Vital support urged for climate fight

March 25, 2022 | 08:00
Vietnam is being warned again about the daunting difficulties faced by climate change, which will need massive resources for developing a greener economy, with lower carbon imprints.
Vital support urged for climate fight
Ho Chi Minh City and delta areas are at high risk of flooding and other climate-related problems

A new report has warned that if climate change fails to be contained, the temperature in Vietnam may increase to up to 6 degrees Celsius, causing grave consequences for humanity and the environment.

The country’s northern region may see a bigger rise in the temperature than the southern region, and the sea level will increase by 1-2 metres in coastal regions. For a 1.5°C increase in temperature compared to pre-industrial times, Vietnam would lose 4.5 per cent of its GDP. For an additional 2°C, this would mean a loss of nearly 7 per cent of GDP.

This new forecast was published by the GEMMES Vietnam programme, implemented by the Vietnamese government and the French Development Agency (AFD).

According to GEMMES, which uses the latest data from the World Climate Programme to establish Vietnam’s climate models under various scenarios, the country’s temperature may rise to 6oC if global efforts at reducing greenhouse gas (GHG) emissions fail to be maximised.

“This extreme temperature increase will seriously hurt Vietnam’s agricultural output, sabotage many cities and villages, and drive many areas into growing natural disasters both in number and loss,” stated Associate Professor Ngo Duc Thanh from the Hanoi University of Science and Technology, one of the scientists compiling the report.

Annual temperatures increased over the whole country with the nationwide average increase of 0.89°C between 1958 and 2018, approximately 0.15°C per decade. The highest expansion was experienced in the last decade. Over the same period, the annual rainfall slightly increased by 5.5 per cent on average, but with contrasting trends depending on regions. In addition, the sea level is rising, with an average trend of 3.6 millimetres per year between 1993 and 2018.

According to Thanh, the hike in the temperature will mean new extreme phenomena.

“If 35°C was considered a high level previously, it will be regarded as a normal temperature in the future because there will be higher levels of 40-45°C. This will endanger the lives of humans and damage the environment,” he warned.

According to a report on climate public expenditure and investment review of Vietnam for the 2016-2020 period in Vietnam just released by the United Nations Development Programme and the Ministry of Planning and Investment, over 70 per cent of ministries’ climate budget and over 90 per cent of the climate budget in cities and provinces was for climate change adaptation expenditure, which was aligned with government policy priorities for public expenditure during 2016-2020.

The Ministry of Agriculture and Rural Development and the Ministry of Transport account for 80 per cent of the total climate change budget with spending on large infrastructure projects such as irrigation and roads.

The report shows that Vietnam has increasingly allocated its financial resources to climate change response. The total budget and expenditure of six ministries and 29 provinces and cities hit almost $6.5 billion, or an average of $1.3 billion per year during 2016-2020.

At the provincial level, the average climate budget of the 28 provinces and one centrally-managed city also increased steadily by about 53 per cent, from about $700 million in 2016 to almost $1.1 billion in 2020. The climate change budget represented a relatively stable proportion of the total provincial budget, varying between 16-21 per cent of the total budget.

Major losses

Vietnam is seen as a country that faces major impacts from expected global warming and climate change. In particular, its deltas and coastal areas are expected to undergo substantial consequences. According to the National Climate Change Adaptation Plan, for instance, 39 per cent of the Mekong Delta region could be flooded by 2100 if nothing is done. The forecast could be even more serious if sea level rise dynamics are taken into account with subsidence and salinity intrusion dynamics.

Vietnam earlier reiterated the threat of rising sea levels due to climate change, especially in the Mekong Delta region which is home to more than 20 million people. The region also produces almost half the country’s rice harvest. A significant amount of land is periodically affected by flooding, resulting in damage to crops and people’s livelihoods.

Ho Chi Minh City itself is regularly prone to flooding. The government’s plan is to develop the city as a financial centre and a smart city by 2025. A report by McKinsey, however, stated that the annual flooding in the city may cost about $1.3 billion a year, mostly from damage to real estate. This trend is likely to increase as costs related to floods may increase faster than economic activity.

