Delegation of the European Union to Vietnam

Speech by EU Ambassador Bruno Angelet at the Economic Forum on Energy Transition

Hanoi, 23/01/2019 - 04:20, UNIQUE ID: 190123_1
Speeches of the Ambassador

Energy Transition

M. Nguyen Van Binh, Chair of the Economic Affairs Commission of the Communist Party of Vietnam,

Secretary of State John Kerry,

Ladies and Gentlemen,

I address 3 important questions today 

  1. What did the EU achieve in its transition to a Green Economy ?
  1. How did the EU achieve this ?
  1. Can Vietnam achieve such transition,  how can the EU support it  ?

1. Growing and Greening :  what did the EU achieve ?

Since World War 2 Europe's economic governance pursues 2 major objectives : Economic Efficiency and Social Justice.

This model was permanently object to debate : economists asserted Economic Efficiency conflicts with Social Justice.

But the EU succeeded in combining growth and social justice and we are proud of what we call our model a "social market economy".

The EU's average Gini Coefficient (measuring the gap between rich and poor), remains amongst the best on earth. And yet the EU remains the world's biggest trader and the world's biggest investor. The EU stands for 20 % of world trade in goods and services. We trade double the volume of China, and triple the volume of the US. The EU is the biggest investor in ASEAN, India, the US, and probably in China is number 1.

Today we have added to Economic Efficiency and Social Justice a 3d objective : environmental sustainability.

And yet again our economic model with this 3 objectives is being debated, many asserting you cannot ensure Growth and at the same time reduce CO2 Emissions.

Standard thinking is that economic growth implies increasing industrial output, energy consumption and CO2 emissions. But look at Slide 1.

You can see that developments in the EU prove the contrary :  from 1990 till 2016 the EU’s economy grew by 43% and the population by 6 % whereas CO2 emissions were reduced by 22 %. Our model broke the vicious circle between economic growth and CO2  emissions.

Slide 1

Some pretend we only managed by moving polluting industries out of Europe, and by turning our economy into a service economy - considered less polluting.

Yes, the service sector has grown enormously. But guess what ! The service sector also became one of our biggest polluters, in particular because of transport services. Whereas, as you can see on Slide 2,  industrial production also increased considerably over the same period, but CO2 emissions considerably decreased. I will in a minute explain why.

Slide 2 :

So, not only did our Economy grow and green. It is increasingly growing because of greening ! Only in renewable, the EU counts today over 90.000 companies and over 2 million new jobs.

 

2. How did the EU achieve Growing and Greening  ?

By a triple strategy combining Energy Efficiency, Energy Mix, Renewable Energy

Energy Efficiency

Traditionally the biggest polluters, households, cities and industry strongly reduced their energy intensity and CO2 emissions over the last 20 years. This resulted from energy efficiency measures following years of fiscal incentives (subsidies) or pressure (green taxation) that stimulated innovation, new business models and a change in consumption and production. Energy efficiency reduced costs of housing and production and made the industry more competitive. From 2005 – 2016, energy intensity from the industry decreased by 16 %.

Slide 3

Energy Mix :

But ¾ of EU CO2 emission comes from fuel combustion (for electricity, heat, production of goods and services, etc..). As slide 4 indicates, a considerable change took place in the energy mix for fuel combustion between 1990-2016.  

Slide 4

And as you can see in Slide 5, the new energy mix for fuel combustion resulted in a reduction of CO2 emissions by 29 % in the energy industry, by 44 % in the manufacturing industry and construction, by 22 % for households, commerce, and institutions. But Transport – in particular road transport - has become a big emitter (+26%) and aviation is the fastest growing emitter.

Slide 5

A Circular economy at industrial scale : Another important contribution is the circular economy, that recycles used goods. Waste management and waste to energy had enormous impact on CO2 emissions in the EU. Today we manage  

- 88 % of construction and demolition material

- 66 % of packaging

- 55 % of waste water

- 46 % of municipal waste

- 40 % of plastic packaging

- 32 % of e-waste is being recycled in the economy. 

Energy transition : from Brown to Green

As you see in Slide 6, just in 10 years' time (2005 – 2015), we doubled power generation from renewables (wind and solar, solid waste), equal today to 30 % of the EU's power generation, followed by nuclear (26 %) and gas (21 %)) generation. Coal-fired power generation is still good for 20 % but we move rapidly out of it.  As in Vietnam today, hydro power generation reached its limits already in 1990. The EU was first to create a competitive energy market, with renewables competing with fossil fuels, now followed by China.

2 decades of subsidies and legal incentives have boosted investment and demand, promoted economies of scale turning reduced costs for solar or wind-energy equipment. The industry is now profitable. Solar production of 1 KWh is cheaper than its coal equivalent. Add external coasts for coal fired electricity (pollution, health, upstream hard infrastructure costs) and it increasingly looks as if coal has no economic future.

Slide 6

Lessons Learned 

1. The pursuit of Social Justice, Economic Growth and Ecological Sustainability can go hand in hand  !

2. Greening the Economy can boost Economic Growth. We have broken the vicious circle and turned reduction of CO2 emissions into a virtuous circle  !!!

3. Greening requires us to walk on 3 – legs : Efficiency, Mix and Renewables

4. The financial crisis triggered a contraction of industrial output and CO2 emissions. But the resumption of growth, allowed us to  accelerated energy transition and the decrease of CO2 emissions.

5. Success of greening has boosted our ambitions in the fight against Climate Change. As you can see in Slide 7, the EU will double its  reduction of CO2 emissions by 2030 !

 

Slide 7

2. What can Vietnam achieve ? How can the EU support you  ?

We believe our success can also apply to Vietnam.

