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Green growth model: Analysis framework and policy option for Vietnam

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This research introduces green growth, an approach that is more specific than the sustainable development approach. Based on OECD analyses of green growth, the research selects some measuring indicators used for assessing the green growth in Vietnam and then suggests some implications for policies on this approach.

JED No.213 July 2012 | 57 Green Growth Model: Analysis Framework and Policy Option for Vietnam NGUYỄN TRỌNG HOÀI Associate Professor, Doctor of Philosophy, UEH Email: hoaianh@ueh.edu.vn ABSTRACT This research introduces green growth, an approach that is more specific than the sustainable development approach Based on OECD analyses of green growth, the research selects some measuring indicators used for assessing the green growth in Vietnam and then suggests some implications for policies on this approach Research results show that Vietnam is facing great challenges in building a green growth model There are falls in efficiency of employment of factor inputs, increases in waste and pollutants, along with exhaustion of natural resources and environmental degradation caused by industrialization Amid the discouraging picture are several encouraging facts: falls in pollutants emitted by agricultural production, increased afforestation, improvements in hygienic conditions and supply of fresh water, and introduction of legislation on environmental protection Policy implication from this research is that emphasis should be put on a combination of various instruments, public participation and international support to achieve the green growth Keywords: Green growth, sustainable development 58 | Nguyễn Trọng Hoài Green Growth Model GREEN GROWTH Green growth used to mean only fostering economic growth and development while ensuring that natural assets continue providing the resources and environmental services on which our future well-being relies This aspect, however, only responds to the sustainability of growth In a newer and more important aspect, the green growth implies supports for innovation, investment and competition for newer economic opportunities and growth that aims at a greener and more stable economy (OECD, 2011a) A good point of green growth according to the OECD approach is its effort to ensure the sustainability in a specific and measurable analysis framework, especially its attention to “greening” the economy by using more wisely natural resources, developing green markets, aiming at supply of green goods and services, reducing inefficient growth factors, and ensuring selection of policies for improvements in life quality beside traditionally basic principles of economic efficiency, environmental efficiency and social efficiency and quality ANALYSIS FRAMEWORK OF GREEN GROWTH OECD (2011a) introduces an analysis framework of green growth used for assessing situation and advances of countries to the green growth This framework includes a group of indicators evaluating socioeconomic background and characteristics of growth of the surveyed nation, and four groups of indicators measuring factors of the green growth: (i) Environmental and resources productivity; (ii) Natural asset; (iii) Environmental dimension of quality of life; and (iv) Economic opportunities and policy responses Relations between the factors are presented in Figure OECD green growth framework is based on two analyzing steps: The first step is to assess present background of the economy and determine principal characteristics of economic growth (efficient or inefficient, extensive or intensive, and sustainable or unsustainable growth), shortcomings of present growth and goals for future growth This assessment aims at measuring growth, productivity, competition, labor market, and quality of human resources by their demographical features The second one is to evaluate efficiency of use of economic resources, especially natural ones The evaluation employs four groups of indicators: JED No.213 July 2012 | 59 Figure 1: Analysis Framework of Relations between Factors of Green Growth Source: OECD (2011a) 60 | Nguyễn Trọng Hoài Green Growth Model (1) Environmental and resources productivity: assessing the use of energy and factor inputs (2) Natural asset: assessing the use of natural resources, stressing urgency of protection for natural resources needed for green growth (3) Environmental quality of life: reflecting direct impacts of the environment on the quality of life (4) Economic opportunities and policy responses: offering suggestions about appropriate and effective policies that help orient public behavior towards green growth targets Within the four groups, 25 sub-indicators are used for measuring advances of green growth (some of them are still under examination now) These sub-indicators are open and flexible, and nations can apply them to their own circumstances