Research Scope This research paper aims to explore the impacts of the energy crisis in 2022 on Vietnam and provide recommendations to mitigate the negative effects.. The paper will provi
FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS -*** MID TERM ASSIGNMENT Module: Environmental Economics Impacts of the energy crisis in 2022 on Vietnam and recommendations to mitigate the negative effects Group: Hanoi, March 2023 GROUP MEMBERS Nguyễn Diệu Linh Khuất Tùng Lâm Vũ Thị Hoài Thương Nguyễn Thị Quỳnh Anh Chu Đặng Phương Thảo Vũ Kiều Trân Đặng Thu Hiền Trịnh Hoài An 2112450050 2113450014 2111110276 2114110004 2112150160 2113150071 2112450032 2112450004 TABLE OF CONTENT Abstract Introduction Research overview: 3.1 Research scope 3.2 Research objectives 3.3 Research questions 3.4 Research methodology Literature review Impacts of the energy crisis in 2022 on Vietnam: .6 5.1 Overview about energy crisis in 2022 5.2 Impacts of the energy crisis in 2022 on Vietnam .11 Recommendations to mitigate the negative effects .22 6.1 Overview about energy crisis impact control in Vietnam 22 6.2 Suggestion for mitigating the negative effects 24 Significant and expected contribution of the study 27 Validity and reliability 28 Potential limitations .29 10 References 30 1 ABSTRACT The energy crisis of 2022 is expected to have significant impacts on the global economy, including in Vietnam This research paper aims to explore the potential negative effects of the energy crisis on Vietnam and provide recommendations to mitigate them The study will use a mixed-methods approach, including literature review, data analysis, and interviews with industry experts The paper will highlight the key areas at risk of negative effects, including energy security, economic growth, and environmental sustainability The findings of this research will provide policymakers and industry leaders with insights into the potential impacts of the energy crisis and inform strategies to mitigate its negative effects on Vietnam 2 INTRODUCTION Viet Nam has confronted intense supply rivalry when the energy crisis hit Europe and other parts of the world, and the crisis will have a significant influence on the nation's energy investment plans and socioeconomic development goals The global energy crisis 2021-2023 began after the COVID-19 pandemic in 2021, with much of the world facing shortages and inflated prices for oil, gas and electricity markets The crisis was caused by a number of economic factors, including a rapid post-pandemic economic recovery that outstripped energy supplies and expanded into a widespread global energy crisis following Russia's 2022 invasion of Ukraine The price of natural gas has risen to a record high, and as a result, the price of electricity in some markets Oil prices reached their highest level since 2008 As energy is an important input to the economy, Viet Nam’s economical welfare has suffered inevitably In the worst case, Viet Nam may face the scenario that there is no available optimal plan to handle the energy crisis This essay begins by discussing how Viet Nam has been dealing with the effect of this global event especially in 2022 It then suggests recommendations of mitigation towards the current complication, following by explaining the validity and reliability of the study, along with its limitations 3 RESEARCH OVERVIEW 3.1 Research Scope This research paper aims to explore the impacts of the energy crisis in 2022 on Vietnam and provide recommendations to mitigate the negative effects The paper will provide an overview of Vietnam's energy sector and its current energy crisis, as well as the potential impacts of the crisis on the country's economy and society 3.2 Research Objectives The paper will provide recommendations for policymakers, businesses, and individuals to mitigate the negative impacts of the energy crisis The recommendations will be based on the research findings and will focus on strategies to diversify energy sources, increase energy efficiency, develop energy storage infrastructure, and promote public awareness of energy conservation 3.3 Research Questions The paper will present the findings of the research, including the impacts of the energy crisis on Vietnam's economy and society, as well as the potential solutions to mitigate these negative effects The findings will be presented in a clear and concise manner, using references from highly qualified scientific papers in order to illustrate key points 3.4 Research Methodology The paper will use the qualitative method, which will include information from scientific papers and interviews with key stakeholders in the energy sector, such as government officials, energy experts, and industry representatives All of the data used in this report is collected from the official websites of the General Statistics Office of Vietnam, OECD National Accounts, International Energy Agency, World Energy, UN World Food Programme, PV Oil, Vietnam National Coal-Mineral Industries Group The State bank of Vietnam and the Electricity of Vietnam data files 4 LITERATURE REVIEW Many studies in the past have examined the association of renewable energy with crucial factors of carbon emission, economic growth and financial development The overview of the empirical findings, however, have established mixed results and in