Irreversible trend
In October 2023, the European Union (EU) began piloting the “carbon border adjustment mechanism”, which imposes carbon tax on all imports to the EU based on greenhouse gas emissions during the manufacturing process in the exporting countries, especially on products with a high risk of pollution such as iron, steel, cement, fertilisers, aluminium and electricity.
However, Vietnamese enterprises do not seem to be ready to join the new game since they have not carried out energy transition in time and lack emissions data. Therefore, the biggest challenge is unavoidable, especially as the EU is Vietnam’s second largest steel export market, with about 1.3 million tonnes or 18.37% of Vietnam’s total steel export in 2022, second only to ASEAN.
Although the above product group does not hold a large proportion of in the economy, it has shown that the transition to a green economy and circular economy is an irreversible trend of global economics, including in Vietnam - a very open economy with an export-oriented economy.
We have strategies, plans, and programmes for green development, sustainable development, and response to climate change for the next 5-year and 10-year periods, based on the Party's policies through congresses. We have also committed to the international community to reduce greenhouse gas emissions with the goal of Net Zero by 2050.
In fact, the directions of the Government and the National Assembly towards this goal, with a suitable roadmap for the actual conditions of the country's economy and the support of the international community, are also being actively implemented. This is also the path that needs to be taken for Vietnam to strongly affirm its Green national brand.
Recently, many localities, led by Ho Chi Minh City, have begun to initiate the transformation to a green and clean economy with many specific actions. For a city whose emissions account for 23.3% of the country's total greenhouse gas emissions, green economy and circular economy are the new growth drivers that will create a continuous impact from the economic engine to other provinces and cities.
The green development needs huge green financial resources for businesses to invest in converting green technology, converting to green energy sources, especially offshore wind power. It is also crucial to develop green hydrogen and ammonia, improve energy efficiency and waste treatment, develop green transportation, environmentally friendly construction, and afforestation towards developing high-quality human resources and changing people's perception in consumption and daily life.
The potential for green development is indisputable as Vietnam has great potential in wind, solar, hydropower, and biomass energy in addition to the challenges caused by climate change and sea level rise.
That's why the National Electricity Development Plan for the period 2021-2030, with a vision to 2050, which is also known as Electricity Plan VIII, has really prioritized the development of renewable energy to reach the rate of 30.9 – 39.2% of total electricity sources by 2030 and 67.5-71.5% by 2050, to reduce greenhouse gas emissions from electricity production to about 204-254 million tonnes in 2030 and to about 27 -31 million tonnes by 2050.
At the same time, from now on, coal power plants will no longer be built and old coal power plants will gradually be converted to new energy.
At the conference themed ‘Hydrogen Energy - Global trends and prospects of Vietnam's new economic sector’, which was recently organised by the Vietnam Institute of Digital Economy Development Strategy in mid-September in Hanoi, many experts from American and German energy corporations such as KBR and Neuman&Esser pointed out that one of the new energy solutions being invested in and developed in their countries is producing green hydrogen/ammonia and environmentally-friendly types of fuel, using electricity from renewable energy sources. This is one of the effective solutions for energy storage, mostly used in industries and transportation. This can help Vietnam achieve its Net Zero emission goal by 2050.
Building green mechanisms and policies
To truly transform the economy towards green and clean, in addition to changing thinking and awareness, it is also important to form a legal basis to encourage and facilitate the process.
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To encourage the development of renewable energy, and avoid inadequacies in mechanism and policies on electricity prices as well as shortages of energy transmission, distribution and storage systems, it is necessary to promote the application of competitive market mechanisms throughout the energy industry value chain.
For example, it is possible to organise reverse bidding in renewable power source development by successfully bidding on electricity prices and establishing a source development project, such as in Australia's experience.
It may be necessary to have a national programme on developing renewable energy, in addition to national programmes supporting the transition to green and clean production, not only in industry but also in agriculture and transportation.
There is a great need for policies to encourage and support the development of the green hydrogen and green ammonia industry, as this is a new energy industry requiring investment from source to storage, transportation, distribution and infrastructure technology research and development.
Having potential is precious, but developing that potential is not easy.
That's why, speaking at the closing of the Vietnam Socio-Economic Forum 2023, National Assembly Chairman Vuong Dinh Hue requested that resources be focused on amending and supplementing the system of laws to exploit opportunities better, creating new growth drivers, promoting economic structural transformation towards digitalisation, greening, and innovation, while emphasising that reforming and improving the quality of economic institutions is the breakthrough motivation, but it is also challenging to implement and may take a lot of time.
Those specific actions will make Vietnam’s goods and services more competitive as they are produced in environmentally friendly conditions, considering when the carbon credit market develops, Vietnam can earn hundreds of millions of US dollars.
If we can conduct the energy transition effectively, there will be a larger potential funding source because, in 2019 alone, revenue from global carbon pricing amounted to 45 billion USD.
All activities transitioning to a green economy will promote the building of the national brand toward green, clean, and environmentally friendly orientation, with our products and services having higher competitiveness in international markets, not only due to low import tariffs and low greenhouse gas emissions fees, but also due to consumer awareness in Vietnam’s key markets, such as the EU, the US, Northeast Asia, and ASEAN.
Moreover, our country will become a reliable destination for high-tech investment capital and environmentally friendly production and be a worthwhile living and working place for the business and intellectual community from abroad.
With the current scale of Vietnam’s economy, the total level of carbon emissions is quite modest, at 321 million tonnes, accounting for 0.85% of the world’s total carbon emissions (according to the data in 2021). However, our proactive implementation of the carbon reduction roadmap shows Vietnam’s positive responsibility, position and role in global issues.
