To fulfil Vietnam’s economic ambitions, climate action is essential

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The contrasting scene of flooding and a wind farm in Vietnam. The contrasting scene of flooding and a wind farm in Vietnam.

Vietnam aims to become a high-income country by 2045, but the damage caused by climate change poses a critical obstacle to this goal.  Climate action —both adapting to its effects and mitigating emissions that accelerate climate change – should be front and center in Vietnam’s development strategy.

In taking up environmental action as integral to a viable development strategy, Vietnam might question, as other countries have, whether pursuing economic growth and protecting the environment are compatible.  After all, economic growth has taken precedence over environmental protection in many instances of development in the past. However, considerable evidence shows that when natural capital becomes significantly compromised, climate action becomes a prerequisite to any growth strategy. Vietnam, like other countries, should consider economic growth and environmental stewardship as two sides of the same coin. 

Geographically similar to  Bangladesh – a low-lying country adjacent to a large body of water – Vietnam is among the most vulnerable to flooding on the planet. Significant segments of Vietnam’s economic activity are already at risk from the effects of climate change. The World Bank, in its country climate and development report, estimates climate change cost Vietnam about 3.2% of its GDP in 2020 and could deprive it of as much as 12% to 14.5% of GDP by 2050 without concerted climate action. This makes clear the case for prioritizing climate adaptation in the form of coastal embankments, residential and business zoning, retrofitting and fortification of infrastructure, and building stronger drainage systems.

Controlling emissions is important too, even though Vietnam is currently not a large producer of the world’s greenhouse gases (GHGs). While Vietnam currently contributes only 0.8 percent of the world’s emissions total, it is one of the fastest-growing per capita GHG emitters worldwide. During 2000-2015, GHG emissions nearly quadrupled.  This matters not just to world efforts to cap global temperature rise, but to Vietnam specifically because emissions are leading to toxic levels of air pollution, particularly in Hanoi, to the detriment of health and productivity.

Furthermore, Vietnam’s heavy reliance on fossil fuels for energy could inhibit its export competitiveness at a time when major economies are considering taxing the carbon intensity of imports.  At 1.6 kg of CO2/USD, the carbon intensity of Vietnamese exports is one of the highest in the region (China’s is less than half of that).

Many of the steps Vietnam could take to ease emissions and adapt to the effects of climate change are part of a sound development approach. A recent World Bank study, “Accelerating Clean, Green, and Climate Resilient Growth in Vietnam,” estimates the welfare-based costs of environmental degradation are currently at 10 percent of GDP in Vietnam . Most environmental indicators show negative trends and suggest the current environmental policy regime could be doing more.  Declining water quality, increasingly high and critical levels of air pollution in major cities, degradation of land and forest quality, and biodiversity loss are all areas of concern. These pressures are unlikely to abate in the coming decades without a policy shift.

As countries around the world address pressures relating to climate change, it will be necessary to take a fresh look at how progress is measured. Mainstream economic analysis has tended to focus on rising gross domestic product (GDP) growth as an indicator of gains in living standards but has underestimated the effects of rapidly escalating climate risk. This approach may be counterproductive because it ignores the cost of negative spillovers from economic activities—like carbon emissions and deforestation— that ultimately diminish the net domestic product. The misconception among some decision-makers that climate action detracts from sustained economic growth needs to give way to an acknowledgment of the full benefits of climate investment.

As Vietnam tackles the challenges of fostering rapid, inclusive, and sustainable growth, optimizing those gains means that building resilience to climate shocks and lowering GHG emissions also belong at the top of the development agenda . The country is already taking several steps including a strong commitment to reach net-zero GHG emissions by 2050, supported by an ambitious Nationally Determined Contributions and Power Development Plan. A national strategy on green growth and a national action plan for sustainable production and consumption with key related targets aim to accelerate the economic restructuring process to use natural resources efficiently. Challenge now will be to translate these into actions on the ground. Responding to the challenges of climate change should become an integral part of the country’s investment plans.


Muthukumara Mani

Lead Environmental and Climate Change Economist

Vinod Thomas

Senior Associate Fellow, Institute of Southeast Asian Studies, Singapore

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