Current Policy Projections
Current policy projections
Viet Nam will overachieve its NDC target with currently implemented policies. The current policy projections estimate Viet Nam will overachieve the unconditional emissions target by 38-41% and the conditional target by 33-34%. Viet Nam’s current policy trajectories are on course to reach 542 MtCO2e excluding LULUCF in 2030, and 497 MtCO2e including LULUCF. This is a 646% increase from 1990 levels (excluding LULUCF).
The main policy reflected in the current policy scenario is the revised Power Development Plan 7 (PDP7). The energy sector represented 53% of emissions in 2014 based on historical data based on our calculations (see assumptions). It is projected to continue to represent 54% of emissions in 2030 (excl. LULUCF, incl. IPPU) under our current policy pathway based on Asia-Pacific Economic Cooperation’s (APEC) (2019b) BAU scenario (see assumptions).
Vietnam is highly vulnerable to the impacts of climate change at 1°C above pre-industrial levels. With further temperature increases, climate-associated risks also increase, such as extreme heat, droughts, flooding, and sea-level rise impacting coastal areas and some agricultural production areas such as the Mekong delta (Climate Analytics 2019a). Vietnam is also a member of the Climate Vulnerable Forum which supports the full decarbonisation of member economies (Climate Vulnerable Forum 2015).
If we were to recalculate Viet Nam’s unconditional NDC based on current policies, it would be a decrease from 919 MtCO2e/yr to 542 MtCO2e/yr by 2030 (excl. LULUCF, incl. IPPU). If we were to translate these emissions levels to the language of Vietnam’s NDC (and include IPPU, as planned in the update), this would be a reduction of 46% compared to BAU by 2030 incl. LULUCF and IPPU which would be rated ‘Highly insufficient”. Therefore, in updating its NDC, Vietnam will need to go beyond this level in order to be a true progression in scaling up climate action.
The energy sector (including all end use sectors) represents the largest contributor to Viet Nam’s greenhouse gas emissions, representing a 53% share (excluding LULUCF). Viet Nam has experienced a number of challenges in its energy sector in recent years. Final energy demand has grown over the past decade by 66% (from 2005 to 2015) (APERC 2019b). Security of energy supply is a key issue in Viet Nam as the country has moved from being a net energy exporter to becoming an importer (Vieweg et al. 2017). Energy imports represented 5% of the energy supply in 2015 (MOIT & DEA 2017). Vietnam achieved universal electrification in 2015 (World Bank 2019) and, with an increasing population and economic growth, it is not surprising there is mounting pressure for a secure energy supply.
In an effort to keep up with demand, Viet Nam has mainly focused on coal, which represented 36% of the total primary energy supply (TPES) in 2017 (IEA 2019a). In the revised Power Development Plan 7 (PDP7) coal is projected to represent 53.2% of the power generation in 2030 (Viet Nam Government 2017a) compared to the share in 2017 of 34% (IEA 2019a).
Viet Nam’s huge coal expansion plans are at odds with the Paris Agreement. At the planned rate of coal use, its domestic coal reserves will be exploited within 70 years (MOIT & DEA 2017). The plans are not compatible with the need to phase out coal by 2040 globally, including in Viet Nam, and to reach a share of decarbonised electricity generation of 50% by 2030 in the ASEAN region (Climate Analytics 2019b), as well as with Sustainable Development Goals (Fujii 2018). Such a high proportion in the energy mix would lock in a fossil fuel economy, or leave Viet Nam to cope with the large costs and risks of stranded assets.
Viet Nam has substantial oil and gas reserves offshore (Vieweg et al. 2017). Oil represents 25% of the total primary energy supply, and natural gas has declined slightly in recent years, representing 10% in 2017 (IEA 2019a). Domestic oil and gas are expected to be exhausted within 60 years (MOIT & DEA 2017). The Revised PDP7 targets gas to represent 16.8% of electricity generation by 2030 (Viet Nam Government 2017a) down from 21% in 2017 (IEA 2019a).
Hydro power is the largest renewable energy source, representing 10% of the primary energy supply and 45% of the electricity generation mix (IEA 2019a). The potential for large and medium scale hydro power has geographical limitations. Hydro capacity is projected to expand from 18 GW in 2017 to 21.6 GW in 2020 (MOIT & DEA 2017). Biofuels and waste represent 19% of the total primary energy supply and wind and solar’s contribution is negligible (IEA 2019a).
However, in the last year, after positive renewable energy policy developments and a decline in costs, renewables have experienced some growth. In June 2019, installed capacity of solar and wind power accounted for 4.5 GW and 0.45 GW, respectively (MOIT & DEA 2019). The future growth rate of solar installations may slowdown as the solar feed-in-tariff ended in June 2019 (MOIT & DEA 2019).