Based on the OECD analysis framework, the research selects certain indicators to measure Vietnam’s path to the green growth Minor adjustments to these indicators help make them more appropriate to Vietnamese conditions and dataset used in the research Besides common indicators often used for assessing the socioeconomic background, such as growth rate, productivity, income, inequality, principal balances, and indicators of demographic quality, certain indicators in the aforementioned four groups that are appropriate to data availability in Vietnam are selected for the research Of group (1), main indicators are carbon and energy productivity, electricity productivity, emission of pollutants by agricultural production In group (2), emphasis is put on the use of fresh water, forest and land For group (3), the research assesses indicators of air pollution, access to hygienic water, and treatment of effluent And in group (4), the environment tax that came into effect in January 2012 is examined METHODOLOGY Empirically, green growth researches estimate trend of each pair of comparative indicators (such as resource and economic ones) to determine greening advances in a development period For group (1), trend of relations between economy and resourceenvironmental variables is estimated to determine whether resource and environmental factors are employed effectively for economic growth To facilitate comparison, increases in these factors are turned into indexes with values of 100 in base years JED No.213 July 2012 | 61 Comparison of trend of relation between the two variables relies on decoupling There are three trends: no decoupling, relatively decoupling, and absolute decoupling (Figure 2) Resources and environment will move towards green growth when they show a relative or absolute decoupling from the economic variable This implies that increases in resources use and pollutant emission are lower than rises in economic growth and output Contrarily, when environmental and economic variables show the same trend of growth rate; or environmental variable grows faster than the economic variable, an unsustainable trend appears and becomes a menace to the green growth, which is considered as non-decoupling Figure 2: Method of Analyzing Empirically Green Growth Variables Source: Statistics Netherlands (2011) From the OECD analysis framework, the research selects certain indicators to measure green growth path in Vietnam Minor adjustments are carried out to make them appropriate to Vietnam’s conditions and dataset APPLICATION OF GREEN GROWTH ANALYSIS FRAMEWORK TO VIETNAM a Socioeconomic Background and Growth Characteristics: 62 | Nguyễn Trọng Hoài Green Growth Model Vietnam has passed the threshold of low income; but it is still on the lowest rung of the middle-income class and needs much more time to reach the take-off phase In the past decade, Vietnam maintained high growth rates, between 6% and 7% but it economic growth is based on increases in factor inputs More particularly, Vietnam’s macroeconomic background in 2007-2011, according to WB estimate, showed signs of stagnation: falling growth rates (from 8.5% to 5.8%) high CPI (8.3% to 18.6%), increasing public debt (45.6% to 58.7%), and prolonged deficit budget and balance of trade The WB Vietnam Development Report 2012 notes that growth of TFP in 2007-2011 showed signs of decline and moved to zero when the macroeconomic stability is poorer because of institutional divide in use of resources for development This means that Vietnam has passed the stage where the economic growth is determined by increases in factor inputs and it is badly in need of an intensive growth model based on better productivity in use of resources, environmental protection and improvements in quality of life Hence, assessment of progressive aspects of the growth model is very important Population and labor structure partly determines readiness of a country for green growth GSO data in 2011 show that Vietnam enjoys a good population and labor structure for the green growth The population growth is steady, around 1% a year and tends to fall slightly (1.17% in 2005 to 1.05% in 2010) Gender structure of the population is balanced with males representing 49% and females 51% Old persons as dependants fell from 8.77% in 2005 to 8.53% in 2010 because of high increases in young persons Additionally, the average longevity of the population rose to 74.61 in 2010 compared with the world average of 69 Regarding the labor structure, the working population is large and increasing steadily, from 55% in 2005 to 58% in 2010 while the unemployment rate fell gradually, from 5.31% in 2005 to 4.29% in 2010 Moreover, quality of human resources is improved when proportion of university graduates rose to 2.49% in 2010 Vietnam also faces population problems: its population density is high in comparison with the world average, reaching 262.45 persons per km2 in 2010, and its GINI rose from 0.424 in 2005 to 0.433 in 2010 Although it has