Complementary policies and tools, such as the national GHG inventory system, monitoring, reporting, and verification (MRV) system, and the National Registry, would support the carbon price mechanism. The Vietnam ETS was anticipated to be applied to large polluters first, following worldwide best practices, before being scaled up to include smaller companies.

Four important environmental and developmental issues were addressed by the new law.

  1. Decarbonization through a carbon price system would aid in the reduction of GHG emissions, air pollution, and thereby human health.
  2. Reducing emissions through a carbon price mechanism would assist to mitigate the effects of climate change and, as a result, lessen environmental degradation pressures.
  3. Carbon pricing methods have the potential to provide money for the state budget while also encouraging the development of greener and cleaner technological solutions that cut emissions.
  4. According to the World Bank, Carbon pricing regimes will help Vietnam attract more foreign direct investment and improve its export competitiveness.

Related: Preserving Environmental Sustainability through Energy-efficient Lighting

Why Is Carbon Pricing Important For Vietnam?

Carbon pricing in the form of an emissions trading system (ETS) for greenhouse gasses is legalized under a new Law on Environmental Protection that will take effect on January 1, 2022.

Low carbon pricing on fossil fuel sources of USD 1.85 and USD 3.86 per ton, starting in 2022 and growing at a real rate of 10% each year, might cut emissions from fossil fuel burning by around 5.5% and 11.2%, respectively, by 2030, compared to business as usual. This is according to a paper by Australia National University

A carbon tax would be ideal, and it could be implemented by simply modifying existing charges on coal and oil goods and imposing a new fee on natural gas. In terms of perceived political viability, an ETS, on the other hand, performs admirably.

For carbon prices to operate effectively, capabilities in monitoring and enforcement must be strengthened. Effective communication and promotional campaigns from the government would also help the public and investors understand the benefits of carbon pricing.

Carbon pricing will provide funds that might be utilized to increase Vietnam’s global competitiveness if spent on infrastructure and other projects, in addition to its environmental advantages.

Carbon pricing might also assist Vietnam to make the case for being excluded from any carbon border adjustments imposed by other nations, allowing it to take full advantage of trade programs like the EU-Vietnam Free Trade Agreement, according to Policy Forum.

The carbon price strategy would also encourage the use of more solar and wind energy. This is critical, given the scarcity of finance for coal-fired power plants and the necessity to transition away from coal-fired electricity.

How Can Cekindo Help?

Investing or expanding your business in Vietnam can be a time-consuming process, especially ensuring carbon emission compliance with the changing regulations. However, investing in alternative energy in Vietnam is a lucrative new industry. Cekindo’s comprehensive business solution services will not only assist you with registering your company but will also ensure that you stay on top of all legal compliances. Following incorporation, we also provide HR and accounting services, business license acquisition, and a seamless carbon tax-paying experience.

Contact Our Consultant

Vojtech Zehnalek

Verified by:​

Vojtech Zehnalek, MSc.

Vojtech Zehnalek is the CEO of the Cekindo Vietnam office. He graduated in Economics and International Trade from the University of Economics in Prague, the Czech Republic, and he also earned a Business Degree at the Vlerick Business School in Belgium.