Firm’s Preferences for Emissions Reducing Measures and Willingness to Pay for a Carbon Tax in Viet Nam

Overview & Synopsis

Viet Nam is committed to reducing its greenhouse gas emissions by 15.8% by 2030 and meeting its net-zero emission target by 2050. The industrial sector, including the power sector, is the primary emitter and its active participation is necessary to achieve the targets. This study uses a stated-preference survey Vietnamese firms to understand their preferences in reducing greenhouse gas emissions. The study finds that Vietnamese firms prefer to reduce their greenhouse gas emissions through improving energy efficiency, substituting fossil fuels with non-fossil fuels and changing production processes. The ranking of preferences differs across the size, type, ownership and geographical location of firms. Their willingness to reduce emissions is driven by anticipated future regulations, social image, and global trends. They consider the lack of finance to be the main barrier to investing in climate change mitigation measures. The study also finds that if a carbon tax were imposed at 100,000 local currency (around US$5) per ton of carbon dioxide, over 60% of firms would be willing to invest less than 5% of their annual revenue in greenhouse gas mitigation; only less than 10% of the firms are willing to allocate more than 10% their revenue for greenhouse gas mitigation. The findings also show that larger firms and state-owned firms have a higher willingness to pay for emission mitigation measures. Given the small sample size and static preference approach, the findings should be interpreted as indicative rather than conclusive.