Limitations in the transmission grid are the main challenges in the installation and uptake of solar generation into the system. These limitations will likely delay the onset of new solar projects in the near future (MOIT & DEA 2019).
Feed-in-tariff mechanisms targeted to wind sources brought about new planned investment in wind power with a capacity of 10 GW, with 5 GW approved for additional planning so far (MOIT & DEA 2019). The MOIT & DEA (2019) find that wind and solar will be cheaper than coal by 2030, and even more cost effective by 2050.
The integration and further development of wind and solar power will be significantly improved with investments in transmission capacity and coupled with battery storage (MOIT & DEA 2019). Viet Nam has a Development Strategy on Renewable Energy, with plans to 2030 and a vision to 2050 (MNRE 2019). The renewable energy targets in this strategy are reflected in the Revised Power Development Plan 7 (PDP 7) (MNRE 2019).
In 2017, the total electricity production was 45% hydro, 20% natural gas, 34% coal and 0.4% oil, with negligible solar and wind in 2017 (IEA 2019b). The revised PDP7 is included in our current policy pathway scenario. The revised PDP7 plans for renewable energy encompassing small hydro, wind, solar and biomass, to represent 6.5% of energy supply in 2020, 6.9% in 2025 and 10.7% by 2030 (Viet Nam Government 2017a). Additional large, medium and pumped hydro is projected to represent 12.4% by 2030 (Viet Nam Government 2017a). Official decisions by the Prime Minster encourage the uptake of wind and solar energy in efforts to encourage and assist the development of projects (MNRE 2019).
Viet Nam faces transmission pressure issues when the installation of energy projects are not balanced with demand in each region (MOIT & DEA 2019). To negate this problem, solar panels can be paired with battery storage along with an improved transmission system and pumped storage (MOIT & DEA 2019). There are many co-benefits between transitioning to renewable energy and sustainable development in Viet Nam, such as reducing fuel import dependency, improving the reliability of electricity supply, improving access to modern energy, reducing air pollution impacts both indoor (from switching from traditional biomass cooking) and outdoor (Climate Analytics 2019a).
The revised PDP7 planned two nuclear power stations (Viet Nam Government 2017a), but these plans were later dropped (ChinhPhu 2016).
Final energy demand grew 66% in the last ten years, and is projected to grow a further 59% from 2015 to 2030 (APERC 2019b). One strategy to cope with the rising energy demand is to improve energy efficiency.
In 2011 the Vietnamese Government introduced the Law on Economical and Efficient Use of Energy, with economy wide coverage, such as the industry, transport, agriculture, and service sectors (Viet Nam Government 2011). Viet Nam introduced consecutive Viet Nam National Energy Efficiency Programs (VNEEP1 and VNEEP2) from 2006 to 2015. The programs covered legal frameworks, capacity building, energy user obligations, energy labelling and more (MOIT & DEA 2019).
There is also a VNEEP3 for the period 2019-2030, which has a target of reducing the total final energy consumption by 5-7% in 2025 below business as usual levels, and by 8-10% in 2030 (MOIT 2018). The program also includes targets to reduce electricity losses, and industrial sub sector energy saving targets (MOIT 2018). Current policy projections do not include the recent VNEEP3 which would further reduce energy demand (APERC 2019b).
There are a number of barriers for the development of renewable energy and increase energy efficiency. The low coal and electricity prices impede the uptake of renewable energy and energy efficiency (Vieweg et al. 2017). Indirect subsidies for natural gas and coal energy production makes it difficult for renewables to penetrate the market (Vieweg et al. 2017).
Utility scale renewables often require large initial investments, and there are difficulties in accessing loans (MOIT & DEA 2017, 2019). Banks often do not have the resources to assess utility-scale renewables, and investors are unwilling to invest (Vieweg et al. 2017).
The energy sector is managed by state-owned enterprises creating a barrier to entry for private business (Vieweg et al. 2017). There is also limited access to information relating to the potential of renewable energy (MOIT & DEA 2017). Renewable energy projects face technical problems such as the lack of project development capacity, poor infrastructure and technology dependence (MOIT & DEA 2017). This is an area where international support can help remove these obstacles through cooperation.
Industrial process emissions are mainly from cement production, but also steel and ammonia production (MNRE 2019). This sector is projected to be the second largest sector in terms of emissions by 2030 based on the current policy pathway. Industrial processes represented 13% in 2014 (latest historical data) and this will increase to 23% by 2030 based on the current policy pathway (excl. LULUCF) (see assumptions). Industrial processes are not included in the NDC target (Vietnam Government 2016), but it is planned to be included in the next NDC update which is important given its increasing share of emissions.
