Patrick Lenain
OECD Economic Surveys: Viet Nam 2025
Abstract
Viet Nam is highly vulnerable to the impacts of climate change, with low-lying areas in its megacities at significant risk from flooding, rising sea levels, and extreme weather events. The government is implementing a range of strategies to adapt to these climate challenges, including flood management systems, urban planning, new farming practices, and when unavoidable relocation of households. The country is also committed to achieving carbon neutrality by 2050 and implementing a robust green growth strategy to support this transition. Viet Nam’s rapid expansion of renewable energy capacity has been remarkable, positioning it among the world’s fastest adopters of clean energy. Shifting the energy mix toward domestic low-carbon sources while reducing reliance on imported fossil fuels also enhances energy security. However, despite progress in renewables, surging electricity demand has driven coal consumption to record levels, leading to increased greenhouse gas emissions. The transport sector, as the second-largest energy consumer, exacerbates urban congestion and deteriorates air quality. To address these challenges, greater reliance on effective price signals, such as carbon taxes and market-based mechanisms, could unlock low-carbon economic growth. Complementing these measures with well-designed regulations that prioritise energy efficiency will further strengthen Viet Nam’s transition to a sustainable, low-carbon future.
Climate change is having a significant economic impact on Viet Nam. Due to its geographic characteristics—approximately 3,260 km of coastline and two densely populated river deltas—Viet Nam is particularly susceptible to rising sea levels and extreme weather events. The country regularly experiences significant damages, including saltwater intrusion into rice fields, flooding of roads and urban areas, land erosion and landslides, shifting ecosystems, and extreme heatwaves in cities. In September 2024, Typhoon Yagi, one of the most powerful storms to hit Viet Nam in three decades, caused economic damage estimated at 0.7% of GDP (World Bank, 2024). Further economic damages and human losses are likely because projections indicate that, even with moderate global mitigation efforts, the global average temperature could increase by over 2.5°C by 2100, surpassing the Paris Agreement's targets (IEA, 2024a).
Viet Nam accounts for only 1% of global GHG emissions and has contributed to just 0.3% of cumulative CO2 emissions. Despite this relatively modest contribution to global emissions, the country is firmly committed to participating in international efforts to address climate change. Viet Nam has pledged to achieve net zero carbon emissions by 2050, with interim targets for 2025 and 2030. In its Nationally Determined Contribution (NDC), Viet Nam has committed to an unconditional reduction of 15.8% of total GHG emissions by 2030 compared to the business-as-usual scenario, and a reduction of 43.5% conditional on receiving international support in the form of financial aid, technology transfer, and capacity building (Figure 3.1). Viet Nam’s commitments have been integrated into detailed green growth plans, notably the Law on Environmental Protection (LEP), the National Strategy on Climate Change, the Eighth Power Development Plan (PDP8), the Action Plan to Reduce Methane Emissions, the National Strategy for Climate Change Adaptation, and measures to strengthen the circular economy. However, GHG emissions have not yet peaked in Viet Nam and recent trends suggest, in the short term, further increases of emissions from fossil fuel consumption (IEA, 2024b). Bucking the trend of carbon emissions will require a package of strong measures to promote clean energies and improve energy efficiency.
(in millions of tCO2eq GHG emissions)
Source: Crippa et al. (2024) for historical data; Viet Nam’s Nationally Determined Contribution official objectives for 2025 and 2030 (update 2022), linear extrapolation to net zero thereafter.
Some of the recent reform initiatives undertaken by Viet Nam are in line with recommendations made in the 2023 OECD Economic Survey of Viet Nam (Table 3.1). In addition, Viet Nam is also making significant efforts to adapt to climate change. A priority area is to protect its largest agglomerations from the effects of rising sea levels, including through flood management systems, urban planning, new farming practices, and when unavoidable relocation of households.
Access to energy has been pivotal in Viet Nam's rapid economic development. The use of fossil fuels has supported rapid development of electricity generation and industrial activities (Figure 3.2). The rapid increase in energy consumption was made possible by expanding the reliance on fossil fuels, in particular coal (47.5%), oil (23.8%), and natural gas (5.3%) (Figure 3.3). Nonetheless, this traditional framework of intensive energy use to fuel development is increasingly reaching its limits. Electricity demand has outpaced what Viet Nam’s electricity producers can reliably supply and severe outages have become more frequent, such as in June 2023 when industrial parks in the northern provinces of Bac Ninh and Bac Giang faced significant power blackouts, disrupting the operations of multinational manufacturers operating in these hubs. To meet energy demand, Viet Nam has to increasingly rely on imports of fossil fuels, which reached USD 27 billion in 2022, the second largest category of imports after electrical and electronic equipment. In a more fragmented world economy, relying heavily on foreign suppliers of energy goods increasingly raise concerns of energy security. The intensive use of fossil fuels has also deteriorated local air quality in urban centres, with deleterious health consequences. Viet Nam is therefore implementing policies to diversify its energy mix by encouraging investments in renewable energy sources. This strategy has been successful in achieving a gradual increase in the share of renewables, with solar power accounting for 4.9% and wind power 1.9%, in complement to hydropower maintaining a large presence (15.5%).
In million tCO2eq
Source: Crippa et al. (2024)
However, the shift toward low-carbon sources has not yet led to a decline in carbon emissions, which are estimated to have reached 373 million tons of CO2 in 2023, more than in Thailand, Malaysia and the Philippines (Crippa et al., 2024). According to preliminary indicators, CO2 emissions were even higher in 2024 owing to the rapid increase in the consumption of coal, which is used extensively to generate electricity (IEA, 2024b). As a result, Viet Nam is likely to have overtaken South Korea in coal-fired emissions in 2024 and thus become the fourth-largest coal-related emitter in Asia, behind China, India and Japan.
(Primary energy consumption by sources)
Source: Energy Institute – Statistical Review of World Energy (2024).
A fundamental pillar for achieving net zero is to decouple CO2 emissions and economic growth. This is an area where Viet Nam has scope for further progress, as evidenced by the country's rising fossil CO2 intensity of GDP over the past decade (Figure 3.4). A key step in this direction would be to improve energy efficiency. Between 2013 and 2023, primary energy consumption increased by an average of 7.5% per year, while GDP grew by 6.0% annually. In 2023, Viet Nam's energy consumption rose by 9.2%, outpacing GDP growth of 5%. In contrast, most peer nations and G20 countries have seen improvements in energy efficiency during the same period, driven by the adoption of increasingly stringent regulations and standards designed to promote more efficient energy use and encourage energy conservation. By contrast, Viet Nam’s National Energy Efficiency Programme (VNEEP) for the period 2019–2030, which aims to achieve energy savings of 5-7% during the period 2019-2025 and 8-10% during 2019-2030, has so far not been effective in replicating the progress made in other countries. Despite this plan, primary energy consumption has continued to grow at a pace exceeding that of economic activity. Improving energy efficiency requires a combination of actions across various sectors, including investment in research and development, technological adoption, stringent regulatory standards, fiscal incentives, and public awareness campaigns.
