Vietnam has shown a strong commitment to tackling the major challenges posed by climate change, as outlined in its National Strategy for Climate Change until 2050, approved by the Prime Minister under Decision No. 896/QD-TTg on July 26, 2022.

The Prime Minister also issued Decision No. 215/QD-TTg on March 1, 2024, which approved the National Energy Development Strategy to 2030, with a Vision to 2045. This strategy sets key goals for ensuring energy security and sustainable development, with a focus on prioritizing renewable and clean energy and reducing emissions.

Firm commitment

Climate change is now having a far-reaching effect on all sectors, including the economy, politics, diplomacy, and security. With clear objectives, Vietnam aims to reduce greenhouse gas emissions and achieve net-zero emissions by 2050. This goal not only supports sustainable development but also presents an opportunity to restructure the economy in an environmentally-friendly manner and enhance global competitiveness. These efforts align with the Paris Agreement and the global trends stemming from the COP26 meeting in Glasgow in late 2021.

The National Strategy for Climate Change until 2050 demonstrates Vietnam’s strong commitment to addressing the challenges of climate change. The government recognizes that climate action is the responsibility of the State, requiring the participation of the entire political system as well as businesses and citizens. The State plays a central role in guiding, creating, and coordinating associated efforts.

The country is committed to developing a green, circular economy, ensuring water resource security, promoting sustainable agriculture, and enhancing the resilience of ecosystems and communities against the negative effects of natural disasters and climate change.

Its strategy aims to address water and land resource degradation by 2030, ensure sufficient water supply for key economic sectors, and transition agricultural practices towards climate-smart models. The forest coverage will be maintained at a minimum of 42 per cent, and the area of terrestrial and marine nature reserves will be further expanded.

To 2050, the strategy focuses on effective natural resource management, biodiversity protection, and ensuring universal access to clean, safe water and comprehensive healthcare services.

The strategy also aims to promote financial mechanisms and carbon markets to encourage low-emission investments, allowing businesses and individuals to actively contribute to climate protection, helping build a sustainable and prosperous future.

Shaping green and sustainable energy

Vietnam possesses substantial potential for renewable energy, especially in solar, wind, and biomass. Developing renewable energy sources also helps reduce dependence on dwindling fossil fuels that pollute the environment and contribute to climate change. Renewable energy not only offers a sustainable power supply but also cuts greenhouse gas emissions, thus supporting global initiatives to combat climate change.

To ensure energy security and sustainable development, the Prime Minister issued Decision No. 215 in March, approving the National Energy Development Strategy to 2030, with a Vision to 2045. This strategy prioritizes the development of renewable and clean energy, targeting a reduction in greenhouse gas emissions and aiming for net-zero emissions by 2050.

A key aspect of this strategy is to create a diversified national energy system that incorporates various energy sources, including solar, wind, biomass, and other emerging forms of energy, while optimizing the responsible use of fossil fuels. The strategy emphasizes developing a transparent and competitive energy market to encourage the participation of all economic sectors, particularly the private sector.

Specifically, it aims to boost the share of renewable energy in the total primary energy supply to 15-20 per cent by 2030 and 65-70 per cent by 2045, while also reducing energy intensity relative to GDP. The plan promotes digital transformation and the adoption of advancements from Industry 4.0 in the energy sector, ensuring smart and efficient energy development at both the regional and international level.

Its ultimate goal is to advance Vietnam’s energy sector to a leading, environmentally-friendly status, guaranteeing national energy security and positively contributing to the country’s socio-economic development. The vision is for Vietnam to emerge as a frontrunner in renewable energy within the ASEAN region.

The strategy also emphasizes enhancing international cooperation and proactively importing essential fuels to maintain a stable energy supply. Furthermore, it seeks to develop a smart, sustainable grid system to meet the demands of industrialization and modernization in the future.

The National Power Development Plan VIII (PDP8) underscores the importance of expanding renewable energy projects such as solar, wind, and small hydropower while gradually reducing dependence on coal and gas projects to limit greenhouse gas emissions and environmental impacts.

Consequently, the proportion of coal-fired power will gradually decline and be replaced by cleaner energy sources, aligning with global trends towards sustainable development and energy transition. PDP8 sets a goal of renewable energy constituting 30-40 per cent of total installed capacity in the national power system by 2030, potentially rising to 50-60 per cent by 2045.

In addition to enhancing renewable energy infrastructure, the plan also proposes the development of smart grid systems, advancements in energy storage technologies, and upgrades to transmission systems to improve energy efficiency and interconnectivity between regions.

New coal power projects will only be approved if they utilize modern technologies that meet stringent emission standards and improve efficiency. Older, polluting coal plants will be evaluated for potential decommissioning or conversion to cleaner energy sources. Additionally, the share of natural gas power will gradually decrease, with a focus on increasing imports of clean electricity from neighboring countries such as Laos and Cambodia.

PDP8, together with the National Energy Development Strategy, represents a pivotal step towards establishing a green and sustainable energy future for Vietnam, ensuring energy security while fostering economic growth and honoring international climate commitments.