this way given rise to ambiguities and uncertainties in establishing the specific connection of renewable energy consumption with well-being of the country, especially in the energy crisis happening in 2022 The article “Pandemic, War and Global Energy Transitions” analyzes the impacts throughout the energy system, including upstream fuel supply, renewable energy investments, demand for energy services, and implications for energy equity, by reviewing recent studies and consulting experts in the field The research shows that both crises initially appeared as opportunities for low-carbon energy transitions: the pandemic by showing the extent of lifestyle and behavioral change in a short period and the role of science-based policy advice, and the war by highlighting the need for greater energy diversification and reliance on local, renewable energy sources However, the early evidence suggests that policymaking worldwide is focused on short-term, seemingly quicker solutions, such as supporting the incumbent energy industry in the post-pandemic era to save the economy and looking for new fossil fuel supply routes for enhancing energy security following the war As such, the fossil fuel industry may emerge even stronger after these energy crises creating new lock-ins This implies that the public sentiment against dependency on fossil fuels may end as a lost opportunity to translate into actions toward climate-friendly energy transitions, without ambitious plans for phasing out such fuels altogether The paper “Stock Prices and the Russia-Ukraine War: Sanctions, Energy and ESG” published in 2022 illustrates that stocks with opportunities in the low-carbon transition benefited, arguably because market participants expect stronger policy responses supporting renewable energy sources in the face of the pronounced dependence of Europe on Russian oil and gas In sum, investors thus expect the speed of transition to a low-carbon economy to diverge between the US and Europe The analysis controls for a range of different Environmental, Social, and Governance (ESG) measures (for which we obtain mixed results) Companies that more frequently refer to inflation in their conference calls with analysts performed worse Internationally oriented firms did poorly, and investors were particularly concerned regarding companies' exposure to China Overall, the results offer a preview of the challenging economic impact of the Russia-Ukraine war In November 2020, Koushan Das wrote in the article “Renewables in Vietnam: Current Opportunities and Future Outlook”: Vietnam’s renewable energy sector is one of the most vibrant in Southeast Asia presenting significant opportunities for investors The country has achieved around 99 percent electrification with relatively low cost in comparison to neighboring countries With electricity demand projected to increase by eight percent annually until 2025, the government is moving forward to develop renewable energy sources to ensure energy security and addressing the growing power demand IMPACTS OF THE ENERGY CRISIS IN 2022 5.1 Overview about energy crisis in 2022 5.1.1 Causes of energy crisis in 2022 5.1.1.1 Slow supply recovery after pandemic The COVID-19 pandemic in 2019-2020 caused a rapid decrease in energy demand and a corresponding cut in oil production, and despite the 2020 Russia-Saudi Arabia oil price war, OPEC responded slowly to the demand recovery under the new normal, resulting in a supply-demand imbalance The 2021-2022 global supply chain crisis, which put additional strain on the delivery of extracted petroleum Furthermore, as Europe sought to replace Russian gas, it bid up the prices of ship-borne liquefied natural gas (LNG) from the United States, Australia, and Qatar, diverting supply away from traditional LNG customers in Asia Because gas frequently sets the price at which electricity is sold, power prices rose as well Both LNG producers and importers rushed to build new infrastructure to increase LNG export/import capacity, but these costly projects take years to come online 5.1.1.2 Climate abnormality impact on renewable energy In 2021, Brazil's worst drought in almost a century threatened its electricity supply It relies on hydropower for two-thirds of its electricity According to Euractiv, about one fifth of the increase in energy prices can be attributed to rising CO2 pricing on the EU's carbon market The driest summer in Europe in 500 years in 2022 had serious consequences for hydropower generation and power plant cooling systems The drought reduced hydropower in Norway, threatened nuclear reactors in France, and crimped coal transport in Germany Droughts of unprecedented proportions in China and California also posed a threat to hydropower generation 5.1.1.3 2022 Russian invasion of Ukraine Russia is a major producer and exporter of oil and natural gas It was the world's third largest oil producer in 2020, trailing only the United States and Saud Arabia, with 60% of its oil exports going to Europe In 2021, the country produced 62 billion cubic meters of natural gas and exported approximately 210 billion cubic meters via pipeline The Russian military buildup outside Ukraine and subsequent invasion posed a threat to Russia's energy supply to Europe International sanctions were imposed following Russia's annexation of