(Fossil CO2 emissions per unit of GDP, change in % between 2013 and 2023)
Source: Crippa et al., 2024.
Note: Fossil CO₂ refers specifically to carbon dioxide emissions resulting from the oxidation of carbon in fossil fuels and industrial processes involving fossil carbon. This excludes biogenic or natural carbon sources. Emissions from countries are compiled using the methodology of the EDGAR (Emissions Database for Global Atmospheric Research) database.
3.3.1. Decarbonisation efforts would benefit from more effective coordination
Addressing climate change is one of the most significant economic challenges and requires comprehensive policy packages that combine diverse measures such as carbon pricing, regulatory frameworks, public investments, fiscal incentives, green finance, and public awareness campaigns. Recent research highlights that integrated policy packages are more effective than stand-alone measures and can be tailored to ensure a more equitable transition (Anadon et al., 2022; Blanchard, Gollier, and Tirole, 2022; Fries, 2021; Lenain, 2024; Stechemesser et al., 2024). Stand-alone policies, like carbon pricing, often carry unintended consequences, such as carbon leakage (the relocation of emissions to jurisdictions with less stringent regulations) and waterbed effects (emissions shifting within the same regulatory market). Research also suggests that while carbon pricing can significantly reduce emissions, achieving net-zero objectives through this approach alone would require price levels far higher than current expectations. Moreover, stand-alone climate actions frequently encounter low political and public acceptance.
Comprehensive policy packages offer a solution by addressing complementary challenges, including the slow adoption of new technologies, limited uptake of incentives, regulatory barriers, skills mismatches, and supply chain disruptions. However, not all policy combinations are effective. Poorly designed packages can lead to adverse outcomes, underscoring the need for careful planning and implementation to maximise their impact and ensure a just transition to a low-carbon economy.
Public-sector coordination is therefore essential for the design and implementation of packages comprising multiple climate actions across a range of ministries and bodies. In Viet Nam, several ministries are responsible for climate policy in their area of expertise such as the Ministry of Agriculture and Environment (MAE), Ministry of Industry and Trade (MOIT), Ministry of Construction (MOC), Ministry of Finance (MOF), as well as State Bank of Viet Nam. The National Steering Committee on Climate Change is an inter-ministerial body responsible for guiding the implementation of the green growth strategy that was established to oversee and coordinate the country's commitments to climate action, particularly following its carbon neutrality pledge at COP26. These national agencies interact with provincial governments and international partners.
In peer emerging-market economies, Climate Change Councils - composed of experts, academics, and other stakeholders -- advise the design and monitoring of climate policy (Box 3.1). These councils foster transparency, hold governments accountable, and ensure that climate policies are grounded in science, which is essential for sustained and effective climate action. By leveraging cross-sector expertise and acting as a watchdog, these climate change councils help bridge gaps between policy, implementation, and public accountability. Viet Nam could continue to reform its climate policy governance in this direction.
A climate change council can be highly effective in guiding climate mitigation actions. More than 25 governments have established such councils, which cooperate under the umbrella of the International Climate Councils Network. These councils operate autonomously from governments, providing scientific, economic, and policy expertise to shape national climate strategies. For instance, in the Philippines, the Climate Change Commission acts as an independent body that helps to design policies and monitor their implementation, enhancing accountability. In South Korea, the Presidential Committee on Green Growth has been crucial in advancing green technology and emissions reduction policies. South Africa's National Climate Change Committee ensures the country's transition to a low-carbon economy through rigorous review and monitoring processes. Similarly, in Mexico, an independent council helps to ensure that climate goals, such as the commitments to renewable energy, are met by reviewing progress and making policy recommendations. Costa Rica benefits from independent advice that helps maintain its leadership in environmental sustainability and its pursuit of carbon neutrality.
3.3.2. Carbon prices implied by current environmental protection taxes could be raised
Putting a price on carbon emissions to increase the price of fossil fuels relative to clean energy can take the form of carbon taxes or mandatory carbon emission permits. Excise duties on fuels have the same effect of changing the relative price of energies. Viet Nam does not have a carbon tax at present. Instead, it collects an environmental protection tax (EPT) on fossil fuels emitting carbon dioxide: gasoline, diesel, fuel oil, jet fuel, and various categories of coal. Natural gas and LNG are not subject to the EPT. The tax is not based on the carbon content of these fossil fuels and therefore does not send effective price signals that would encourage a shift to the less carbon-intensive energies. For instance, diesel fuel is taxed at half the rate of gasoline, although diesel engines tend to produce more CO₂ per litre of fuel burned compared to gasoline.
Like in many other countries, Viet Nam decided to reduce taxes on fuels in early 2023 to help consumers faced with rapidly rising energy prices and high inflation (Table 3.2). The EPT rates on petroleum products were halved in April 2023. This is estimated to have reduced tax collection from 0.54% to 0.41% of GDP. The lower EPT rates were extended several times, the latest extensions until end-2025 being announced with the Resolution 60/2024/UBTVQH15. In view of the fiscal cost of this measure, and the detrimental impact on the energy transition, EPT rates should return to their original level, as now planned as of 2026. This would also be an opportunity to define the tax burden in terms of carbon content. Aligning the EPT on gasoline and diesel at the level of 4 000 VND/litre could be a reasonable starting point. Raising the EPT on coal used for power generation would also be crucial in view of its very low level in terms of CO2 content. This would encourage the adoption of cleaner practices in thermal plants and accelerate the shift to low-carbon electricity.
In addition to the environmental protection tax, other taxes are applied to petroleum products, such as the environmental protection fee for emissions, value-added tax, special consumption tax, import tax, resource tax, business expenses charge, profit norm, and a contribution to the stabilisation fund. These different taxes raise the price of gasoline in Viet Nam (0.80 USD/litre), though it remains below prices in Indonesia (0.83 USD/litre), the Philippines (1.09 USD/litre) and Thailand (1.315 USD/litre) (prices at end-March 2025). Raising the EPT rate as suggested above would bring the price of gasoline close to that of peer countries.
Source: Resolution 579/2018/UBTVQH14 dated September 26, 2018, of the Standing Committee of the National Assembly on the Environmental Protection Tax Schedule and subsequent updates.
While the various taxes imposed on gasoline and diesel increase pump prices, and therefore encourage a lower consumption, they are not high enough to reflect the externalities entailed by the use of these fuels. In addition to negative externalities resulting from the deleterious effect of climate change, the use of gasoline and diesel also entails negative externalities resulting from local air pollution, particularly in mega-cities such as Ho Chi Minh City and Hanoi.