Balancing economic development and environmental protection

According to the World Bank’s Vietnam Country Climate and Development Report, with a coastline stretching 3,260 km, Vietnam is among the countries most vulnerable to climate impacts, affecting its 100 million people.

Vietnam faces significant economic losses due to climate change, amounting to $10 billion in 2020, which represents 3.2 per cent of its GDP. Forecast models indicate that economic costs could reach $523 billion by 2050.

Though Vietnam contributes only 0.8 per cent of global greenhouse gas emissions, rapid economic growth has quadrupled per capita carbon emissions over the past two decades, posing substantial challenges in balancing economic development with environmental protection.

As a result, Vietnam must continue to reduce carbon intensity, especially since it has committed to ending deforestation by 2030, reducing methane emissions by 30 per cent, eliminating investments in new coal-fired power plants, and expanding renewable energy.

These commitments reflect Vietnam’s determination to reduce emissions and achieve sustainable development goals. The country needs to prioritize climate change adaptation and reach developmental targets, such as the regional program for the Mekong Delta, which focuses on coastal protection and supporting farmers’ livelihoods, as well as plans to protect coastal cities and improve transportation infrastructure.

Additionally, there is a need to accelerate the transition to renewable energy and expand social welfare programs to shield vulnerable populations from the economic impacts of climate solutions.

Vietnam will require investment of approximately 6.8 per cent of its GDP each year, equivalent to $368 billion from now to 2040, to adapt to and mitigate the impacts of climate change. Mobilizing private capital and implementing sound policies will be crucial to achieving the dual goals of becoming a high-income country and reaching net-zero emissions.

Strategies to promote renewable energy development

The Vietnamese Government is actively fostering the growth of green and sustainable energy sources by offering incentives for investments in renewable energy projects, particularly in solar and wind power, to decrease reliance on fossil fuels and safeguard the environment.

A key mechanism in this initiative is the Feed-in Tariff (FIT) policy, which enables renewable energy producers to benefit from preferential pricing. This facilitates cost recovery and ensures sustainable profits. The FIT policy is one of the most significant and effective tools for advancing renewable energy development.

The policy not only supports the expansion of renewable energy projects but also enhances the competitiveness of clean energy sources compared to traditional fossil fuels, aiding the transition to a green economy, reducing greenhouse gas emissions, and protecting the environment.

It also helps Vietnam in fulfilling its international commitments regarding climate change, while providing socio-economic benefits by generating new jobs in the production and maintenance of renewable energy systems.

Vietnam has proactively identified regions with high potential for renewable energy, such as south-central Ninh Thuan and Binh Thuan provinces and central highlands’ localities, positioning them as hubs for renewable energy development. This approach stimulates investment in clean energy projects and improves energy infrastructure to meet the increasing electricity consumption needs of society, fostering sustainable economic development and a shift towards a green economy while adhering to international commitments to reduce greenhouse gas emissions and combat climate change.

Additionally, green credit mechanisms and sustainable financing are vital for promoting renewable energy development in Vietnam, particularly as the country seeks to transition to a green economy and cut greenhouse gas emissions.

Through financial institutions, preferential loans are available for renewable energy projects, including solar, wind, and other clean energy initiatives. These loans help lower initial costs for investors and enable businesses to secure funding at lower interest rates, thus encouraging strong private sector involvement in sustainable projects.

Green credit packages and green bonds are effective financial instruments that facilitate capital mobilization for environmentally-beneficial projects. Green bonds enable investors to support green initiatives while earning stable returns from safe and transparent investments.

Green financial mechanisms not only promote increased investment in renewable energy but also contribute to climate change mitigation goals and international commitments. Implementing green credit and sustainable financing further stimulates the development of supporting industries, generates new employment opportunities, and enhances international collaboration in clean technology and environmental protection.

The Vietnamese Government has introduced tax incentives to encourage investment in renewable energy, supporting the transition to a green and sustainable economy. Renewable energy projects, including solar, wind, and biomass, benefit from corporate income tax exemptions, alleviating financial burdens for investors and enhancing long-term profitability. Import duties on equipment and technologies for renewable energy development have also been significantly reduced, facilitating access to advanced technologies from abroad.

These green tax incentives help lower initial investment costs and encourage both domestic and international companies to invest in clean energy projects, thereby promoting a robust renewable energy sector.

By implementing these tax incentives, Vietnam is gradually fulfilling its international commitments to reduce greenhouse gas emissions while meeting rising energy demands. The tax exemptions also play a crucial role in attracting private investment in the renewable energy sector, creating numerous opportunities for international collaboration and sustainable development in the future. These green policies offer economic advantages, protect the environment, and boost the country’s competitiveness on the global stage.

Moreover, subsidy programs and technical support are essential for promoting renewable energy development, positioning Vietnam as a center for clean energy in the region. Through these subsidy policies, many renewable energy projects, such as solar, wind, and biomass, have received financial support to offset some or all research, development, and implementation costs, significantly easing the initial investment burden for project developers and allowing them to explore and apply new technologies.

