Vietnam Firms Back Emissions Cuts but Show Limited Appetite for Carbon Costs

A new study by the World Bank’s Development Research Group, conducted with the Economy and Environment Partnership for Southeast Asia (EEPSEA) and the University of Illinois Urbana-Champaign, offers fresh insights into how Vietnamese businesses view greenhouse gas (GHG) reduction and carbon pricing. Based on a survey of 250 firms across energy, manufacturing, mining, transport, and service sectors, the research arrives at a crucial time as Viet Nam works toward reducing emissions by 15.8% by 2030 and achieving net-zero emissions by 2050.

Businesses Expect Climate Rules to Get Tougher

The study finds that climate awareness is already widespread in the corporate sector. More than 84% of surveyed firms believe greenhouse gas emissions should be reduced. However, environmental concerns are not the main driver behind this support.

Around 70% of firms said they are preparing for future emissions regulations because they expect climate rules to become mandatory. More than half also cited concerns about protecting their corporate image, reputation, and market value. Foreign-invested firms were especially influenced by investor expectations and global sustainability trends.

For policymakers, this signals that clear and predictable regulations can encourage businesses to start preparing for decarbonization even before carbon pricing mechanisms are fully implemented.

Finance Remains the Biggest Obstacle

While firms support climate action in principle, many struggle to translate intentions into investments. Lack of financial resources emerged as the most significant barrier to reducing emissions.

Many businesses reported that they face competing priorities and limited access to capital for green investments. Smaller firms were particularly likely to identify financing constraints as a major challenge. Companies in the Mekong Delta also reported greater economic barriers than firms in other regions.

The findings suggest that awareness campaigns alone will not be enough. Governments and development partners may need to expand green financing programs, concessional loans, technical assistance, and targeted subsidies to help firms invest in cleaner technologies.

Energy Efficiency Tops the List of Preferred Solutions

When asked how they would reduce emissions, firms overwhelmingly preferred measures that could also improve business performance.

More than 70% of emission-intensive firms identified energy efficiency improvements as their preferred mitigation strategy. Fuel switching from coal and oil to electricity or lower-carbon fuels was the second most popular option, supported by roughly half of respondents. Many firms also favored changing production processes to reduce emissions.

In contrast, participation in carbon markets, carbon offset programs, and direct carbon tax payments received far less support. This indicates that businesses are more willing to embrace climate measures that generate operational savings rather than simply increase compliance costs.

Carbon Tax Acceptance Depends on Costs and Incentives

The study tested reactions to a hypothetical carbon tax of 100,000 Vietnamese dong (around US$5) per ton of carbon dioxide. The results show limited willingness to absorb significant mitigation costs.

About 67.4% of firms said they would invest less than 5% of their annual investment budget in emissions-reduction measures to avoid carbon tax liabilities. Another 24.8% would invest between 5% and 10%, while only 8.8% would spend more than 10%.

At the same time, businesses showed strong sensitivity to energy prices. Nearly half said they would invest in energy efficiency or clean energy if electricity prices increased by less than 10%, while another 40% would do so if prices rose by 10% to 30%.

The findings suggest that carbon pricing alone may not drive the required level of investment unless accompanied by supportive incentives and financing mechanisms.

What This Means for Governments, Donors and Businesses

The research offers several lessons for stakeholders involved in Vietnam’s low-carbon transition.

For governments, the message is clear: firms respond positively to regulatory certainty but need financial support to take action. Recycling carbon tax revenues through lower corporate taxes or green investment incentives could improve acceptance of future carbon pricing policies.

For development partners, the study highlights opportunities to expand climate finance, energy-efficiency programs, and technical assistance initiatives. Financial support targeted at smaller firms could unlock significant emissions reductions.

For businesses, the findings point to growing risks and opportunities. Companies that invest early in energy efficiency and cleaner technologies may gain a competitive advantage as climate regulations tighten and sustainability requirements become more important in global supply chains. Those who delay adaptation may face higher compliance costs and increasing pressure from investors, customers, and regulators.

Overall, the study shows that Vietnamese firms are willing to participate in the country’s climate transition, but they need predictable policies, accessible financing, and practical incentives to turn climate commitments into large-scale investment and action.