In addition, the use of combustion engine vehicles contributes to negative externalities in terms of traffic congestion, road accidents, and damages to roads. The IMF estimates an “efficient” price of gasoline reaching the equivalent of 2.06 USD/litre in 2021 prices to reflect all these externalities in Viet Nam (Black et al., 2023). The difference between the actual price and this efficient price can be considered an “implicit fossil fuel subsidy” – i.e., a transfer from those affected by negative externalities to drivers consuming gasoline and diesel. With similar estimates across a range of fossil fuels, the IMF estimates that fossil fuel subsidies accounted for 14.3% of GDP in 2022, most of which being implicit subsidies. Although building the political consensus for raising prices of gasoline and diesel high enough to eliminate the implicit subsidy will probably take time, the trend should gradually go in this direction. In parallel, policies should be designed to help those relying on passenger vehicles – especially low-income commuters -- to shift to cleaner forms of transportation, such as electric two-wheelers and mass transit systems.
3.3.3. The implementation of domestic carbon markets should be accelerated
Viet Nam has initiated the establishment of a domestic carbon market, with both mandatory and voluntary segments. Decree No. 06/2022/ND-CP on Mitigation of GHG Emissions and Protection of Ozone Layer and amendments provide the legal foundation of the market. In the initial phase (2023-25), companies must start collecting, and reporting by 2025, their carbon inventory in view of their future participation in the mandatory market. Companies emitting more than 3,000 tonnes of CO2eq annually -- such as thermal power plants, steel mills, and cement factories - are required to conduct GHG inventories and submit their inventory to the relevant authorities. It is expected that about 2 200 facilities will be subject to this obligation.
Starting in 2025-26, the government will allocate free emission quotas to a set of companies. Businesses that exceed their emission limits will be required to take measures to reduce their emissions in accordance with their quotas. The carbon market will start to operate on a pilot basis from 2025, and it will be formally launched in 2028, enabling the bidding, transfer, borrowing, and return of GHG emission quotas as well as the use of carbon credits to offset GHG emissions. The aim is to create an economic incentive for businesses to reduce emissions, while leveraging market mechanisms to ensure that mitigation takes place where it is least costly. Drawing on the experience of carbon markets operating around the world, Viet Nam could accelerate this implementation and start the operation at an earlier date than in 2028.
In addition to trading GHG emission quotas, the market will allow voluntary transactions of carbon credits (“verified emissions reductions”) on the carbon credit exchange market. These carbon credits could originate from verified emission reduction certificates in forestry and land use, renewable energy, energy efficiency and fuel switching, agriculture, waste disposal, transport, household devices, and chemical processes/industrial manufacturing. A key requirement for the success of the exchange market will be the credibility of the validation process. In addition to the initial certification by an independent third party, the certificates will need to be verified every 5 years in order to ensure the ongoing compliance and accuracy of the carbon credit. Strong verification mechanisms will require transparency, accountability, integrity, and credibility within the market. This will be essential to eventually integrate Viet Nam’s domestic carbon market with regional and global systems, a step that will allow greater participation and facilitate broader market liquidity. Agreement reached among governments at the COP29 talks in Baku in November 2024 will facilitate trading in voluntary international carbon markets and could help like Viet Nam to get the funding needed for their climate actions.
A first step in this direction was the credit transaction related to the protection of forest arranged with the World Bank in March 2024. Viet Nam benefits from a forest coverage of 42%, with an absorption potential estimated at nearly 70 million tons of CO₂ annually. This could generate carbon credits through forestry-based projects, which can then be sold in voluntary and mandatory carbon markets, which would generate financial rewards for preserving its forests, and thus support poverty alleviation in forest-dependent communities. An important milestone was a first verified carbon credit for reducing emissions from deforestation and forest degradation (known as REED+). This transaction resulted from 10.3 million tons of carbon emissions reduced between February 2018 and December 2019. Viet Nam received a payment of 51.5 million USD for verified emissions reductions under the World Bank Forest Carbon Partnership Facility (FCPF). The payment benefits forest owners and communities, including ethnic groups living in the forest, distributed through a sharing mechanism. The forest management programme is generating emission reductions in excess of the volume contracted with the FCPF, which can be sold as carbon credits to third party buyers or used to fulfil the country’s Nationally Determined Contributions.
Combining a mandatory carbon market with a voluntary market comes with the benefits of using both “carrots” and “sticks”. While mandatory markets impose a price on carbon emissions by limiting the amount of emissions, voluntary markets generate financial rewards for reducing emissions, together with potential co-benefits in terms of protecting the biodiversity and supporting local communities. There are multiple risks, however, with the use of carbon credits, which are discussed in Box 3.2.
As countries increasingly combine mandatory with voluntary carbon markets, the two sometimes overlap, creating potential risks. One risk is double counting, which occurs when both the seller country and the buyer of carbon credits claim the same emission reduction. To avoid this, corresponding adjustments are crucial, especially under Article 6 of the Paris Agreement. These adjustments ensure that emission reductions are accounted for only once. Without these adjustments, claims of carbon neutrality could be compromised.
Fraudulent activity with the registration of carbon credits has also brought integrity at the forefront of discussions. Recent evaluations have found that approximately half of the carbon credit-generating activities in the market are considered low quality. This can result, as an illustration, from the over-issuance of credits and weak methodologies, particularly for certain project types like avoided deforestation or cookstove projects. Several initiatives can be established to enhance the integrity of the carbon markets. These include carbon credit ratings agencies, which independently evaluate risks such as additionality, quantification accuracy, and non-permanence of emission reductions.
Maintaining robust integrity in carbon markets, with clear verification processes, transparent methodologies, and ongoing monitoring will be essential to ensure the credits sold genuinely contribute to global emission reductions. Without such mechanisms, voluntary carbon markets will lack the credibility required to attract the participation of private-sector participants, which do not desire to be seen as engaging in greenwashing or take the risk of carbon credits losing their certification following ex-post evaluations.
Source: Wetterberg et al. (2024)
3.3.4. Environmental regulations should be more stringent to complement carbon markets
Like other countries, Viet Nam has tightened its environmental regulations, including regulations on energy efficiency, as part of its transition to a low-carbon future. In many countries, environmental regulations involve, inter alia, energy efficiency standards for electric appliances, emission limits for thermal power plants, fuel efficiency standards for cars, bans of the sale of new fossil fuel cars, and bans on the installation of new boilers using natural gas and heating oil. These policies are usually found to be effective, although they may result in costs for consumers. This may be particularly difficult for low-income consumers but could be addressed by targeted policies to help low-income households master the energy transition. As an illustration, California’s building energy codes have been found to have undesirable financial effects on low-income consumers (Bruegge et al., 2019).
In this context, assessing the stringency of current environmental regulations can be a useful starting point. The OECD has developed an Environmental Policy Stringency index, with a sub-indicator that aims at capturing rigidity and intensity of non-market based regulatory policies. This indicator compiles information and allows comparisons across countries.
