ESSAY PUBLIC ECONOMIC: The policies of the Vietnamese government to respond to climate change in order to protect the economy: theory and practice

CÁC CHÍNH SÁCH CỦA CHÍNH PHỦ VIỆT NAM NHẰM ỨNG PHÓ VỚI SỰ THAY ĐỔI CỦA KHÍ HẬU NHẰM BẢO VỆ NỀN KINH TẾ: LÝ LUẬN VÀ THỰC TIỄN.Adam Smith đã đưa ra một quan sát nổi tiếng nhất trong kinh tế học, nó nói rằng: các hộ gia đình và các hãng sản xuất kinh doanh tương tác với nhau trên thị trường được dẫn dắt bởi một bàn tay vô hình để đưa họ đến những kết quả thị trường mong muốn. Tuy nhiên, kinh tế học cũng chỉ ra rằng, mặc dù thị trường làm nhiều việc tốt, nhưng thị trường không phải lúc nào cũng làm được tất cả mọi việc hiệu quả. Biến đổi khí hậu (BĐKH) là ví dụ điển hình về một dạng thất bại thị trường liên quan đến ngoại ứng, đồng thời các hoạt động giảm nhẹ BĐKH và thích ứng với BĐKH có đặc điểm của hàng hóa công cộng. Lý thuyết về ngoại ứng và hàng hóa công cộng chính là điểm khởi đầu cho các phân tích kinh tế về BĐKH. Tuy nhiên, BĐKH có một số điểm khác biệt so với các dạng thất bại thị trường khác, đòi hỏi các phân tích kinh tế đối với BĐKH phải xem xét các yếu tố này

Student’s name: Đỗ Quang Huy + 1714450012

Bùi Minh Quang + 2014450212 Class: KTEE407(GĐ1-HK1-2221).1

Lecturer: Th.s LÝ HOÀNG PHÚ

Hà Nội, tháng 9 năm 2021

FOREIGN TRADE UNIVERSITY

ECONOMIC FACULTY

*** ESSAY The policies of the Vietnamese government to respond to climate change in order to protect the economy: theory and practice

Student’s name: Đỗ Quang Huy - 1714450012

Bùi Minh Quang - 2014450212 Class: KTEE407(GĐ1-HK1-2221).1

Lecturer: Th.s LÝ HOÀNG PHÚ

Hà Nội, tháng 9 năm 2021

TABLE OF CONTENT

CHAPTER 1: GENERAL THEORY ON CLIMATE CHANGE

CHAPTER 2: THE NATURE OF CLIMATE CHANGE IN THE PUBLIC ECONOMY

2.1.1 Climate change is an externality 10

2.1.2 Climate change mitigation and adaption is a public good 11

2.1.3 Climate change is the biggest market failure 12

CHAPTER 3: PRACTICE OF GOVERNMENT POLICIES

3.1 SITUATION OF CLIMATE CHANGE IN VIETNAM 14

3.1.1 Impacts on Vietnam's economy and society 14

3.1.2 Loss of people, property and money due to climate change 14

3.1.3 Climate change affects the industry 15

3.2 POLICIES RESPOND TO CLIMATE CHANGE

Adam Smith made the most famous observation in economics: households andfirms interacting in the market are guided by an "invisible hand" that guides them todesire market outcome However, although the market does many good things, the marketdoes not always do everything efficiently Climate change is a typical example type ofmarket failure in terms of externalities, while climate change mitigation and adaptationactivities are characterized by public goods The theory of externalities and public goods

is the beginning point of economic analysis about climate change However, climatechange has some differences from other forms of market failure, requiring economicanalysis about climate change to consider these factors

As an economics student, it is essential to be aware of the relation betweeneconomic growth and climate change Therefore, with the researching of documents,reference books and the guidance of the subject lecturer, I decided to choose the topic

"The policies of the Vietnamese government to respond to climate change in order toprotect the economy: theory and practice” The topic helps me understand and see theright policies, solutions and directions of the government in the process of developing thecountry With limited practical knowledge and experience, mistakes in implementationwill be inevitable, I look forward to your valuable comments and suggestions

