Carbon price intensity and economic growth: Evidence from EU and Asian Emissions Trading Systems, with policy implications for Vietnam

This thesis examines the association between Emissions Trading System (ETS) carbon price intensity and Gross Domestic Product (GDP) growth by analysing ETSs in five major economies: Germany, France, Italy, South Korea and China. The study investigates whether carbon price intensity is associated with GDP growth and whether this relationship is moderated by structural economic conditions, particularly industrial structure, trade openness and Foreign Direct Investment (FDI). Using panel data for the period 2005-2024, the analysis applies fixed-effects regression models with robust standard errors to account for unobserved country-specific characteristics, common time shocks and cross-sectional dependence. The empirical results suggest that carbon price intensity is positively associated with GDP growth in the baseline specification. However, this association is conditional rather than uniform. The interaction between carbon pricing and industry share is negative and statistically significant, indicating that more industrialised economies may face stronger compliance-cost pressures. The interaction with trade openness is also negative, suggesting that highly trade-exposed economies are more vulnerable to competitiveness pressures under carbon pricing. By contrast, the positive interaction between carbon pricing and FDI inflows is consistent with a potential technology-transfer channel, whereby foreign investment may facilitate access to cleaner production methods, though the model does not directly observe technology adoption or productivity responses at the firm level. The thesis then applies these findings cautiously to Vietnam's emerging ETS. Since Vietnam is not included in the empirical sample and its ETS only entered the pilot phase in 2025, the results cannot be interpreted as direct predictions of Vietnam's future GDP effects. Instead, the study frames the Vietnam discussion as a set of design principles. Vietnam's high industry share, exceptional trade openness and strong FDI dependence suggest that its ETS should combine gradual implementation, credible Monitoring, Reporting and Verification (MRV) systems, transitional protection for trade-exposed sectors, clear benchmark tightening and policies that link FDI attraction to low-carbon technology transfer. The thesis concludes that the association between carbon pricing and economic growth is conditional on the broader institutional, industrial and tradepolicy framework within which carbon pricing operates.