Calculations prepared for this chapter suggest that Viet Nam’s environmental regulations could be made more stringent across several dimensions. At present, regulations are less stringent not only than those of OECD countries but also when compared to China or India (Figure 3.5). This suggests that Viet Nam has room to do more on the regulatory dimension of environmental policies.
Stringency of non-market based environmental policies (EPS) Index, Scale 0 (least stringent) to 6 (most stringent)
Source: OECD, OECD Environmental Policy Stringency Index; OECD calculations.
Regulatory standards for appliances, coupled with enforcement mechanisms for manufacturers, and public awareness campaigns focused on energy conservation are critical to encouraging behavioural changes and fostering a culture of efficiency. Under decision No. 14/2023/QD-TTg, the Vietnamese government plans to phase out the use of low-efficiency electrical equipment and to promote energy-efficient technologies. The decision targets home appliances (such as fluorescent lamps and air conditioners), office equipment and industrial equipment. It prohibits to import, manufacture, or sell products that fail to meet the minimum energy efficiency standards, with roadmaps specifying the timeline for phasing out low-efficiency equipment. The decision also covers power generation, banning the development of low-efficiency coal and gas-fired power plants that do not meet minimum efficiency requirements. Viet Nam also regulates the use of cooking fuels to reduce the traditional reliance on biomass fuels like firewood and charcoal, while promoting the use of LPG, natural gas, and electricity. However, traditional biomass fuels still prevail in rural areas and more could be done to encourage their replacement and improve air quality and public health. In addition to existing regulation, the adoption of modern cooking fuels would benefit from incentives and information campaigns directed to low-income households.
With over 40% of Viet Nam’s greenhouse gas emissions stemming from direct emissions in the power sector, advancements in low-emission electricity generation are critical to achieving the country’s emission reduction targets. It will be important to make progress in this area before large-scale electrification can have the desired effects on emission reductions. To meet rapidly growing electricity demand and prevent shortages, Viet Nam Electricity (EVN) continues to rely heavily on fossil fuel-based generation. At the same time, significant investments are being directed toward expanding wind and solar power capacity. Simultaneously, the government is taking swift action to modernise the electricity market’s structure and implement regulations aimed at fostering further investment in clean energy. Renewables hold much potential to improve energy security, a crucial issue in light of the power outages in the summer of 2023 and May-June 2024.
3.4.1. Coal remains the main source of electricity generation
Coal plays a key role in Viet Nam’s electricity system, as it does in other countries in Asia. The country relies on coal-fired power plants for a substantial portion of its electricity, with around 50% of the national power supply coming from coal, which is the most emission-intensive way of generating electric power. In 2024, coal-fired generation and emissions both increased by 15% compared to the previous year and reaching an historical record (Figure 3.6).
(generation in TWh, emissions in million tCO2 –12 months of each year)
Source: Ember data.
Viet Nam's substantial reliance on coal has historically been influenced by its affordability and domestic availability, especially given the significant coal reserves in the Quang Ninh region. However, the extensive use of coal has exceeded the extraction capacity of its mines (Figure 3.7), and the country has increasingly relied on foreign suppliers. Imports of coal are estimated to have further increased in 2024 due to strong electricity demand and low hydropower output (IEA, 2024b). As a result, Viet Nam is projected to become the fifth largest coal importer globally (IEA, 2024b), with detrimental effects on the foreign trade balance and potential risks for energy security.
At COP26 in November 2021, Viet Nam pledged to phase out unabated coal power by the 2040s or as soon as possible thereafter. Though the government has plans to build new coal-fired power plants until 2030, it has also decided to terminate some of these projects, such as the Song Hau 2 coal-fired plant cancelled in July 2024. The government plans a gradual reduction in coal's share, capping it at around 30 GW by 2030 (as compared to 27.2 GW in 2023, Figure 3.8), with a goal to phase it out almost entirely by 2050.
Carbon emissions could be reduced substantially by elaborating decommissioning, repurposing, and refurbishment plans for coal-fired power plants, while investing in alternative clean facilities (UNDP, 2024). The oldest thermal plants, which have poor efficiency, such as the Pha Lai 1 coal-fired plant that entered in operation in 1983, are slated either for closure or conversion. Clean options for these plants include switching them to biomass, flexible gas turbine units combined with battery energy storage systems, solar power, and carbon capture and storage. Social transition plans in case of coal phaseout are essential for the sizeable numbers of workers employed directly or indirectly by coal mining activities, transportation, and power generation, particularly across remote areas. Support should include re-training and re-skilling not only of affected workers, but also communities indirectly affected, so as to mitigate the local economic impact and garner popular support for the energy transition (UNDP, 2024).
Source: Energy Institute (preliminary data for 2023).
Low-carbon alternatives to coal-fired power generation are now widely available at levelised costs that have declined rapidly over the past decade. Hydro, solar and wind power are affordable sources of electricity because they convert natural energy directly into electricity, bypassing the heat generation stage required by thermal power plants. Viet Nam has significant opportunities to expand its low-carbon electricity generation thanks to a its large potential from hydraulic, solar and wind sources (Figure 3.8). It is estimated that Viet Nam has potential solar power of up to 500 GW, combining utility PV, floating PV panels and rooftop solar (EREA & DEA, 2024). The potential of solar power can be found across the country, with the best resources located in the South and South Central. However, installing solar power takes land areas away from agriculture, and taking this into account the largest available potential is in the North of the country. There is also considerable potential for wind power, with 217 GW of onshore wind potential located in the Highlands, Southwest and South-Central regions. Viet Nam has also excellent conditions for offshore wind: fixed-based wind power of 101 GW and additional floating offshore wind of 117 GW are estimated in areas with a distance to shore between 6 nautical miles and 150 km outside of shipping lanes (EREA & DEA, 2024).
Source: EREA & DEA (2024), Viet Nam Energy Outlook Report, Pathways to Net-Zero.
Viet Nam is therefore heavily investing in solar and wind power capacity, which increased from 17 GW in 2020 to 23 GW in 2023 and now exceeds that of Thailand (4.7 GW) and Indonesia (0.7 GW) though it is less than in Korea (29 GW), Japan (93 GW), India (118 GW) and China (1052 GW) (Kaelin and Jones, 2024). Looking ahead, natural gas and liquefied natural gas (LNG) plants are expected to see rapid developments, with the eighth Power Development Plan (PDP8). Notwithstanding this ongoing contribution of fossil fuels, the main source of new capacity will come from clean power sources, which the government plans to increase from about 45 GW in 2023 to 80 GW in 2030 (Figure 3.9). Viet Nam is also exploring the potential of hydrogen and ammonia as future energy sources.
