Progress on the Viet Nam Green Growth Strategy

1. Progress on the Viet Nam Green Growth Strategy Presentation for the G20 Development Working Group Workshop on Inclusive Green Growth Ms. Nguyen Thi Dieu Trinh (DSENRE – Vietnam Ministry of Planning and Investment) Ms. Ngo Thi Nhung (Vietnam Ministry of Finance) Moscow - July 2013

2. Content • Overview of the Vietnam National Green Growth Strategy (VGGS) • Institutional framework • Key Challenges • Green growth financing • Tools and Instruments • Next Steps

3. Overview of the Vietnam National Green Growth Strategy (VGGS) • Approved on September 25th 2012 by the Prime Minister (decision 1393/QD-TTG) • Overall objective of the VGGS – (Low carbon Development Strategy) • Green growth, as a means to achieve a low carbon economy and to enrich natural capital, will become the principal direction in sustainable economic development; reduction of greenhouse gas emissions and increased capability to absorb greenhouse gas are gradually becoming essential indicators in social-economic development. • 3 strategic tasks outlining the scope of the strategy • Low Carbon Growth • Greening of Production • Greening of Lifestyles • 17 solutions addressing specific Green Growth policy directions for sectors and provinces • 10 priority actions to initiate immediate Green Growth action • Overall supervision through the National Committee on Climate Change which is headed by the Prime Minister

4. Participatory Process Prime Minister assigns the Ministry of Planning and Investment to formulate and implement the Vietnam National Green Growth Strategy (Notice 38/TB-VPCP dated 03/03/2011 and Decision 1393/QD-TTg dated 25/9/2012) Phase 1 Establish Drafting Board and Editing Board including Ministerial Leaders and Directors from relevant sectors (Finance, Industry and Trade, Natural Resources and Environment, Agriculture and Rural Development, Transportation, Science and Technology and Construction) Formulate the Green Growth Framework for Vietnam with consultation with international community on 24 November 2011 Phase 2: Building the Vietnam National Green Growth strategy Consultation with stakeholders (twice with business community, 3 times with local authorities, research institutes and social society organization and international community in 5, 2012) Receiving directions from Country Top Leaders through thematic reports and comments from members of the National Council for Climate Change; getting recommendations from Drafting Board and Editing Board Assessments on low carbon development options Gaining experiences through site visits: South Korea, Mexico, Germany and the Netherlands International Expert consultations (with support from UNDP, WB, KOICA and GGGI).

5. Targets The VGGS sets the following targets for GDP growth and GHG emission reductions: • For the year 2020:  • GDP per capita is doubled compared to 2010 • Reduce energy consumption per unit of GDP by 1.5 to 2% per year • Reduce intensity of greenhouse gas emissions per unit of GDP by 8-10%  or double the target with international support • For the year 2030: • Reduce total GHG emissions by at least 1% per year without and 2% with international support.  • Environmental degradation is addressed and natural capital stocks have been improved while the access and use of clean and green technology is significantly enhanced. • In 2050, Viet Nam has mainstreamed Green Economic Development

6. Implementation Establish an Inter-ministerial Coordinating Board for implementation of the Green Growth Strategy under the National Committee on Climate Change to direct the implementation of the green growth strategy. The Board will have the Deputy Prime Minister as its Head. The Minister of Planning and Investment will be the standing vice Head of the Inter-ministerial Coordinating Board and four other vice-Heads are leaders of ministries: Finance, Industry and Trade, Agriculture and Rural Development, Natural Resources and Environment. Inter-ministerial Coordinating Board members include representatives of some ministries, sectors and local authorities and representative of some associations. The supporting office for the ICB is located in the Ministry of Planning and Investment. Establishment of Climate Finance Task Force to advise Government on policies and mechanisms;

7. Key Challenges • Moving from strategy development towards implementation: • Developing mechanisms for provincial and sectoral target setting requires tools/mechanisms • Criteria for green growth projects/ programs. • Assess investment requirements • Sources of finance (domestic vs. external) • Assessing what market based mechanisms are appropriate • Promote private sector involvement • Work on development partner coordination: • A coordination framework has been developed but needs to be rolled out • Development partners have converging approaches which hampers coordination • Limited understanding at local level. • Despite significant identified win-win potential the upfront investment costs remain significant for private sectors which demands new financing mechanism. • Uncertainty on climate finance and green climate funds limits mid – to longer term commitments.

