Carbon Pricing Aids Vietnam’s Efforts Towards Decarbonization

Vietnam’s rapid economic growth and its increasing energy demand have led to an exponential increase in GHG emissions, leaving the country with the second highest air pollution levels in Southeast Asia in 2019. To meet its development and climate change goals, the new domestic carbon emission trading scheme enabled by Vietnam’s revised Law on Environmental Protection aimed to create a carbon pricing instrument that will penalize emitters of GHG emissions based on the principle of “polluter pays.”

The carbon emission trading scheme (ETS) envisioned creating a market instrument through which production facilities, localities, and countries seeking to reduce their contribution of GHG emissions could buy credits to offset their actual GHG emissions. The carbon pricing mechanism would be supported by complementary policies and instruments such as the national GHG inventory system, monitoring, reporting and verification (MRV) system, National Registry. In line with international best practices, the Vietnam ETS was expected to be applied to big emitters first before being scaled up to encompass smaller entities.

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The World Bank Group