IMF's recommendations on fiscal policy to help Viet Nam achieve its climate change mitigation goals 30/05/2022 12:30:00 401

Within the framework of cooperation between the Ministry of Finance and the IMF, the IMF supported the implementation of the Report "Assessment of Climate Change Mitigation Options in Viet Nam". The report reviews Viet Nam's climate change mitigation goals, discusses different fiscal policy tools that Viet Nam can use to achieve them, and makes recommendations on design the emission trading system (ETS) that Viet Nam plans to deploy in the near future.

Climate change mitigation goals of Viet Nam

According to the IMF, Viet Nam is one of the few countries (26/197) that has set an "ambitious" carbon reduction target, which is to achieve net zero emissions by 2050. In addition, Viet Nam has also achieved pledges to stop investing in the development of new coal-fired power plants, scale up the deployment of clean power generation, phase out coal power gradually by the 2040s, and increase deployment of clean technologies. The IMF welcomes Viet Nam's emission reduction commitments and recommends that it soon be transformed into specific and appropriate actions and policies.

The IMF's proposal on fiscal policy to help Viet Nam achieve the goal of climate change mitigation

  According to the IMF, the most effective policy to help achieve the goal of climate change mitigation is the policy that makes greenhouse gas emissions expensive, creates incentives to save energy or switch to other sources of energy through market mechanisms, and at the same time generate revenue from the state budget. Regarding tax instruments, there is carbon tax. Regarding non-tax instruments, there are: (i) Emission Trading System (ETS); (ii) combined fee-refund mechanism (feebate) and (iii) regulations/standards.

The IMF recommends that mitigation measures be combined into a package to meet different policy objectives and overcome implementation challenges.

ICD