Parliament has agreed to restart the Ninh Thuận nuclear power project of 2GW, which was shelved following the accident in Fukushima. Investments to build small modular reactors (SMRs) are also being considered, including both land-based and floating versions, with the potential to produce dispatchable energy during peak consumption hours. Nuclear power could help to decarbonise electricity in Viet Nam, particularly where innovations can make it a source of cost-effective electricity. Nuclear power can contribute to improving energy security and nuclear electricity production is more stable over time compared to intermittent renewables while also being low-carbon, although concerns involve high-impact negative risks in case of severe nuclear accidents. It is important for nuclear projects, as well as any other energy project, to be underpinned by transparent and comprehensive life-cycle cost-benefit analyses that inter alia account for the cost of constructing power plants, storing nuclear waste and decommissioning disused power plants. Such analysis must also consider the (direct and indirect) subsidies granted through the entire production cycle.
(in gigawatts, historical data up to 2023 and government targets thereafter)
Source: Ember (historical data 2010-2023); and PDP8 objectives (Prime Minister Decision QD-TTg).
3.4.2. Stronger competition in renewable electricity markets
Reforming the electricity market design would help to make the expansion of renewables happen more rapidly, more cost effectively, and with a greater participation of private-sector investment. Viet Nam has already unbundled the generation of power from its transmission, though EVN still dominates electricity production. Electricity prices remain regulated by the government, with tariffs that involve cross subsidies between producers and between consumers. Reforming these regulations and easing the infrastructure bottlenecks mentioned earlier are critical to unlock renewable electricity investments.
The issuance of Decree No. 80/2024/ND-CP (“DPPA Decree”) on July 3, 2024, marks a significant step toward deregulating electricity distribution by authorizing direct power purchase agreements (DPPAs). The decree allows renewable energy producers to sell electricity directly to large corporate consumers. It introduces two mechanisms: physical DPPA (transmission via private network at negotiated prices) and synthetic DPPA (via the national grid at official prices). Previously, all electricity transactions had to go through the state-owned EVN and its subsidiaries, apart from limited exceptions. The DPPA reform aligns Viet Nam with other nations utilising similar direct power purchase agreements, such as Australia, France, India, the United Kingdom, the United States, and Taiwan. If implemented without overly stringent mechanisms, this will foster competition and support the adoption of clean electricity in Viet Nam.
The government is also working on the gradual launch of Viet Nam’s Wholesale Electricity Market (VWEM) to ensure competition and efficiency in the power sector. Large thermal and hydropower plants are generally required to participate in the VWEM, but large producers are authorised to bypass the market and sell directly to EVN. In addition, the market lacks a competitive environment due to the lack of independence of the largest operators from EVN and regulations requiring market prices to strictly follow production cost, as opposed to mechanisms used in other countries such as market-based pricing or merit-order bidding procedures.
Encouragingly, Viet Nam’s National Assembly adopted a new Electricity Law on 30 November 2024 and, in early March 2025, the government issued Decree No. 56/2025/ND-CP, which provides detailed guidance on the implementation of a number of provisions regarding developing power projects. The new law introduces several key reforms aimed at modernising the design of the electricity market and at addressing various obstacles discussed earlier in this section. It introduces a multi-component pricing system to gradually eliminate cross-subsidies between electricity consumers, aiming for more equitable and market-reflective electricity tariffs. The Electricity Law also establishes a comprehensive legal framework to promote renewable energy sources. It creates a streamlined procedure for the approval of energy projects, which simplified rules for processing projects and land conversion requests when investments are urgently needed to meet growing energy demand. It provides supportive regulation for offshore wind projects, in particular for land leases and sea allocation. Finally, it creates new rules to increase the dynamism of the wholesale electricity market.
These recent reforms, when fully implemented, will provide a strong impetus to the emergence of clean electricity generation. Further reforms could be considered to modernise Viet Nam’s electricity market:
Introducing demand-side management (DSM) programmes, including time-of-use tariffs and dynamic pricing with smart meters, which would encourage consumers to shift their electricity use to off-peak hours, alleviating pressure on the grid and making energy consumption more cost-effective.
Allowing Distributed energy resources (DERs), such as micro grids involving rooftop solar and small-scale wind, which would play a crucial role in areas with unreliable grid access.
Supporting net metering or peer-to-peer energy trading would enhance energy security and decentralised power generation.
3.4.3. Renewable investment incentives could be strengthened
Since 2017, Viet Nam has offered attractive feed-in tariffs (FiTs) for electricity generated from renewable sources such as wind and solar. The initial solar FiT programme launched in 2017 set a rate of USD 0.0935 per kWh, which led to a wave of investment culminating in 4.46 GW of solar capacity by 2019. For onshore wind, the FiT was set at USD 0.085 per kWh, and for offshore wind, at USD 0.098 per kWh. The FiTs are administered by Viet Nam Electricity (EVN) and were meant to involve charging end-users at prices sufficient to recover them. However, this has not unfolded as planned and resulted in significant losses. While no overall estimates of FiTs’ costs are available, it is noteworthy that EVN is facing financial challenges: a recent audit revealed a significant financial loss of 34.24 trillion VND for 2023 (approximately 0.3% of GDP, and 6.5% of production and business costs).
Subsidising utility-scale solar power investment no longer seems necessary as it is already the cheapest source of new bulk generation in Viet Nam in terms of levelised costs of electricity (44-50 USD/MWh, Ember 2024), lower than power from coal-fired units (USD 84-104/MWh, BloombergNEF, 2023). In November 2023, the government revised the procedure used to establish feed-in tariffs. They are now set annually, rather than on a 20-year basis, as was previously the case, which means that prices can vary across the life span of the investment. Viet Nam Electricity was assigned the responsibility of calculating the annual FiTs based on the fixed and operational costs of the operators. The electricity regulator (ERAV) will approve these tariffs, which are set separately for the three regions to take into account local conditions, such as lower solar radiation in the North than elsewhere. The FiTs will ensure that renewable energy developers receive a set price per kilowatt-hour for power that cover their costs. Overtime, Viet Nam plans to transition to an auction-based system, with developers submitting bids for new renewable projects, as done in other countries, which will help to ensure that they reflect economic realities. Offering contracts for differences set around these auction-based prices would help to derisk the arrangements, both for the government and private investors.
In addition to FiTs, Viet Nam also offers tax incentives to operators of renewable units. Companies investing in renewable energy projects can enjoy a preferential corporate income tax rate of 10%, compared to the standard 20%. This rate applies for 15 years from the first year of income, extendable up to 30 years in exceptional cases with the prime minister’s approval. Tax incentives are used in many countries to promote low-carbon investments, especially at initial deployment stages where levelised costs are not yet competitive and obtaining market funding is difficult because investors consider these investments as not bankable in the absence of government support. However, tax incentives create distortions in market forces and deprive the government from revenue. They should be subject to sunset clauses, evaluated periodically, and terminated as soon as investments become cost-effective without official support.
Accelerating the switch to renewable energy will require addressing the various barriers currently hindering the expansion of new renewable capacity. This includes the need to strengthen the transmission grid and enable new connections, build up storage to handle the intermittency of renewables, such as pumped hydro and large-scale batteries, ease administrative obstacles to land acquisition and obtaining permits, and identify financial resources. Importantly, the installation of renewables and pylons for the grid will need to be accepted by local communities, with measures to make these investments beneficial for all. Viet Nam is currently working on some of these issues, including investing in grid infrastructure improvements and cross-border electricity trade, particularly with neighbouring countries like Laos.