According to a report on climate public expenditure and investment review for 2016-2020 in Vietnam just released by the United Nations Development Programme and the Ministry of Planning and Investment, the costs of climatic changes in the past have not been estimated, but the costs of natural disasters may be treated as a proxy because most natural disasters in Vietnam are climate-related. This has been estimated as approximately 1.5 per cent of GDP annually, across the country over the past decades.

The most affected sectors are agriculture, including crop farming, aquaculture, livestock keeping, and forestry. Damages are particularly sustained to crops, irrigation, and transport infrastructure, as well as power distribution lines, depending on climate-related extreme events.

The World Bank has studied the economics of adaptation in Vietnam and some other countries and concluded that climate change impacts on agriculture could reduce total GDP in 2050 by 0.7-2.4 per cent, depending on GHG emissions pathways.

According to GEMMES, it is forecast that an increase of the average temperature of 1°C led to 3.4, 3.6, 6.9 and 2.2 per cent declines in revenue, total factor productivity, output, and firm size respectively. Similarly, a 1 per cent increase in precipitation led to the same percentage losses in the same areas, but a 0.08 per cent increase in productivity.

“These results highlight the importance of having an appropriate policy to support firms in responding to global warming,” said AFD economist and co-author of the report Etienne Espagne.

International support

In addition to policies to respond to climate change and develop a low-carbon economy, Vietnam has received significant international financial support. It often takes the form of official development assistance (ODA) provided by bilateral and multilateral institutions such as the World Bank, the Asian Development Bank (ADB), the Japan International Cooperation Agency, the AFD, the United States Agency for International Development (USAID), or German investment bank KfW together with the German Corporation for International Cooperation.

Vietnam has received over $7 billion for climate change response, mainly from major bilateral and multilateral institutions. During the 2016-2020 period, about $652 million was mobilised from ODA sources for projects under the national strategies of climate change and green growth.

In January, USAID and the Ministry of Natural Resources and Environment signed an MoU on climate change and environmental pollution.

The collaboration will focus on air quality management; integrated water resource management and water security; conservation and sustainable use of biological diversity; ocean plastic, solid waste management and recycling; and reduction of emissions responsible for climate change.

“The COP26 conference in November aimed to accelerate humanity’s cooperation on climate change and underscored the importance of collective action to preserve and protect our environment and planet,” said USAID mission director Ann Marie Yastishock. “USAID applauds the commitments made by Vietnam’s prime minister at COP26, and we are ready to support Vietnam to reach these important goals.”

In another case, early this month, the ADB inked a $15 million equity investment in global investment manager New Forest’s Tropical Asia Forest Fund 2 to support sustainable forestry practices in Southeast Asia and reduce logging in natural tropical forests by helping sustainably managed plantation companies to scale up their operations.

The investment comprises $5 million from the ADB’s ordinary capital resources and $10 million from the Australian Climate Finance Partnership trust fund. The investments will target climate adaptation as well as climate mitigation.

“Opportunities will be sought in Cambodia, Indonesia, Laos, Malaysia, Thailand, and Vietnam,” said ADB Private Sector Investment Funds and Special Initiatives director Janette Hall.

In another case, the International Finance Corporation (IFC) is providing a $70 million loan to HDBank to increase its funding for renewable energy projects in Vietnam.

With the loan, HDBank expects to expand its climate finance portfolio to more than $800 million by 2025, resulting in a reduction of over 54,000 tons of CO2 emissions per year from 2021-2025 and thereafter.

As a signatory to the Paris Agreement, Vietnam aims to double its renewable energy generation capacity, excluding hydropower, over 10 years to meet the increasing demand for power driven by robust economic growth and a growing population. This will help keep the country on track to reduce its GHG emissions by at least 9 per cent by 2030 and further enable Vietnam to reach its recent COP26 commitment to net-zero carbon emissions by 2050.

Currently, 50 per cent of Vietnam’s electricity comes from coal, making the need to develop a greener, lower-carbon economy, including necessary financing, crucial for the country to meet its reduced carbon emission commitments.

According to the IFC, as one of the top GHG emitters globally Vietnam’s overall climate-smart investment potential is estimated at $753 billion by 2030, of which up to $59 billion is in the renewable energy sector. However, the share of climate financing, as a percentage of total bank lending, in Vietnam was just about 5 per cent or $10.3 billion as of 2016, indicating a significant climate finance gap.

By Nguyen Dat

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