The Vietnamese Government is also committed to providing training programs and technology transfer initiatives to businesses and investors, enhancing expertise and facilitating access to the latest advancements in renewable energy technology. By promoting training and technology transfer, Vietnam can build sustainable and efficient production and operational models, contributing to the long-term growth of the renewable energy sector and ensuring national energy security.

Education, research, and technology transfer have been and will continue to be powerful drivers for Vietnam in promoting renewable energy development, achieving national emission reduction goals, protecting the environment, and ensuring energy security while contributing to economic growth and fulfilling international climate change commitments.

In this regard, education and training are crucial for developing a skilled workforce knowledgeable about renewable energy technologies, including solar, wind, and biomass.

Alongside education, scientific research is a key factor in developing advanced technologies and proposing innovative solutions for the effective utilization of clean energy resources.

Technology transfer is an important step in applying research findings into practice, enabling businesses and investors to access cutting-edge technologies. This process helps reduce initial investment costs for companies, boosts competitiveness, and fosters sustainable business models. Additionally, it creates opportunities for international collaboration, allowing Vietnam to gain valuable insights from developed countries in the renewable energy field.

With comprehensive financial and technical support, Vietnam is progressively transitioning to a low-carbon economy while meeting its national objectives for reducing greenhouse gas emissions and protecting the environment.

Enhancing legal frameworks and incentive structures

The advancement of renewable energy is crucial for minimizing greenhouse gas emissions and significantly contributes to strengthening resilience against climate change. By reducing reliance on fossil fuels, renewable energy helps lower CO₂ and other greenhouse gas emissions released into the atmosphere, aiding in the deceleration of global warming.

Studies and econometric models indicate that investing in renewable energy not only leads to a marked decrease in global greenhouse gas emissions but also provides long-term economic advantages. Beyond emission reductions, renewable energy empowers vulnerable communities to adapt to climate change. Renewable energy projects can be established in regions heavily impacted by natural disasters and climate change, ensuring stable and sustainable energy supply where traditional energy sources often face interruption due to extreme weather.

The development of renewable energy is especially vital for countries like Vietnam that have extensive coastlines. It offers environmental benefits, stimulates socio-economic growth, and creates numerous job opportunities, particularly in the manufacturing, installation, and maintenance sectors of renewable energy systems. This fosters job creation and skills development, and contributes to forming a highly-skilled workforce in green technology.

Additionally, renewable energy helps reduce operational costs and ensures a stable energy supply, thereby bolstering national energy security, protecting the environment, and promoting sustainable economic growth.

To reach these objectives, it is essential to enhance legal policy frameworks to ensure transparency and consistency, while also introducing more favorable financial mechanisms that facilitate investor access to and the sustainable development of renewable energy.

Developing renewable energy necessitates a strong synergy between robust financial mechanisms and supportive policies. Although renewable energy presents numerous long-term benefits - such as lowering greenhouse gas emissions and increasing resilience to climate change - the high initial costs associated with large-scale projects often deter potential investors.

To tackle this challenge, financial mechanisms such as green credit, green bonds, and preferential loans are critical for supporting the financing of renewable energy projects. Green credit provides low-interest loans to investors in clean energy, easing the initial financial burden and accelerating project deployment. Green bonds serve as financial instruments that enable governments or businesses to raise capital from financial markets for funding green initiatives, including renewable energy projects. This approach helps mobilize substantial capital and encourages environmentally-responsible investors to engage.

Preferential loans from both international and domestic financial institutions are also vital in promoting renewable energy development. By offering more favorable borrowing conditions, these loans enable large-scale projects to move forward without placing undue stress on the budgets of businesses and the State, thereby supporting investments in renewable energy and advancing sustainable development goals while mitigating climate change impacts.

Investment in green infrastructure is essential for driving renewable energy development in Vietnam, especially as many regions face limitations in integrating renewable energy sources into the national grid. Upgrading and modernizing infrastructure - such as expanding substations, constructing new power transmission lines, and implementing smart energy management technologies - is crucial for ensuring effective and sustainable integration of renewable energy sources into the national power system.

Investing in green infrastructure not only enhances electricity transmission and distribution but also optimizes the management of renewable energy sources. Technologies like energy storage systems, intelligent controls, and load management can help regulate electricity flow, reduce dependence on traditional energy sources, and improve grid flexibility, thus minimizing energy losses and maintaining system stability amid rising energy demand. Constructing and upgrading green infrastructure also creates opportunities to attract both domestic and foreign investors to renewable energy projects, facilitating Vietnam’s transition to a sustainable and environmentally-friendly energy landscape.

With Vietnam’s commitment to achieving net-zero emissions by 2050, investing in green infrastructure is essential to ensure that renewable energy is not only generated but also transmitted and utilized efficiently. This investment represents a significant leap in modernizing energy infrastructure and lays a strong foundation for sustainable development and resilience against the challenges posed by climate change.

(*) Associate Professor Nguyen Dinh Tho & Nguyen Khanh Tam are from the Institute of Strategy and Policy on Natural Resources and Environment at the Ministry of Natural Resources and Environment