Crimea in 2014, and were later tightened following Russia's invasion of Ukraine in February 2022; certification of the new Nord Stream pipeline was later suspended Russia had already refused to increase exports to Europe prior to its invasion, and in response to European sanctions, the state reduced gas deliveries to Germany via the Nord Stream pipeline, which it completely halted in early September, despite the pipelines still containing natural gas Gas leaks in late September rendered the pipes inoperable The leaks were caused by sabotage, according to European Union and NATO officials, but no one was identified as the perpetrator 5.1.1.4 OPEC supply restrictions In October 2022, OPEC+ cut oil production by two million barrels per day OPEC+ claimed it is trying to prevent price volatility, although some analysts believe the goal is to increase oil prices, which had decreased over the previous few months Saudi Arabia's foreign ministry stated that the OPEC+ decision was "purely economic" and taken unanimously by all members of the conglomerate 5.1.2 Worldwide impacts 5.1.2.1 Food crisis Chart Fertilizer Prices 16 having a lower growth rate than the import price index, which reflects that Vietnam is at a disadvantage when the price of imported goods is more favorable than the price of exported goods 5.2.1.4 Unemployment The General Statistics Office of Vietnam (GSO) reports that, as of October 2022, 51.9 million Vietnamese individuals of working age were recorded, of whom 50.5 million were employed Based on the aforementioned figures, Vietnam's unemployment rate in 2022 is expected to reach 2.3%, which is equivalent to the preCOVID-19 rate and significantly lower than the 3.9% rate recorded in 2021 In 2022, both employers and employees in the manufacturing sector faced a range of challenges and difficulties In early 2022, many factories had to address backlogs due to the COVID-19 lockdowns in 2021 Meanwhile, workers were hesitant to return to work in big cities At the beginning of the year, there was a shortage of qualified workers, but this was short-lived and reversed towards the end of the year when Vietnam had a surplus of workers but not enough orders This was largely due to the slowdown of the global economy, particularly the rising inflation in key markets of Europe and the United States In October, Vietnam's purchasing managers index (PMI) dropped to 50.6 points, which is down 1.9 points compared to September This is reflected in lower-thanexpected orders later this year, mainly in the textile sector Some factories have laid off workers and some have even closed completely However, the GSO still recorded job growth in the manufacturing sector In the third quarter, the number of newly hired workers increased by 156,000 people compared to the second quarter of 2022, bringing the total number of workers in Vietnam's manufacturing sector to nearly 12 million 5.2.2 Transportation 5.2.2.1 Transportation cost During times of energy crisis, fuel prices are likely to increase, leading to reduced usage and higher transportation costs In the first four months of 2022, fuel 17 v costs increased to trillion ($1.04 billion) - up 93.4% year-on-year due to a sharp rise in crude oil prices of over $30 per barrel in the global market, as compared to initial estimates During the same period, Vietnam experienced a 63.7% year-on-year increase in crude oil imports According to the PV OIL report, the highest price of RON 95 - III was 32,870 VND/liter (21/6/2022), reflecting a 31.527% increase compared to the highest price in 2021 (10/11/2021) and the highest price in Vietnam's history Despite the turbulence caused by rising fuel prices, Vietnam has managed to control fuel prices by reducing environmental protection taxes and using petrol and oil price stabilization funds to adjust prices Additionally, the country is considering reducing value-added tax from percent to percent for transportation services and cutting corporate income tax for transport firms from 20 percent to 15 percent 5.2.2.2 Transportation activities In 2022, it's estimated that passengers carried at a rate of 3,664.1 million, which is a 52.8% increase from the previous year (a decrease of 32.7% in 2021) Passenger traffic reached 171.8 billion passengers km, which represents a growth of 78.3% (a decrease of 40.9% in 2021) Despite the good recovery of all transportation industries in 2022 compared to 2021, they still haven't reached the output level of 2019 In the event of an energy crisis, alternative transportation sources such as public transit systems or hybrid/electric cars become more important Buses in Hanoi served 212.7 million passengers in the first nine months of 2022, rising by over 25% from the same period last year In 2022, revenue for the ride-hailing and taxi segment in Vietnam reached about 3.77 billion U.S dollars It can be said that increasing transport prices stimulated the transition to public and green transportation 5.2.3 Industrial production 2022 marks the year Vietnam is expected to return to normalcy after a prolonged battle with the Covid-19 epidemic Most industries are gradually resuming their usual operations, with industrial production leading the way Factories have increased their production activities, and in the first nine months of 2022, the IIP increased by 9.6%