not been serious (GINI higher than 0.5 implies a serious inequality), this indicators requires improvements in the green growth as conditions for solving social problems JED No.213 July 2012 | 63 b Environmental and Resource Productivity: Vietnam environmental and resource productivity is falling drastically Figure shows that in the years 1990-2008, there was no decoupling of carbon emission from GDP growth; and the former at times rose more quickly than the GDP Growth of carbon emission in this period was 10.2% a year while the average growth rate was 7.2% per year Ratio of carbon emission to US$1 of GDP rose from 0.496kg in 1990 to 0.573kg in 2008 (World Bank, 2012, World Development Indicators) This means that the environment suffers more carbon for every US dollar of GDP Figure also shows that no decoupling between increases in electricity consumption and GDP growth took place in 1990-2009 During the two decades, consumption of electricity always rose faster than the GDP growth rate, reaching 13.5% a year compared with a GDP growth rate of 7.1% Such empirical evidence suggests that in spite of rises in GDP and industrial output, Vietnam continues to employ obsolete technologies with low productivity, high consumption of power and high gas emission This reflects waste of energy and resources, and neglect of environment and public health during the industrialization We can conclude that Vietnam in the past two decade only attain a brown growth instead of a green one Figure 3: Carbon Emission and Electricity Consumption GDP GDP Carbon emission Electricity consumption Source: World Bank, World Development Indicators In this a dark picture, however, there are bright spots The agricultural sector looked greener: there was a relative decoupling of methane emission from added value of 64 | Nguyễn Trọng Hoài Green Growth Model agricultural production Growth rate of methane emission (4.2% a year) was much lower than the growth of value of agricultural output (16% a year) (Figure 4) In the years 1990-2000, nitrous oxide emission from agricultural sector was high as compared with added value of agricultural production The emission volume, however, has fallen steadily since 2000 and a relative decoupling of nitrous oxide emission from added value of agricultural production came into being in 2000-2008 (Figure 4) These data show that Vietnam’s agriculture has witnessed improvements in productivity and technology However, more efforts to modernize technology and farming techniques are needed to turn this trend into an absolute decoupling when pollutant emission falls over times and a high growth rate in agricultural output is ensured Figure 4: Pollutant Emission from Agricultural Sector in 1990-2008 Added value of agricultural production Added value of agricultural production Methane emission from agriculture Nitrous oxide emission from agriculture Source: World Bank, World Development Indicators c Assessment of Natural Resources: - Fresh water: Vietnam enjoys an abundant water resource Its surface water resource amounts to 830-840 billion cubic meters that are large enough to satisfy all needs, but its source of fresh water faces exhaustion because of overuse According to international standard, the threshold for exploitation is about 30% of volumetric flow, but the exploitation of rivers in Central Vietnam and Western Highlands has reached 50%, and up to 70%-80% in Ninh Thuận in particular (Ministry of Natural Resources and Environment, 2010) JED No.213 July 2012 | 65 Moreover, water security is also a challenge to Vietnam because over 60% of volume of surface water is from foreign territories Cửu Long, its biggest river, has 95% of its volume from foreign territories Some 40% of water volume for Hồng and Thái Bình Rivers is from China (Ministry of Natural Resources and Environment, 2010) Building of hydroelectric dams on upper parts of rivers reduces remarkably streams and flows in Vietnam Additionally, unpredictable changes in rainfall and saltwater intrusion caused by climate change are also negative effects These are problems for Vietnam in using water resources in an effective and sustainable manner - Forest: Vietnam at present has 13 million hectares of forest including specialized forest (2 million hectares), protective forest (5 million hectares), and production forest (6 million hectares) (Vietnam Development Report 2010) Proportion of forest coverage has increased remarkably in recent years, from 30% in 1990 to over 40% in 2010 due to forestation programs in the past 20 years (United Nations Statistics Division, 2012) Forest area in Vietnam, however, is reducing because of fires, unruly deforestation, and changes in use purpose (building of irrigation systems or hydropower dams) Forest fires are sometimes beyond control and causes great damage: 7,350 hectares in 2005; 4,746 hectares in 2007 and 5,668 hectares in 2010 Unruly deforestation has been reduced but up to 2010 over 1,000 hectares of forest were destroyed as reported