Vietnam can design its own Green Transition, and walk on the 3 legs combining Energy Efficiency, Energy Mix and Renewable Energy.

But no one expects Vietnam to just copy Europe's model. Vietnam needs its own, calibrated strategy.

Vietnam is particularly exposed to Climate Change. So the EU decided to run its biggest energy program beyond Europe with Vietnam. We provided a package of some 270 Million Euros in grants. Through Budget Support we implement an Energy sector reform program with the Ministry of Trade and Industry.

First, we supported Vietnam to ensure access to affordable electricity to its most remote and poorest households. Today, 98 % of Vietnam's population has access to electricity : an enormous success for Vietnam, that does much better than its neighbors !

Now we shift efforts with the Government by designing a more comprehensive energy transition strategy. We do so in coordination with other important development partners : the United Nations, the World Bank, Germany and Denmark.

In June 2017, with Minister Tran Tuan Anh and the World Bank Country Director Ousmane Dione, we launched a Policy Platform called the "Vietnam Energy Partnership Group".

5 Working Groups address strategic topics  : Renewable Energy, Energy Efficiency, Energy Market, Access to Energy and Data and Statistics.

Only 1 year since we started, last November, we already endorsed  40 policy recommendations.  

Let me summarize 5  highlights:

First : on the role of private sector investment. Over the last 2 years, Feed-In tariffs have been introduced for solar PV and increased for wind.  This triggered a surge in private investment proposals from foreign and domestic investors. However, these proposals have still not massively materialized yet.

The reason is that the supplier has to conclude a contract (a Power Purchase Agreement) with the buyer – EVN Electricity of Vietnam -  but this standard PPA is still considered insufficient in terms of legal security.

Making the PPA more attractive and in line with international standards should become top priority for the coming months. It means f.ex. tackling its "termination clause" or improve the "dispute settlement mechanisms".

Once this is secured, a lot of Private Investment will become operational and the Government could then even consider a more competitive market by auctioning on-grid projects in renewable energy.

Second : on the role of households through solar rooftops. Households and any production unit can produce solar energy on their roofs and sell on-grid to EVN. This could massively increase energy supply. The Prime Minister just recently took decisions to promote roof top solar power production. This looks very promising.

Third : on the need to rapidly increase the capacity of the grid. Potential for Renewables in Vietnam is enormous and doesn't cost too much as it will come from private investment. But this additional energy supply requires increasing absorption capacity of the EVN. This, and the future of EVN in power distribution, should be well integrated in Vietnam's next energy strategy.

Fourth : on the  need for the right energy mix. Vietnam's energy needs will triple by 2030. Renewables alone can never match those needs and the option of nuclear power has been dropped. So, improving energy mix is key. Vietnam should have an exit strategy for coal to be gradually replaced by gas. Gas pollutes too, but substantially less than coal. Studies indicate that a good mix of renewables and gas has the potential to reduce up to 50% of CO2 emissions. Coal might seem cheaper than gas, but if we include external costs and subsidies, it is no longer the case. What Vietnam should urgently consider is to increase carbon taxes, not only on fuel but also on coal. It should move away direct and indirect subsidies on coal and move them to gas and renewables.

The new Medium to Long term Energy Plans, including PDP 8 but also the forthcoming new Vietnam National Energy efficiency program (VNEEP3), will have to design a strategy for transition and a new Energy mix that is indeed gradual and realistic but also comprehensive. 

Fifth and last point : on the imperative need for Energy Efficiency.

As we saw, 2 of the 3 legs of Europe's energy transition are Energy Mix and Energy Efficiency. Vietnam should also ensure a strong reduction of energy intensity in industry and consumption. There is no legal framework today in Vietnam to ensure Energy Efficiency. Lower energy prices simply undermine efforts to reduce energy intensity in consumption and production.

Energy Efficiency is not costly and it is wrong the pretend it does not fit for a middle-income country. The opposite is true : excessive energy intensity in consumption and production is today wasting money and costs most to the poor. Burning waste for example is burning money. Proper waste management, recycling or waste to energy can have extremely positive effects on CO2 emissions as well as bringing new revenue.

 

Prime Minister, Dear Friends from Vietnam

We strongly believe Vietnam just as Europe can pursue Social Justice, Economic Efficiency and Environmental Sustainability while also reducing CO 2 emissions.

We strongly believe Vietnam can embark on Energy Transition by walking on the same 3 legs : Energy Mix, Energy Efficiency and Renewable Energy.

But Vietnam needs calibrated solutions. We offer today calibrated policy recommendations from the Vietnam Energy Partnership Group. Our strong hope is you will include them in the reflections of the Party, the Government and the National Assembly, and in Vietnam's future Strategic Documents. 

Combine public Investment with fiscal policies.

Shift subsidies away from Brown to Green and shift taxes from Green to Brown.

Extend Eco taxes from fuel to coal.

Encourage citizens and the industry to produce solar energy on their roof tops.

Reduce energy in production and consumption by a strategy on Energy Efficiency.

Doing this, Vietnam can become much more ambitious in reducing CO2 emissions, well beyond its present commitments to our Paris Agreement.

Vietnam needs this

Vietnam should do this

Vietnam can succeed in this

Vietnam’s Energy Transition can be Vietnam's new Doi Moi.

Over 20 years ago, Vietnam's first Doi Moi was about rebooting the economic model to increase economic efficiency while preserving social justice. Today, as Europe did 20 years ago, a new Doi Moi could aim to add a third 3 objective to

And if Vietnam’s leadership can achieve this second Doi Moi, not only Vietnam's future generation will be grateful for this major efforts and success, but the entire world.

I thank you for your attention.

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