Emissions fees a step towards sustainability ambitions

October 11, 2023 | 09:00
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Vietnam’s recent proposal to introduce an environmental fee for emissions is seen as a commendable stride towards sustainability amid global climate concerns.

In the face of escalating climate change and environmental degradation, each step towards responsible environmental practices is a beacon of hope for our planet’s future. While the applicable fee is still in the proposal stage, it underscores Vietnam’s commitment to combat climate change and pave the way for a sustainable environment for generations to come.

Emissions fees a step towards sustainability ambitions
Dr. Samuel Buertey, Accounting lecturer, The Business School, RMIT Vietnam

With global climate concerns intensifying, governments worldwide are under mounting pressure to take substantial actions to safeguard our planet. The urgency to curb environmental degradation has become a matter of human survival. Drawing inspiration from the Netherlands’ 1970 Pollution of Surface Water Act and Germany’s 1976 wastewater charge, many countries in more recent years have embraced various forms of green policy reforms, including environmental taxes and pollution fees.

Although empirical evidence regarding the effectiveness of this approach in curbing environmental degradation is somewhat divided, a growing consensus suggests that when implemented well, these policies can be powerful tools for achieving a sustainable environment.

In contrast to the ‘command and control’ approach to environmental regulation – such as uniform standards and licensing requirements – economic tools like pollution charges, tradable permits, and taxes are seen as more efficient. These tools provide businesses with the choice to either pay and pollute or invest in cleaner practices, aligning their interests with policy objectives.

Vietnam’s introduction of an emissions fee reflects a proactive stance on environmental protection. However, the complexities of this endeavour cannot be overlooked. Striking a balance between encouraging behaviour change and avoiding undue burdens on individuals and businesses remains a formidable challenge.

Although high fees might impact companies, particularly those reliant on high emissions, resulting in job losses and social consequences, research suggests that low charges have also proven ineffective in reducing emissions. This is primarily because they lack economic incentives for emission reduction.

Emissions fees a step towards sustainability ambitions
Emissions fees a step towards sustainability ambitions, illustration photo/ Source: freepik.com

In comparison to Ukraine’s ($1.03 per tonne) and Poland’s (0.08 US cents per tonne) carbon tax rates as two European countries with the lowest rates, Vietnam’s proposed annual emissions fee of $126.50 with a variable rate of 0.02-0.03 US cents per tonne appears relatively low.

Nevertheless, the strategy of starting with a modest rate and gradually increasing it over time aligns with the approach adopted by many nations when introducing emission levies. For instance, in 2012, Japan introduced its tax for climate change mitigation at approximately $1.20 per tonne of carbon dioxide. This rate was subsequently raised to $1.90 and $2.78 in 2014 and 2016, respectively.

It is essential to recognise that while lower emission rates may not drive significant emission reductions in companies, a positive outcome would be the potential revenue generated. Vietnam’s government can direct these funds towards renewable energy projects, afforestation initiatives, and public awareness campaigns, thereby contributing to emission reduction.

Ultimately, the introduction of an environmental fee is a substantial leap forward. However, it is crucial to acknowledge that its impact hinges on diligent implementation and periodic reviews. Regular inspections and checks play a pivotal role in ensuring businesses, industries, and individuals adhere to the government’s emission guidelines. These checks will deter potential violators, foster a culture of accountability and responsibility.

Establishing a robust monitoring system will enable authorities to accurately track emissions, identify trends, and address areas needing attention. Moreover, companies have a responsibility to establish transparent recording and reporting mechanisms that will facilitate monitoring and assurance purposes.

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By Samuel Buertey

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