by Forest Protection Department under Ministry of Agriculture and Rural Development in early 2012 Programs to turn forests into farming land, irrigation works and hydropower dams are also worrying signs In Gia Lai alone in 2008, 16,072 hectares of forest were used for other purposes (15,828 hectares of which were turned into farming fields Deforestation for irrigation increased considerably in the past few years Although helpful in increasing the national energy output, it caused great damage to the ecosystem and livelihood of local residents Table 1: Forest Area Used for Other Purposes (ha) 2007 2008 2009 2010 Crop farming 353.87 15,828.70 1,040.73 200.3 Irrigation works 299.45 445.7 1,600.72 1,409.94 Source: Forest Protection Department (BARD) 66 | Nguyễn Trọng Hoài Green Growth Model - Land: With some 33 million hectares of land, or 0.38ha per capita, Vietnam is among countries with the lowest per capita land area (ranking 203rd in 208 countries) Additionally, per capital farming area is also small (0.11 ha) (Ministry of Natural Resources and Environment, 2010) At present, there are various problems with the land resource Firstly, urbanization makes agricultural land contract because it is used for building residential districts, industrial estates and other public works The ratio of non-agricultural land to farming land rose from 0.113% in 2006 to 0.138% in 2009 In the Hồng Delta, some 0.43% of farming is lost because of urbanization (Ministry of Natural Resources and Environment, 2010) % Figure 5: Ratio of non-agricultural land to farming land Source: Ministry of Natural Resources and Environment, 2010 Secondly, soil pollution caused by unreasonable use of pesticide and other chemicals, or residue of hazardous substances used in wartime, such as dioxin, has become more serious Other menaces to the land resource are erosion, natural disasters, desertification and saltwater intrusion These are great challenges to Vietnam’s efforts to use and protect the land resource effectively for green growth d Environmental quality of life: Evaluation of the environmental quality of life is based on estimates of several representative variables: air pollution, access to fresh water and treatment of effluent Air pollution reflects in volume of fine dust, particularly TSP and PM10 indicators because they can intrude into lungs and harm respiration and cardiovascular systems JED No.213 July 2012 | 67 Generally, the PM10 and TSP density in cities, such as Hà Nội and HCMC, is higher than the allowed level (Figures and 7) Figure 6: Average PM10 in Some Big Cities over Years Source: Ministry of Natural Resources and Environment, 2010 NB: QCVN 05:2008 is a Vietnam’s set of norms that stipulates standards for ambient air quality TB năm: Annual average Figure 7: TSP Density in Some Cities in 2005-2008 Source: National Environmental Monitoring Network, 2010 NB: QCVN 05:2009 is a Vietnam’s set of norms that stipulates standards for ambient air quality TB năm: Annual average TB 24h: Daily average 68 | Nguyễn Trọng Hoài Green Growth Model Proportion of residents with an easy access to fresh water increased remarkably over the years, from 58% in 1990 to 94% in 2008 in both rural and urban areas, so did the proportion of resident with access to hygienic toilets, from 35% in1990 to 75% in 2008 More efforts are required, however, because 25% of the population have no access to hygienic toilet, and this figure reaches 67% in rural areas in 2008 Vietnam Urban areas Vietnam Rural areas Figure 8: Proportion of Population with Access to Fresh Water Rural areas Urban areas Figure 9: Proportion of Population with Access to Hygienic Toilet e Economic Opportunities and Policy Option: Environment tax is one of policy options for the green growth Vietnam’s Environment Tax Law was proposed in 2010 and came into effect in 2012, marking its effort to deal with pollution and encourage the use of eco-friendly technologies and goods The Environment Tax Law specifies tax rate on the principle that all emissions of pollutants should pay To encourage a greener economy, the new tax policy pays full attention to pollutant-generating fields (fuel, coal, etc.), and use of nylon bags, pesticide, and weed-killer This is a good progress by legislature although it is very late in comparison with neighboring countries Moreover, its effects on changes in public behavior for the green growth are still questionable RESEARCH RESULTS Aforementioned analyses show that Vietnam is facing great challenges in its struggle for the greener growth These are falls in resource productivity, economic inefficiency, waste of resources and higher emission of pollutants Additionally, JED No.213 July 2012 | 69 exhaustion of natural resources, and falls in environmental quality of life caused by fast industrialization are also worrying In such a pessimistic picture, however, there are some bright spots, such as falls in emission of pollutants in agricultural sector, improvements in forest