3.4.4. Green finance mechanisms can help to finance massive investment needs
Moving towards low-carbon energy sources will have an upfront economic cost and will entail massive investment needs over the next decade to develop new generation capacities, strengthen the transmission grid, and address intermittency with battery storage systems and other technologies. Investments will not only be needed to replace current fossil-fuel based generation, but also to meet the rapid increases in electricity demand. The most recent estimates of investment costs produced by the IEA (2024c) suggest a rapid increase in total investment reaching USD 60 billion per year in 2045, which is about 15 times higher than average annual power sector investments over the 2018 to 2022 period. Funding will also be important to help the transition of communities affected by the low-carbon transition, which will create social challenges, as it entails large sectoral reallocations of capital and labour.
Electricity consumption per capita of 2.9 MWh/capita in 2023 is less than the global average (3.7 MWh/capita) and less than in Thailand (3.1 MWh/capita) and Malaysia (5.6 MWh/capita). As income levels rise, so will the demand for electricity. Importantly, the transition to carbon neutrality involves a large-scale electrification of energy uses such as ground transportation (EVs), heavy industries (electric arc furnaces), household cooking (electric stoves), and data centres. Higher electricity demand will require more generation capacity, an expanded transmission grid, and a more flexible electricity market.
Another factor driving higher energy consumption is the increase in air temperatures, especially during days of extreme heat, which pushes up the use of cooling equipment. Climate change has intensified heatwaves, with temperatures frequently exceeding 40°C in some regions. In Viet Nam, the number of very hot days (>35°C) in a given year has increased by around 10-40 since the mid-20th century. Viet Nam may experience up to 40-60 additional very hot days by 2100 (UNDP, 2023). This not only poses challenges for individual health, but it also results in a surge of cooling demand, with peaks in power consumption during days of heat stress. Electricity of Viet Nam (EVN) has reported daily consumption records of 1 billion kWh during hot days in late May 2024, higher than average peak usage of 940 million kWh in 2023 (EVN, 2024).
Viet Nam is taking significant steps to attract financing to clean energy projects and narrow the large funding gap entailed by the transition to a low-carbon economy. This includes the issuance of green bonds and loans, which attract financing earmarked specifically to low-carbon projects, with certified auditing to provide credibility. By mid-2024, outstanding green credit volumes reached VND 680 trillion (around USD 24.9 billion), representing about 4.5% of total bank loans. Institutions like EVN Finance play significant roles in raising green capital through bonds. In 2023, Viet Nam's state-owned bank BIDV partnered with the World Bank to issue a USD 104 million equivalent green bond - the first senior, unsecured, and unguaranteed green bond by a local Vietnamese commercial bank. This was followed by the country's first sustainability bond, valued at the equivalent of USD 122 million. The Asian Development Bank (ADB) has also helped Viet Nam to issue financing certified as a Green Loan by the Climate Bonds Initiative, a syndicated USD 173 million package for the Lotus project, which combines three wind power projects with a total capacity of 144 megawatts.
International funding for shifting to a low-carbon economy has been provided under an agreement with a coalition of jurisdictions, under the Just Energy Transition Partnership (JETP). The coalition has committed to providing Viet Nam with USD 15.5 billion over the next three to five years, with a mix of public and private finance to assist the country in meeting its climate goals. Under the agreement, Viet Nam has pledged that its greenhouse gas emissions would peak in 2030, five years earlier than initially planned. It has also agreed to limit coal-fired power to 30.2 GW, down from the previously planned 37 GW. Finally, the country has pledged to achieve at least 47% of renewable electricity generation by 2030, compared to the earlier target of 36%. In addition to clean energy goals, the partnership includes strategies to protect vulnerable communities, particularly those employed in the coal and heavy industry sectors. However, concerns have been raised about the debt servicing costs entailed by this financing because only around 2% is provided as grants and 14% as sovereign concessional loans, with the remainder provided as non-concessional loans at market rates. This has limited progress in disbursements so far. The pace of progress made by Viet Nam toward its low-carbon objectives has also been an obstacle. Accelerating the pace of reforms to promote a low-carbon economy – in particular a more rapid implementation of the mandatory carbon market and easier regulations to start operations – would create better conditions for private equity investments, including foreign investments, thus reducing debt servicing costs.
The monetary authority State Bank of Viet Nam (SBV) has also updated its regulations to encourage commercial banks’ lending to low-carbon activities. SBV supports green banking through initiatives like refinancing and rediscounting to encourage financial institutions to offer favourable terms for green projects. At the same time, in its supervisory role to prevent banking difficulties, under Decision 1663/2024 issued in August 2024, SBV created a legal basis requiring all domestic and foreign banks operating in Viet Nam to implement internal regulations on environmental risk management, particularly in credit-granting activities. Banks are expected to assess environmental risks and ensure compliance with local environmental laws.
A step further in this direction would be to require that commercial bank undertake “green stress tests”. This should include an assessment of damages and NPL-impact of extreme floods in Hanoi and HCMC, as well as typhoons, through combining disaster scenarios with macroeconomic and financial modelling. NPLs could increase as a result of direct losses of residential and borrowers affected by damages, and indirect losses resulting from reduced demand of goods and services through macroeconomic channels, such as income losses in affected regions. Early knowledge of these possible credit delinquencies would help commercial banks, and their supervisors, make preparedness plans that would mitigate the financial impact.
A taxonomy of low-carbon activities is still missing. Issuing a taxonomy would provide a clear framework for investors, companies, and financial institutions to identify which projects or activities are considered by the government as environmentally sustainable, making it easier to direct capital toward these projects. This would reduce the uncertainty that currently prevents more active participation of lenders in this market segment. To facilitate international financing, the taxonomy should be aligned on international standards, such as the EU Green Taxonomy. It should cover sectors like renewable energy, sustainable agriculture, green buildings, and water management, among others. Involving the private sector in the development of the taxonomy, as Chile is doing, is also key to ensure legitimacy and building acceptance. To prevent carbon lock-in when defining transition economic activities, the taxonomy should include sunset clauses, whereby an activity counts as a transition activity until a set date and must meet stricter requirements thereafter.
Transport is the second-largest energy-using sector in Viet Nam and is projected to have the highest energy and emissions growth in future years. Due to the limited availability of rail infrastructure, road transport represented in 2019 the bulk of passenger transport (63% of kilometre-passengers), with domestic aviation accounting also for a significant share (33%). For freight transport, coastal shipping is the main form of transport (56% of tonne-kilometres in 2016), with road transport representing the second type (24%) (Huu, et al., 2021).
