Viet Nam: Green Growth and Just Energy Transition

OBJECTIVE

The Program will enhance the Government of Viet Nam’s efforts to achieve its climate goals by enhancing Viet Nam’s policy, regulatory, and financing frameworks to accelerate the transition toward a low-carbon, climate-resilient, and socially inclusive development pathway, in line with Viet Nam’s  NDC and net-zero emissions target by 2050 in the areas of energy transition and green growth.

DESCRIPTION

Viet Nam is among the countries most exposed to climate-related risks globally, due to its long coastline, low-lying river deltas, dense population centers, and climate-sensitive growth model. Rising temperatures, sea-level rise, and increasingly frequent and intense typhoons, floods, droughts, and heatwaves are already disrupting economic activity and threatening infrastructure assets.

The Program, co-financed with KfW, will help overcome key climate mitigation and adaption constraints by prioritizing three primary reform areas:

Pillar 1: Develop and establish financial and investment incentives and mechanism for Green Transformation and Green Growth.

Reforms under this pillar focus on implementing regulations and incentives for the initiation of a domestic carbon market, the adoption of electric vehicles, and the development of a green taxonomy.

Pillar 2: Implement favorable investment policies for the Just Energy Transition.

Reforms under this pillar focus on addressing regulatory obstacles to facilitate private investment in renewable energy, energy efficiency, and breakthrough technologies such as offshore wind and pump storage through mechanisms like direct power purchase agreements and streamlined approval processes.

Pillar 3: Improve the financing framework for the Just Energy Transition.

Reforms under this pillar focus on enhancing public financing options through improved access to official development assistance and concessional funding for just energy transition projects, thereby ensuring energy security and affordability.

Collectively, these three pillars reinforce Viet Nam’s NDC implementation, Viet Nam’s Green growth strategy and operationalize the long-term vision of the National Climate Change Strategy to 2050.

ENVIRONMENTAL AND SOCIAL INFORMATION

Applicable Policy and Categorization. AIIB's Environmental and Social Policy (ESP), including the Environmental and Social Exclusion List (ESEL) and provisions related to CPBF set forth in Section 16 of the ESP, are applicable to all three (3) pillars of this Program. Therefore, the provisions on Environmental and Social (ES) categorization in the ESP do not apply to this Program. The ES effects of the Program are assessed as moderate. Effect management and enhancement measures have been prepared and consulted with relevant stakeholders for implementation. 

Environmental and Social Aspects. The Program would have significant positive environmental effects. The Program, however, would have some low to moderate environmental risks including increased generation of hazardous waste streams (notably the e-waste) with insufficient end-of-life management systems; biodiversity, land-use, and marine ecosystem impacts from large-scale renewable energy and pumped storage hydropower development; cumulative environmental impacts due to accelerated infrastructure deployment under streamlined approval procedures, particularly where provincial capacity for environmental screening remains limited; and others. On social aspects, the Program is expected to generate broadly positive social outcomes through improved energy affordability, enhanced public health, job creation in green sectors, and increased access to clean energy services, but would also have some moderate social transition risks, including potential land acquisition, resettlement, and livelihood impacts associated with renewable energy, transmission, and pumped storage hydropower infrastructure; distributional impacts from carbon pricing and compliance costs, which may be partially passed through to consumers; labor transition risks arising from structural changes in carbon-intensive industries, including potential job displacement and increased informality in the absence of fully developed just transition mechanisms; and unequal access to clean energy technologies due to financial constraints and asset ownership barriers, particularly affecting lower-income and rural households. 

Environmental and Social Instrument. An ES assessment matrix that has been prepared covering the Program’s policy actions, which was based on an ES assessment (ESA). In parallel, the co-financier has engaged ES consultants to carry out assessments on ES effects by prior actions and the national ES Systems in relation to managing the identified ES effects by prior actions. Findings of the AIIB’s due diligence and the co-financier consultant’s assessment are reconciled. The ES Assessment Matrix provides details on direct and indirect environmental effects, and direct and indirect social effects associated with each prior action. These effects, together with the proposed mitigation and enhancement measures, have been consulted with relevant stakeholders and finalized for implementation. 

Monitoring and Reporting Arrangement. MOF, as the executing agency, will report to AIIB on the implementation progress of the Policy and Results Matrix. AIIB will conduct Program monitoring periodically to ensure that the policy actions continue to be put in place without reversal. This monitoring arrangement shall track targeted ES indicators, with greater focus on e-waste management, supporting poor and vulnerable groups, job retrenchment, compensation and livelihoods restoration due to land acquisition and resettlement, gender aspects. AIIB will monitor and oversee the implementation of the ES aspects of the Project annually and address any issues that arise during the Client’s implementation of the Project, including implementation of actions identified to address shortcomings in Member systems.