Energy-related industry emissions are included in the NDC (Vietnam Government 2015). Industry accounts for 55% of final energy consumption (IEA 2019a). In 2015 the Minister of Industry and Trade approved the Green Growth Action Plan 2015-2020 for the industry sector, and the Ministry of Construction has an action plan until 2020 to reduce cement industry GHG emissions (MNRE 2019). The plan aims to reduce 20 MtCO2e by 2020 and 164 MtCO2e by 2030 compare to BAU levels (MNRE 2019). This policy has not been quantified in the current policy projections as we do not know the baseline used, and it is described as a policy to reduce energy related emissions, not process related emissions.
Although not included in the current policy scenario, the VNEEP3 (2019-2030) sets energy efficiency targets for the industry sector, to reduce average energy consumption in subsectors compared to the 2015-2018 levels (MOIT 2018). For example, the chemical industry has a minimum 10% target to reduce average energy consumption, and the cement industry has a target to reduce average energy consumption to produce 1 tonne of cement from 87kgOE in 2015 to 81 kgOE in 2030 (MOIT 2018). VNEEP3 sets targets for newly built industrial parks to apply energy efficiency and conservation solutions by 2025 among other targets (MOIT 2018).
The transport sector accounted for 20% of the total final energy consumption in Viet Nam in 2017 (IEA 2019a). In APERC’s (2019b) Outlook, domestic transport demand has a sharp increase with a compound annual growth rate of 3.7% (from 2015-2050). Road transport accounts for 97% of domestic transport energy demand in the same period (APERC 2019b).
In 2011, the Prime Minister approved a project to control transport pollution aiming to reduce GHG emissions (MNRE 2019). In 2016, the Minister of Transport approved an Action Plan (2016-2020) relating to green growth in transport, and in 2016 he approved an action plan to reduce CO2 in civil aviation for 2016-2020 (MNRE 2019). The government has a roadmap to mix A92 gasoline with at least 5% bioethanol, and compulsory energy labelling for LDVs and motorcycles, which is projected to encourage some renewables (4.6%) and electricity (minor levels) by 2050 (APERC 2019b).
Viet Nam is trying to limit the number of motorcycles and cars to 36 million and 2 million, respectively, but this is not deemed feasible in the APERC (2019b) Energy Outlook as two or three wheel vehicles already reached 60 million in 2016. APERC’s BAU scenario (that includes current policies, see assumptions) projects that road transport will be dominated by fossil fuels to 2050 with 95% (APERC 2019b). The VNEEP3 (2019-2030) aims to develop and implement energy conservation practice standards for all transport vehicles (MOIT 2018). This is not quantified in the current policy pathway.
Unsurprisingly, energy demand in the building sector has risen in the past decade as result of Viet Nam’s successful implementation of universal electrification (APERC 2019b). The residential sector accounts for 18% of the total final energy consumption in 2017 (IEA 2019a). The government has introduced some energy efficiency policies, including the NEEP3 (MOIT 2018). An official Prime Minister Decision (No.04/2017/QD-TTg) in 2017 sets out mandatory energy labelling and minimum energy efficiency standards roadmap for equipment and appliances (MOIT 2018). In the National Green Growth Strategy there are specific tasks relating to the development of green buildings, and energy efficiency of buildings (MNRE 2019).
The latest government data (in 2014) shows agriculture represents 28% of Viet Nam’s GHG emissions (MNRE 2019). Energy demand in the agriculture sector is considered in the current policy scenario. An official Decision by the Minister of Agriculture and Rural Development approved a program to reduce GHG emissions in the agriculture sector to 2020, promoting low carbon agriculture (MNRE 2019). In 2016, the Minister also approved the Action Plan to Respond to Climate Change of Agriculture and Rural Development for 2016-2020 with a vison to 2050, including mitigation projects to reduce emissions (MNRE 2019). The Green Growth Action Plan (2017) aims to achieve an emissions reduction of 20% from the sector by 2020 below 2010 levels (MNRE 2019).
The NDC has a specific forestry target for 45% forest cover by 2030. In 2016, forest coverage amounted to 41% (MNRE 2019). Viet Nam’s LULUCF sector is intended to play a large role in meeting Viet Nam’s NDC (Viet Nam Government 2015) which in 2017 was a sink of 38 MtCO2e. The 2017 Law on Forestry regulates the management of forests, and notes that an assessment is needed to limit forest loss and conserve the forests (MNRE 2019). The National Action Programme on the Reduction of GHG Emissions Reduction of Deforestation and Forest Degradation, Sustainable Management of Forest Resources, and Conservation and Enhancement of Forest Carbon Stocks (REDD+) by 2030, was approved in 2017 (MNRE 2019).
In 2014, the waste sector represented 7% of emissions (excluding LULUCF). In 2018 the Prime Minister approved the National Strategy for General Management of Solid Waste to 2025 with a 2050 vision, which included energy recover and GHG reduction (MNRE 2019).