The impact of green tax reforms on environmental performance: A Vietnam’s legal institutions perspective
Main Article Content
Abstract
Purpose - The current paper explores the effect of green taxation reforms on environmental performance in Vietnam, paying particular attention to the moderation effect caused by high-quality institutions in terms of laws and regulations.
Design/menthodology/approach - Based on World Bank data from 1990 to 2022, the research utilizes a threshold model for the assessment of the effect of environmental taxation on environmental performance depending on the intensity of the applied measures.
Findings - It is revealed that environmental taxes can positively contribute to the reduction of carbon dioxide emissions and help introduce more advanced technologies into operation; however, this is possible if a certain threshold is reached or exceeded. Moreover, the effect of environmental taxation is significantly intensified in the case of effective law enforcement.
Originality/value - Consequently, environmental performance can be improved through proper taxation and institutional reforms. The significance of this paper lies in its identification of threshold effects of green taxation in Vietnam, but more empirical studies need to be done in other institutions and sectors as well.
Practical implications - The policy makers need to make green taxes adaptable and region-specific in nature and give financial benefits (such as tax rebates, subsidies, and special loans) to companies (particularly small and medium enterprises) for helping them in using green technology. Besides, resource licensing on condition, strong monitoring of the environment, international technology transfer, and carbon index/data system should also be put in place.
Social implications - Green technology, fair resource use, and regional cooperation can help in limiting industrial pollution and carbon emissions, improving health of people and protecting natural ecosystems in Vietnam.
Keywords
Environmental performance; Green tax; Legal institutions; Vietnam
Article Details
Field of Economic (JEL Codes)
H21 - Efficiency • Optimal Taxation - Taxation, Subsidies, and Revenue, O44 - Environment and Growth - Economic Growth and Aggregate Productivity, Q56 - Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth - Environmental Economics
References
Fu, S., & Wang, J. (2018). Have green taxation policies reduced carbon emissions in China? An empirical study based on the extended STIRPAT model. Modern Economic Inquiry, 2, 72–78.
Kok, R. (2015). Six years of CO₂-based tax incentives for new passenger cars in The Netherlands: Impacts on purchasing behavior trends and CO₂ effectiveness. Transportation Research Part A: Policy and Practice, 77, 137–153. https://doi.org/10.1016/j.tra.2015.04.009
Le, T. T. H., & Phan, N. H. T. (2023). Government's liabilities effect on economic growth: Asymmetric Evidence from Vietnam. Southeast asian journal of economics, 11(2), 1-43.
Li, Y., Liu, J., & Li, Y. (2024). Exploring the impact of renewable energy, green taxes and trade openness on carbon neutrality: New insights from BRICS countries. Heliyon, 10(18), e29821.
Marshall, A. (1952). Theory of negative externalities and Pigouvian tax. London: Macmillan.
Murray, B., & Rivers, N. (2015). British Columbia’s revenue neutral carbon tax: A review of the latest “grand experiment” in environmental policy. Energy Policy, 86, 674–683. https://doi.org/10.1016/j.enpol.2015.08.011
Nakata, T., & Lamont, A. (2001). Analysis of the impacts of carbon taxes on energy systems in Japan. Energy Policy, 29(2), 159–166. https://doi.org/10.1016/S0301-4215(00)00104-X
Phan, N. H. T., Le, T. T. H., & Nguyen, Q. M. (2025). Analyzing the Asymmetric Impact of Taxation on Economic Growth: A Case Study of Vietnam. Southeast Asian Journal Of Economics, 13(1), 131-168.
Pigou, A. C. (1920). The economics of welfare. London: Macmillan and Co., Limited.
Ploeg, F., & Withagen, C. (2015). Global warming and the green paradox: A review of adverse effects of climate policies. OxCarre Working Papers, 9, 285
Ridzuan, A. R., Sapuan, N. M., Abd Rahman, N. H., Borhan, H., & Othman, A. (2019). The impact of corruption on environmental quality in the developing countries of ASEAN-3: The application of the bound test. International Journal of Energy Economics and Policy, 9(1), 469–478. https://www.econjournals.com/index.php/ijeep/article/view/8135
United Nations Framework Convention on Climate Change. (1997). Kyoto Protocol to the United Nations Framework Convention on Climate Change. Retrieved from https://unfccc.int/resource/docs/convkp/kpeng.pdf
Wissema, W., & Dellink, R. (2007). AGE analysis of the impact of a carbon energy tax on the Irish economy. Ecological Economics, 61(4), 671–683. hhttps://doi.org/10.1016/j.ecolecon.2006.07.034
Xu, Y. Z., Yang, Y. C., & Guo, J. (2015). The path and effect of environmental regulation on carbon emission reduction: An empirical analysis based on provincial data in China. Science and Technology Management, 36, 135–146.
Samuel, S. A. (2025). Carbon pricing mechanisms for reducing greenhouse gas emissions and encouraging sustainable industrial practices. World Journal of Advanced Research and Reviews, 25(2), 1-24. https://doi.org/10.30574/wjarr.2025.25.2.0350
Zhang, W., & Chiu, Y.-B. (2020). Do country risks influence carbon dioxide emissions? An nonlinear perspective. Energy, 206, 118048. https://doi.org/10.1016/j.energy.2020.118048
Zhou, D., & Luo, D. Q. (2021). The impact of industrial structure change on carbon emissions in China from the perspective of green taxation. Resources Science, 43, 693–709.
Zhou, Y., Fang, W., Li, M., & Liu, W. (2018). Exploring the impacts of a low-carbon policy instrument: A case of carbon tax on transportation in China. Resources, Conservation and Recycling, 139, 307–314. https://doi.org/10.1016/j.resconrec.2018.08.015
Duan, S., Li, J., Zhang, X. et al. (2026) Corporate sustainability: the role of environmental taxes in ESG performance. Environ Dev Sustain, 28, 5529–5549. https://doi.org/10.1007/s10668-024-05185-1
Chen, Y., & Liu, C. (2026). The game of sustainable development driven by policy: the impact of environmental tax on the evolution of corporate ESG strategies. Applied Economics, 1–15. https://doi.org/10.1080/00036846.2026.2622563
Caner, M., & Hansen, B. E. (2004). Instrumental variable estimation of a threshold model. Econometric theory, 20(5), 813-843.