The design and implementation of carbon tax in Indonesia: some experience and recommendations for Vietnam

Carbon pricing instruments (CPIs) are policy tools that use pricing to encourage economic actors to cut carbon dioxide (CO2) emissions and engage in climate mitigation. Compared to other policy tools,CPIs are cost-effective and may help with further development goals. Currently, many Asian countries are implementing or considering the implementation of CPIs. The Indonesian Government introduced a carbon tax, while the Vietnamese Government paved the way for the carbon trading market. In this paper, the authors study Indonesia’s adoption and implementation of the carbon tax. Based on the Indonesian experience, we propose some recommendations for Vietnam to adopt a carbon tax in the foreseeable future. The authors argue that Vietnam should carefully research the impact of a carbon tax, including pilot programs, and consider when to apply a carbon tax. Moreover, good tax governance and transparency are essential to gain public acceptance of carbon tax and ensure its effectiveness.