WB recommends path for Vietnam to address climate risks

The World Bank’s Country Climate and Development Report for Vietnam underscores the urgency of adaptation to climate change, combined with policies and public and private investments to reduce the carbon intensity of growth.

“Vietnam is having to devote significant resources to protecting its largest city, Ho Chi Minh City, the low-lying coastline, and the Mekong Delta from climate change,” Manuela Ferro, World Bank vice president for East Asia and Pacific, said in a statement on Friday for spreading out the WB report.

“Vietnam is also an increasing contributor to greenhouse gas emissions. Implementing Vietnam’s ambitious international commitments will require action in key emitting sectors, energy, transport, agriculture, and manufacturing, and the use of carbon pricing to drive investment,” she added.

The country, one of the world’s fastest growing economies, has pledged to halt deforestation by 2030, cut methane emissions by 30%, end all investment in new coal power generation, scale up deployment of renewable energy, and phase out coal power by the 2040s.

To help Vietnam achieve its development goals while implementing its climate commitments, the report proposes actions on two fronts: adapting to climate impacts and pursuing a growth strategy that steers the economy away from carbon-intensive production.

“These two paths will help the country achieve its climate objectives while expanding its GDP per capita by more than 5% a year, the average rate needed to become a high-income country by 2045,” the statement said.

Based on the report’s modeling and analytical work, the WB recommends five priority policy packages.

The first is a regional program for the vulnerable Mekong Delta, which contributes 50% of the country’s rice production and a third of its agricultural GDP.

“The region faces threats from coastal and river erosion, sea-level rise, and saltwater intrusion. The program would curtail sand mining and groundwater extraction, retrofit physical assets, and strengthen regional coordination, while supporting the livelihoods of farmers seeking to adapt to the challenges of climate change,” the WB detailed.

Secondly is an integrated plan to shield coastal urban areas and transport links from extreme weather. “This would include upgrades to road and power assets, and improved weather-risk management and early warning systems.”

The next is a program to reduce air pollution clogging the Hanoi area, where poor air quality has exceeded World Health Organization guidelines at least five times for extended periods between 2018 and 2021, and where particulate concentrates are predicted to increase.

For the fourth, the WB said it is to accelerate the transition to renewable energy with regulatory reforms that encourage greater private sector participation, investments in the power grid, and implementation of energy efficiency plans.

Last but not least, the fifth mentions scaled up social protections to offset economic impacts climate action may have on the most vulnerable people. “Funding social programs with revenues from a carbon tax will help buffer poor people from price increases in transport and energy.”

The report estimated the discounted costs of additional investments in climate adaptation and mitigation in Vietnam to be 6.8% of GDP a year or a cumulative $368 billion through 2040 at current value.

According to this WB document, public investment in the nation will need to be supplemented by policy reforms to crowd in private investment. Priority investments in adaptation could cost around $254 billion to 2040, and the cost of slowing the growth in emissions will require at least $81 billion. Carbon taxes or regulations creating emissions trading systems will be key to reaching Vietnam’s ambitious climate and development goals.

“The twin goals of becoming a high income and net-zero country in the next 30 years will require the mobilization of large amounts of private capital. For this to happen, it is vital that Vietnam designs and implements the right policies and reforms,” Alfonso Garcia Mora, IFC’s regional vice president, Europe, Latin America and the Caribbean, said in the release. IFC is the World Bank’s investment arm.

“Greening the financial sector, spurring green growth projects across sectors and ensuring transparent and predictable processes for energy projects are a clear priority,” he said.

According to the report, Vietnam’s 100 million people are among the most vulnerable in the world to climate impacts, facing hazards along the country’s 3,260-km long coastline and extensive low-lying regions. Threats to urban and industrial areas, especially in and around the economic powerhouse of Ho Chi Minh City, put large sections of the economy at risk. The Mekong Delta, home to 18 million people, is already being affected by climate change; some provinces could see over 70 percent of their land inundated within 80 years.

“Vietnam lost about $10 billion in 2020, or 3.2% of its gross domestic product, to climate impacts. Models suggest that the costs to the economy generated by climate change could total as much as $523 billion by 2050.” The report argued that investments to address climate impacts are a priority.