coverage, easier access to fresh water and hygienic conditions, and introduction of environmental protection laws Research results are presented in Table Table 2: Assessment of Green Growth in Vietnam Indicator Research period Trend Environmental and Resource Productivity Carbon emission 1990 - 2008 No decoupling Electricity productivity 1990 - 2009 No decoupling Methane emission from agriculture 1990 – 2008 Relative decoupling Nitrous oxide emission from agriculture 1990 – 2008 Relative decoupling 2000 - 2010 On the decrease Forest area 1990 - 2010 Remarkable increase Forest fire 2004 - 2010 At a high level Deforestation area 2000 - 2010 Relative decrease Turned into farming land 2007 - 2010 Relative Decrease Used for irrigation works 2007 - 2010 Fast increase 2006 - 2009 On the decrease Air pollution 2005 – 2009 Increasingly serious Access to fresh water 1990 – 2008 Remarkable improvement Access to hygienic toilet 1990 – 2008 Remarkable improvement 2010 – 2012 Signs of progress but not as expected Natural resources Water Forest Land Environmental quality of life Economic Opportunities and Policy Option Environment Tax Law 70 | Nguyễn Trọng Hoài Green Growth Model POLICY IMPLICATIONS FOR THE GREEN GROWTH Green growth is a policy priority when Vietnam tries to restructure its economy and adopt a new growth model The green growth strategy is expected to be submitted to the Government in Quarter II of 2012 From results of our research we suggest the following policies to promote the green growth in Vietnam Firstly, the Environment Tax Law, one of market instruments, should be enforced properly and strictly Fees for emission of carbon and other pollutants should be increased step by step when possible to encourage companies to move to greener technologies Moreover, financial support can be given to companies that apply green technologies and new sources of energy as allowed by WTO rules Secondly, there should be heavy sanctions against violations of environment protection laws and acts that cause pollution and damage to natural resources Such acts may be prosecuted according to criminal codes Thirdly, more information should be distributed to help consumers pay more attention to eco-friendly products such as bio-fuel and recycled energy Fourthly, there should be policies to introduce greener technologies, increase investment in research and development of new sources of energy and eco-friendly technologies, improve resource productivity, and adjust production to climate change as a driving force for enhancing the competitiveness Fifthly, policies on green industrialization should give priority to agricultural sector where both potential threats and effects are high and widespread because it employs natural resources and a large proportion of working population Finally, cooperation with other countries and international organizations should be strengthened with public participation enhanced to ensure success for the green growth strategy when personal income and resources for green growth in Vietnam are still limited JED No.213 July 2012 | 71 References Government of Ireland (2008), “Ireland National Development Plan 2007-2013: Transforming Ireland a Better Quality of Life for All” Ministry of Natural Resources and Environment (2010), “Báo cáo môi trường quốc gia năm 2010 - Tổng quan môi trường Việt Nam” (2010 National environment report – Vietnamese environmental panorama) OECD (2011a), Towards Green Growth OECD (2011b), Towards Green Growth: Monitoring Progress OECD Indicators OECD (2011c), Tools for Delivering on Green Growth OECD (2012d), Greening Development: Enhancing Capacity for Environmental Management and Governance Statistics Netherlands (2011), Green Growth in the Netherlands Vietnamese National Assembly (2010), Luật thuế bảo vệ môi trường 2010 (2010 Environment tax law) World Bank (2011a), Navigating Turbulence Sustaining Growth, East Asia and Pacific Economic Update, Vol World Bank (2011b), Báo cáo phát triển Việt Nam: Quản lý tài nguyên thiên nhiên Báo cáo chung Đối tác phát triển cho Hội nghị nhóm nhà tài trợ cho Việt Nam (Vietnamese version of VDR 2011: Natural Resources Management), Hà Nội 12/2011 World Bank (2012), Vietnam Development Report: Market Economy for a Middle-Income Vietnam, Joint Donor Report to the Vietnam Consultative Group Meeting, December, 2011 ... environmental efficiency and social efficiency and quality ANALYSIS FRAMEWORK OF GREEN GROWTH OECD (2011a) introduces an analysis framework of green growth used for assessing situation and advances of... Water Forest Land Environmental quality of life Economic Opportunities and Policy Option Environment Tax Law 70 | Nguyễn Trọng Hoài Green Growth Model POLICY IMPLICATIONS FOR THE GREEN GROWTH Green. .. Opportunities and Policy Option: Environment tax is one of policy options for the green growth Vietnam s Environment Tax Law was proposed in 2010 and came into effect in 2012, marking its effort to

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