8. Climate Finance in Viet Nam Government investment for Climate Change projects and program of around $1 annually. Viet Nam has received International Climate Finance support under the form of ODA from 1993 of about $2 billion; Almost all CFs are for adaptation purpose; Funding channels: SPRCC, REDD+, VEPF, CDM. Assessing existing expenditures on climate and green growth [will provide more detail and accurate data] UNDP and WB supported Climate Public Expenditure and Investment Review (has been initiated). Improving access to climate finance: Establish the Vietnam Climate Finance Options Framework (inception workshop March 26 ); In collaboration with UNEP and Frankfurt School of Finance and Business develop green growth/climate financing mechanisms; MPI DSENRE is a member of the Steering Committee for the Asia Low Emission Development Strategies Partnership Forum – a partner network of the LEDS Global Partnership. Work with sectors and provinces to set targets and identify policy actions and investments: Work on developing the MACC (Marginal Abatement Cost Curve) findings into investments and policy actions. Develop synergies between existing work at sectoral level (agriculture and rural development, renewable energy, green industry strategy) 8

9. VGGS requires a broad based funding strategy - Engagement of private sector, as investor and as recipient: • Building on PPP modalities work on blending CF/Green finance sources in private sector investments in infrastructure, power generation; • Develop new modalities to facilitate innovation through subsidizing promising R & D which engage private and public sector partners. - Use the Budget as entry point enlarging fiscal space to allow public investments in green growth. - Develop market based mechanism to generate financing for green growth (with PMR support): • NAMA development (credited/performance based); • A future cap and trade system (probably initiated through sector based CO2 based emission allocations).

10. Proposed Roadmap Phases: Learning main-streaming- Green Growth towards a GE “green Viet Nam” GGS Mainstream GG in (SEDP 2015-2020 Gradual sharpen targets through cap and trade, increased and targeted env taxes, Learning On GG, identify win-wins GGS tasks: 1. Low carbon growth 2. Greening of production 3. Green lifestyles Establish national REDD +Program Green Viet Nam: high Green GDP and low GHG/unit GDP Develop MRV Initiate innovation in Green Supply Chains Develop financial infrastructure and market based mechanism (new mechanism/NAMA)s CDM Climate finance master plan Green public Procurement PMR support area Public awareness campaigns 2012------------------2015------------------2020-------------------2025-----------------------2030--- 2050 IEC Develop Human resources and technology for GG

11. Tools and Instruments TAX POLICIES FINANCIAL POLICIES ON LAND CDM POLICIES

12. TAX POLICIES CIT: PROMOTE GREEN ENTERPRISES Enterprises in the domains of high technology, scientific research and technological development and Enterprises operating in environmental domains are entitled to tax exemption for no more than four years and a 50% reduction of payable tax amounts for no more than nine subsequent years. are entitled to the tax rate of 10% (general tax rate is 25%) for 15 years since enterprise has turnover.

13. TAX POLICIES IMPORT TAX: Encourage enterprises to invest in waste treatment sector ROYALTIES: Limit wasteful resource use, especially water resources machines, equipment, means, tools and materials for exclusive use in environmental observation and analysis; generation of clean or renewable energy are entitled to tax exemption machines, equipment, means, tools and materials for exclusive use in collection, storage, transportation, recycling and treatment of wastes are entitled to tax exemption. Tax rate for exploiting groundwater is from 3% to 8%: prevent environmental pollution caused by exploiting and processing minerals Tax rate for exploiting surface water is from 1% to 3%: prevent the depletion of water resources

14. Financial policies on land are exempted from land use levy and land rents List of domains are entitled to special investment preferences: Treatment of pollution and protection of environment; production of equipment for pollution treatment and equipment for observation and analysis of the environment;. Collection and treatment of wastewater, waste gas and solid waste; recycling or reuse of waste... located in geographical areas with exceptionally difficult socio-economic conditions. 1 1 2 2 Are reduced 50% of land use levy, land rents amounts payable into the state budget List of domains are entitled to special investment preferences: Manufacture of equipment for responding to and dealing with oil spills; Manufacture of equipment for waste treatment…. located in geographical areas with difficult socio-economic conditions 3 3

15. CDM (Clean Development Mechanism) policies Invest in producing certain goods in "clean production - environmental protection” way requires large capital investments and its profit will be lower than invest in producing other goods. So, there should be an appropriate mechanisms and policies to encourage investment in this sector. To encourage investment, support enterprises, the Prime Minister issued Decision dated 02/7/2007 No.130/2007/QD-TTg on a number of mechanisms and fiscal policies for projects under the clean development mechanism (CDM). Investors that build and implement CDM projects in Vietnam are: +) Exempt or reduce CIT +) Exempt or reduce land use levy, land rents in special investment preferences domain (highest preference) +) Consider subsidies for products of CDM projects in Vietnam

16. Next steps Roll out the 10 priority programs (including the financing) Design the VGGS Implementation Plan, obtain approval and roll out of the priority actions (second half of 2013) which includes low carbon policy instruments. Coordinate interested Development partners based on aid effectiveness principles. Building capacity for Climate Finance Fask Force At provincial – and sectoral level, awareness and understanding remains limited requires additional capacity building investments. Develop an overall climate/green growth finance mechanism to start working towards directly assessing the Green Climate Fund.

17. Thank you for your attention!