Carbon Pricing Policy and Emissions Trading: Policy Implications for Greenhouse Gas Mitigation in Vietnam’s Industrial Sector

Abstract

Industry is one of Vietnam’ largest sources of greenhouse gas emissions, and it is also the sector most directly exposed to the domestic carbon pricing mechanisms now under development and to international carbon-related trade barriers such as the EU’s CBAM. This paper synthesizes and analyzes the academic literature on carbon taxes, emissions trading systems, and the impact of CBAM on Vietnamese industry and situates these findings against the current legal framework and international experience with heavy industry decarbonization. The review shows that computable general equilibrium models consistently identify a trade-off between emission-reduction targets and GDP growth, with estimated GDP losses ranging from 0.35% to 4.57% depending on the instrument and its coverage. The paper puts forward six policy implications for designing a carbon pricing mechanism suited to Vietnam’s 2025 - 2028 carbon market pilot phase.