The development of mass transit systems in Viet Nam would be an effective way to reduce congestion and pollution in major cities like Ho Chi Minh City and Hanoi, but it has faced several obstacles that have slowed progress. A key issue is the complexity of securing sufficient funding for large-scale infrastructure projects, which often require a mix of public and private investment as well as international loans. Delays in disbursement, budget constraints, and coordination challenges among various government agencies further complicate project timelines. Additionally, land acquisition for transit routes can be slow due to legal and compensation issues, often leading to public opposition or disputes. Viet Nam's rapid urbanisation also outpaces planning efforts, making it difficult to implement comprehensive transit networks efficiently. Furthermore, regulatory hurdles, lack of expertise in managing such large projects, and reliance on motorbikes and cars as the dominant modes of transport reduce the urgency for immediate mass transit solutions. This combination of financial, administrative, and logistical challenges has hindered the rapid progression of Viet Nam's mass transit systems. Enhancing the capacity of local institutions to plan, implement, and manage mass transit projects effectively would be a crucial approach, with a clear framework that support sustainable urban mobility. To cope with limited public funding, Viet Nam could also explore diverse funding sources, such as public-private partnerships and innovative financing models to ensure the financial sustainability of mass transit projects.
The rising take-up of internal combustion engine vehicles – cars, motorbikes, trucks, buses – has led to higher consumption of car fuels, with deleterious effects on air quality in large cities and punishing health impacts. Hanoi is now ranked the 8th most polluted city in the world. On average in 2023, Viet Nam’s PM2.5 readings were nearly six times the WHO recommended levels.
Only 3% of vehicles sold during January-September 2024 were hybrid electric vehicles, with pure electric vehicles (EVs) representing only a marginal proportion of sales of new vehicles. Many countries have introduced fiscal incentives and regulatory measures to encourage the development of electric mobility, which is not only cleaner but also more energy-efficient than mobility using internal combustion engines. Rather than stand-alone measures, it is the complementarity of interventions that seems to increase the adoption of electric vehicles because adoption is a slow process that require both “carrots” (subsidies and tax credits) and “sticks” (carbon taxes, feebates, bans, and other stringent regulations). As an illustration, high car fuel taxes encourage reduced use of fossil-fuel vehicles, while scrapping incentives promote their replacement, and EV incentives encourage the adoption of cleaner cars. These measures can effectively promote the decarbonisation of national car fleets. China and Norway are examples of countries that have successfully spurred the adoption of electric vehicles (Benoit and Lenain, 2023).
To spur the adoption of electric vehicles, Viet Nam offers several tax incentives. Viet Nam has reduced or exempted import taxes on certain types of EVs, especially components and parts used for the production of electric vehicles. This makes it more cost-effective for companies to manufacture EVs domestically and also for consumers to purchase imported EVs. These vehicles are subject to a much lower excise tax compared to gasoline and diesel vehicles: battery electric vehicles (BEVs) with up to 9 seats benefit from an excise tax rate of 3%, significantly lower than the rate for internal combustion engine (ICE) vehicles, which can be as high as 35-40%. In 2022, the government approved a policy to exempt EVs from registration fees for the first three years, and for the following two years, EVs are subject to only 50% of the standard registration fee applicable to gasoline vehicles.
In many countries, subsidies for electric vehicles (EVs) have been highly effective during the early stages of market development, addressing key barriers such as high vehicle prices, uncertain resale value, range anxiety, and limited charging infrastructure. However, as the EV market matures, governments typically shift from direct purchase subsidies to other policy measures, aiming to establish a self-sustaining market over the medium term. Germany has already terminated its “Umweltbonus” subsidy for EV purchases, while the UK has discontinued most direct support for retail EV buyers. France and Norway are gradually reducing EV subsidies and China is phasing out its subsidies for the EV consumer market. This transition reflects a broader strategy to balance market incentives with fiscal responsibility.
A gradual pivot from subsidising EV purchases to supporting charging infrastructure is logical, as the widespread availability of charging points is critical to achieving mass EV adoption. Viet Nam currently has around 150,000 charging ports operating across its provinces and centrally-run cities. While sufficient for now, the charging network will need to expand significantly to meet future demand, particularly in growing urban areas. Government support will be essential for establishing charging infrastructure in remote areas, where initial utilisation may not justify investment costs. Additionally, regulations to standardise charging plugs, harmonise payment systems, and ensure electricity prices reflect actual costs are vital to creating a cohesive and accessible charging network. These measures will play a crucial role in sustaining EV market growth and ensuring a smooth transition to electric mobility.
Regulation can also play a useful role to ensure that internal combustion engines respect air quality standards. Through Decision No.14/2023/QD-TTg regarding vehicle emissions, Viet Nam has mandated the inspection of motorcycle emissions starting from 2025, with more stringent regulations for automobiles as well. This effort is part of broader environmental policies aiming to reduce greenhouse gas emissions from the transport sector. In addition, Viet Nam could consider establishing low-emission zones in Hanoi and Ho Chi Minh City, as illustrated by their successful deployment in the United Kingdom (Box 3.3).
In central London, since 2003, a congestion charge (GBP 15 per day) must be paid by most cars and motor vehicles during traffic peak hours. In addition, since 2008, commercial vehicles driven in Greater London’s Low Emission Zone (LEZ) must meet specific emission standards or pay daily fees ranging from GBP 100 to GBP 300. Finally, since 2019, cars need to meet minimum emissions standards when travelling within the London Ultra Low Emission Zone (ULEZ) or pay a daily charge (GBP 12.50). The proceeds of these various fees are generally earmarked to invest in the public transport network, and therefore help mobility while improving air quality. Other UK cities have also adopted similar clean air programmes either based on payments of fees or outright bans of driving diesel vehicles (e.g., Bristol). Research finds that the LEZ and ULEZ have “significantly improved air quality, benefiting Londoners’ physical and mental health” (Fichera et al., 2023).
All countries are subject to the growing physical impact of climate change, such as extreme heatwaves, droughts, wildfire and rising sea levels. In addition to losses of human lives, climate risks may have severe socioeconomic consequences on employment, health, productivity and public finances. Governments need to adopt adaptation investment frameworks to mitigate these risks (OECD, 2024). This includes strategic planning, such as through Viet Nam’s National Adaptation Plan (NAP) that identifies climate risks and mainstreams them into policy development. Beyond planning, governments need to take concrete actions to fill gaps in adaptation investments, identify resources to finance these investments, and adopt good implementation and evaluation practices.
