Strategy alignment key for COP goals

February 17, 2022 | 10:15
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With its efforts to combat climate change, Vietnam has made new promises in this area, while keeping its economy continuing to grow. Caitlin Wiesen, resident representative in Vietnam of the United Nations Development Programme (UNDP), talked with VIR’s Thanh Thu about how the economy is performing and the way it can move forward with implementation of its strong commitment to reduce greenhouse gas emissions.
Strategy alignment key for COP goals
Caitlin Wiesen, resident representative in Vietnam of the United Nations Development Programme (UNDP)

Do you believe that Vietnam’s economy will bounce back with a brighter outlook this year?

Vietnam’s great success in rolling out coronavirus vaccines will make a big difference in 2022. From a standing start in April 2021, universal vaccination of the adult population was achieved in January 2022. Making booster shots available to all will protect the population and make it less likely that further lockdowns will be needed.

Experience over the past two years has shown that many factors are beyond our control, such as the appearance of new variants of the virus and problems with supply chains due to disruptions in other countries. Barring such uncertainties, it is expected that Vietnam will record a high rate of growth this year as conditions rebound to a new normal.

Trade remains a bright spot for Vietnam. Exports grew by 19 per cent in 2021 despite the resurgence of the pandemic, and the country recorded a $4 billion trade surplus for the year. Vietnam has remained competitive in traditional exports like garments, footwear, furniture and agricultural commodities, and has added various categories of electronics to the mix. Global companies see Vietnam as a great place to invest, which generates steady jobs and incomes for working people.

What should be done to increase demand?

Last year private consumption was depressed by the resurgence of the pandemic, which had a negative impact on jobs, incomes and economic growth. The UNDP has urged the government to implement a cash assistance programme to help people who had lost jobs and incomes and to stimulate economic recovery. When private consumption growth slows, the government has a vital role to play in supporting spending to make sure that a bad situation does not get worse.

Retail sales in January 2022 were down 0.3 per cent in real terms from January 2021 despite the additional spending expected in the lead up to the Tet holiday. This figure indicates that consumption growth has not yet recovered, and many households are still struggling to make ends meet. The government can stimulate the recovery and reduce the risk of transient poverty by providing a one-time cash benefit to families with small children and people over the age of 65. Over the long period, the government should accelerate implementation of the Master Plan for Social Assistance approved in 2017, which would modernise the social assistance system and create new instruments to help people vulnerable to poverty.

Last year Vietnam made a strong commitment to achieving net-zero greenhouse gas emissions by 2050. Do you think this goal will be feasible?

Vietnam is among the most forward-looking developing countries as shown by the country’s track record in reducing multidimensional poverty and moving steadily to achieve all the Sustainable Development Goals by 2030. The government’s ambitious pledges at COP26 are further evidence of Vietnam’s willingness to take on difficult challenges to achieve sustainable development.

Achieving net carbon emissions by 2050 and phasing out coal-fired power generation by the 2040s will not be easy. One of the first tasks facing the government is to update and align all relevant development strategies and plans with an eye to the impact of sectoral and regional decisions on carbon emissions. Of particularly importance are the Power Development Plan VIII, the National Climate Change Strategy, the Vietnam Green Growth Strategy, and Vietnam’s Nationally Determined Contribution (NDC).

The government is instrumental in driving development pathways toward a green and circular economy as highlighted by Prime Minister Pham Minh Chinh at COP26 in Glasgow. A resilient and productive economic model that is underpinned by respecting and regenerating nature with efficient use of resources is essential for a vibrant carbon neutral circular economy in Vietnam.

As the prime minister highlighted at the Annual Summit on Industry Revolution 4.0, Vietnam needs to achieve the dual growth goals of becoming a high middle-income country and ensuring green, inclusive, people-centred growth. Private investment will be crucial to achieving these goals.

The government has a critical role to play in stimulating the contribution of the private sector to green growth by creating incentive structures that discourage investment in extractive and polluting sectors and encourage the development of new, sustainable industries, especially in renewable energy systems.

Increasing access of private investors to domestic, long-term finance is also important. The UNDP has urged the government to explore the experience of countries that have successfully deployed state development banks to crowd-in and lengthen the time horizon of private finance and to increase the supply of finance to innovative sectors and industries.