Viet Nam is increasingly exposed to various climate risks. It ranks 16th in the World Risk Index (2024) mainly due to its high exposure to climate events and limited adaptative capacities. Within the Notre Dame Global Adaptation Initiative (ND-GAIN), Viet Nam’s score is 47.1, positioning it within the medium resilience category. These scores indicate that while the country has made progress in adapting to climate change, significant challenges remain in reducing vulnerability and enhancing adaptive capacity. According to long-term model simulations by the Asian Development Bank (2024b), Viet Nam is among the most vulnerable countries in the Asia Pacific area. Under a high-end emission scenario following IPCC’s scenario SSP5-8.5, GDP would be about 10% below a trajectory without climate change in 2040, 20% below in 2055, and 35% below in 2070. The bulk of these losses would result from a rising sea level and the erosion of coastal areas. As an illustration of these losses and damages, it has been estimated that about USD 300 billion of assets held by the commercial and industrial sector are vulnerable to climate-related disasters (World Bank, 2022). A second source of activity contraction would stem from lower productivity, particularly in the agricultural sector.
Viet Nam’s densely populated areas are heavily vulnerable to the rise of the sea levels. The country has two megacities situated in low-elevation coastal zones, which are already at significant risk of storm surges that periodically lead to flooding in both urban and manufacturing areas. The rapid population growth in Ho Chi Minh City, spurred by the migration of rural workers, has led to a sprawl of settlements in low-lying areas prone to flooding. Located in the Mekong River delta, the city is experiencing a dual threat from both rising sea levels and significant land subsidence, exacerbating its vulnerability to flooding. Approximately 40–45% of the city lies less than one meter above sea level, making it particularly susceptible to flooding. Recent studies indicate that the city is subsiding at an average rate of 2–5 centimetres annually, with certain commercial zones experiencing subsidence up to 7–8 centimetres per year. This rate of subsidence exceeds that of the current sea-level rise, which is estimated at around 4.1 millimetres per year along the southern coast, according to the World Bank Climate Change Knowledge Portal. The projected sea level increase by 1 meter by 2100 would inundate 47% of the delta and displace up to 5 million people (UNDP, 2023). Revising land occupation plans and authorisations along coastal zones will become increasingly important considering the projected sea-level rise. Preparing for the displacement of agriculture land in vulnerable coastal areas may also be part of an adaptation strategy, but this may require financial support for affected subsistence farmers.
Viet Nam's extensive coastline, spanning over 3 260 kilometres, is vulnerable to climate-induced hazards. This is exacerbated by rapid urbanisation and economic development in coastal regions, where approximately 12 million people reside in areas at high risk of flooding, and over 35% of settlements are situated on eroding coastlines (de Vries Robbé et al., 2020). Approximately 65% of the country’s dike system may not be able to withstand an emergency situation. At the same time, these coastal areas host thriving economic sectors, underscoring their pivotal role in economic development, with activities in agriculture, aquaculture, tourism, and manufacturing. Notably, the Mekong River delta is major hub for aquaculture (catfish and shrimp farming) and is the country’s “rice bowl”, with approximately half of national output. To protect these vital regions, Viet Nam has developed a programme to enforce spatial planning, promote nature-based solutions, and strengthen disaster preparedness and response capacities. Investments in climate-resilient infrastructure, aiming to safeguard livelihoods and sustain economic growth in the face of escalating climate risks, have been prioritised.
Hanoi and Ho Chi Minh City have plans to strengthen their systems of dikes, drainage, and water retention areas to reduce the risk of flooding – which all require costly public investments. Viet Nam estimates that adaptation to climate change would cost as much as USD 55-90 billion by 2030 in infrastructure investments and support to affected people and businesses, with concrete financing plans only existing for a fraction of this cost (Ministry of Natural Resources and Environment, 2024).
Integrating adaptation considerations into infrastructure planning and urban mobility systems will be another potential line of action. This requires comprehensive planning of land use, settlement patterns, and infrastructure projects that consider climate risks. Investing in resilient mass-transit infrastructure can mitigate risks for commuters. Future public transport infrastructure expansion plans should incorporate climate change risk assessments upfront and allocate responsibilities for climate-related risks. OECD guidelines for building climate-resilient infrastructure, covering design, institutional frameworks, and public-private partnerships, can inform these efforts (OECD, 2018). In addition, the government should actively inform the public about climate risks and encourage preparedness and resilience. This includes messages so that people take proactive action, such as creating emergency kits, developing evacuation plans, and adopting sustainable practices to reduce long-term risks. Information campaign should also cover retrofit work to protect buildings from floods and storms and awareness of property insurance options.
Viet Nam has experienced a notable increase in land temperatures over recent decades, with an average rise of approximately 0.6°C since 1971, which has accelerated during the most recent period. Projections indicate that, by the late 21st century, additional increases in average temperatures could reach 1.0°C to 4°C, depending on future emission scenarios. These temperature increases will have profound implications for agriculture and water resources. Higher temperatures lead to increased water demand for crops and heightened water stress. In the Mekong River delta, a critical rice-producing region, rising temperatures coupled with sea-level rise contribute to salinity intrusion, adversely affecting rice yields and reducing arable land. Additionally, the Central Highlands, a major coffee-growing area, has faced prolonged droughts, severely impacting coffee production and threatening the livelihoods of farmers. The combination of rising temperatures and altered precipitation patterns exacerbates the frequency and severity of droughts, leading to significant challenges in water availability for both agricultural and domestic use. These climatic changes call for the adoption of climate-resilient agricultural practices and improved water management strategies to mitigate adverse impacts on Viet Nam's agriculture and water resources. A recently approved programme will support the development of one million hectares of low-emission rice in the Mekong River delta by 2030, which involves the reorganisation of the production system along the rice value chain, the adoption of sustainable farming practices to enhance production and economic efficiency, and the improvement of income and livelihoods for farmers.
Rising temperatures exacerbate local air pollution, which causes at least 70,000 deaths each year in Viet Nam, shortening the average lifespan by 1.4 years (Pratt et al., 2024). Populations with lower socioeconomic status are more likely to be exposed to high concentrations of air pollution than are populations with higher socioeconomic statuses. Commuters using bicycles and motorbikes are those most exposed to fine particles (Le Thi Huong et al., 2024). Without action to address these health effects, air pollution could jeopardise the significant gains in life expectancy Viet Nam has achieved in recent decades. Poor air quality also reduces the productivity of workers, diminishes crop yields and livestock production, reduces domestic and international tourism revenues and weighs on international investment.
In addition to these gradual changes in weather patterns, Viet Nam is also affected by extreme weather events, in particular typhoons. These hit the country of average four to six times annually, primarily impacting its central and northern coastal regions. While the frequency of these storms has remained relatively stable over recent decades, their intensity and associated economic damages have escalated. The most severe typhoons disrupt industrial production, damage agricultural lands, and necessitate substantial expenditures for recovery and rebuilding. The aftermath of Typhoon Yagi, for example, flooded over 300 000 hectares of crops and damaged nearly 235 000 homes. Looking ahead, climate change is projected to increase the intensity of typhoons making landfall in Viet Nam. Model simulations suggest that future typhoons may be about 8% more intense at landfall, with faster movement and more concentrated rainfall, thereby amplifying their destructive potential (Tran et al., 2022). These events underscore the pressing need for enhanced disaster preparedness and resilient infrastructure to mitigate future economic and human losses.
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