How will the UNDP and development partners support Vietnam in achieving its goals?

In a joint letter to PM Pham Minh Chinh last December, 18 ambassadors, the World Bank, and the UN system reaffirmed commitments to Vietnam and the country’s efforts to achieve the new climate targets.

The UNDP is ready to deepen our work collectively with the like-minded donor group on NDCs to support the government to mobilise international resources, including a combination of increased public and private investment, drawing on official development assistance and concessional loans to reduce costs to Vietnam, and providing needed expertise and technology to accelerate the green transition and improving the regulatory environment. As Vietnam is one of the most vulnerable countries to climate change, the government will need to increase investment in climate change adaptation measures.

Building on existing programmes with the Green Climate Fund and Global Environment Facility financed projects, the UNDP is working closely across key ministries and local authorities to generate most up-to-date and reliable scientific information on current and forecasted impacts of climate change, to map out the necessary interventions in relevant sectors and regions such as coastal area and central highlands region, and to mobilise international climate finance for innovative transformative interventions.

Carolyn Turk - Country director for Vietnam World Bank

Strategy alignment key for COP goals

As Vietnam aims to become a high-income economy by 2045, the energy sector will be once again called upon to rise to the challenge of supporting this next phase of growth.

However, this time the challenge will be even more complex. On one hand, there is a need to continue the rapid expansion of the sector for the country’s development needs, doubling the required system capacity within a decade. On the other hand, there is a need to better manage the climate impacts by significantly lowering the carbon footprint of the sector which already amounts to 65 per cent of Vietnam’s emissions.

Doing all this, while raising the needed financing for the energy transition and keeping the principles of equity and affordability in mind, will require proactive and continued reforms.

The energy transition challenge also brings new opportunities. We welcome the visionary commitments that the government made during COP26 to aim for net neutral emissions by 2050, and to phase out coal-based power by the 2040s. This sets clear endpoints for the energy sector.

Now, defining and implementing feasible pathways for achieving these goals should be the priority. The energy sector is well-positioned to lead the green growth ambitions of the country – it can catalyse new investments, create new jobs, and improve the competitiveness of the economy.

There are some key issues for the government to consider.

Firstly, the evolution of sector policies and the national Power Development Plan VIII must keep clean energy transition at its core. This means selecting an appropriate energy mix, with due attention to phasing out the use of coal, managing the impact of this transition on people and businesses involved in the coal industry, and considering the appropriate role of transitional fuels such as natural gas.

Secondly, barriers to renewable energy deployment should be eliminated. We have witnessed the excellent success of the solar and wind industries under the feed-in tariff regulations, but it has also created challenges related to uncontrolled expansion and has created unwanted curtailment and system instability.

It is time now to accelerate the design and launch of competitive bidding programmes. Organised and coordinated auction-based schemes can propel the industry forward, particularly offshore wind, a domestic clean energy resource that can be immensely beneficial for Vietnam.

Next, the power grid needs to be urgently expanded and modernised to keep pace with the growth of new clean energy technologies. In addition to power transfer capacity, the grid also needs to improve its flexibility with batteries and energy storage systems. Alleviating the grid bottlenecks is also an opportunity for mainstream automation and digitalisation.

Furthermore, consumer-side energy efficiency and demand moderation measures are immediate low-hanging fruits. These interventions not only reduce the need for vast supply-side expansion but are also highly cost-effective. Greater use of distributed renewable energy resources can complement what a centralised power system can deliver.

Lastly, a systematic approach to mobilising the large amounts of financing needed for the energy transition, which in our estimation will be about $12-14 billion annually, is necessary.

Timely and sector-specific investment climate reforms are needed for private sector participation, which will drive the majority of the needed investments. At the same time, it is essential to enact regulations that support public sector financing, including channelling official development assistance resources and climate funds to the sector, where it complements and leverages the private sector, such as for power grid development and public-private partnership projects.

Clean energy transition will require a holistic economy-wide approach and one-off solutions will not be sufficient. When implemented, the envisioned transformation of Vietnam’s energy sector can be a boost to the development objectives as well as the climate ambitions of the country.

By Thanh Thu

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