CHAPTER 1: GENERAL THEORY ON CLIMATE CHANGE

1.1 CLIMATE DEFENITION

Alixop's concept of climate: the climate of a place is a specific weather regime inmany years, caused by solar radiation, the characteristics of the buffer surface of theclimate circulation The factors that form the climate: radiation factor, terrestrial radiationbalance, atmospheric radiation balance, terrestrial-atmospheric system radiation balance,Earth thermal balance Average weather of a particular region, lasting for a long time,usually 30 years (according to WMO) including factors of temperature, humidity,precipitation, phenomena occurring in the atmosphere and many other weather factors are

a state, including descriptive statistics of the climate system Meteorological factors: solarradiation, amount of cloud, barometric pressure (atmospheric pressure), wind speed anddirection, air temperature, amount of water falling (precipitation), evaporation and airhumidity, weather

1.2 CONCEPT OF CLIMATE CHANGE.

The Earth’s climate system includes the atmosphere, continents, oceans,cryosphere, and biosphere Climate processes take place in the continuous interaction ofthese components The time scale of the feedback in each component varies greatly Manyfeedback processes of physical, chemical and biochemical factors play a role in increasingclimate change or limiting climate change The United Nations Framework Convention

on Climate Change defines: “Climate change is the “adverse effects of climate change”,which are changes in the physical or biological environment that cause significant adverseeffect on the composition, resilience or reproduction of natural and managed ecosystems

or on the functioning of socio-economic systems or on the health and welfare of humanspeople” Earth’s climate change is the change of the climate system including theatmosphere, hydrosphere, biosphere, lithosphere at present and in the future by naturaland man-made causes A change in climate caused directly or indirectly from humanactivity that alters the composition of the earth’s atmosphere that, together with naturalclimate change, has been observed over a given period of time “ (UNFCCC) Climatechange is the variation in the average state of the global or regional atmosphere over time

from a few decades to millions of years (IPCC 2007) These changes are caused by thedynamics of the earth , solar radiation, and impacts from human activities These changesare caused by the dynamics of the earth, solar radiation, and more recently humanactivity Climate change during the twentieth century to date is mainly caused by humans,

so the term climate change (also known as global warming) is considered synonymouswith modern climate change.)

1.3 CAUSES TO CLIMATE CHANGE.

Global climate change is inevitable, no matter how well we control greenhouse gasemissions The reason is that existing levels of emissions in the atmosphere will continue

to increase temperatures and sea levels over the next century

Climate expert Gerald Meehl and colleagues at the US National Center forAtmospheric Research (NCAR) and colleagues used computer climate models to predictwhat would happen if humans control emissions greenhouses at different levels Thestudy takes into account the ocean's slow response to global warming The results suggestthat the most optimistic scenario + that greenhouse gas emissions in the atmosphere aremaintained at 2000 levels + requires drastic reductions in CO2 emissions, much morethan the levels in the Kyoto Protocol Even in this case, the global temperature willcontinue to increase by 0.4-0.6°C in the 21st century, on par with the temperature increasethroughout the 20th century

Climate change is an issue that is currently being deeply concerned by countriesaround the world Climate change, typified by global warming, is taking place The worldtemperature has increased by about 0.7°C since pre-industrial times and is currentlyincreasing at an increasing rate In addition to natural and calculated causes As a complexchanger of climate systems around the world, most of the world's leading environmentalscientists agree: greenhouse gases are released into the atmosphere by human activities.caused global climate warming

Recent studies show that the emission of greenhouse gases (mainly CO2 andMethane CH4) is the leading cause of climate change, especially since 1950 when the

world accelerated the pace of industrialization and consumption Related to that is theincrease in the use of fossil fuels such as coal, oil, cement production, deforestation andthe increase in cattle ranching (discharge of cattle manure creates an increase in methane),reclaimed peatland wetlands The conclusion of researchers from the University of Berne+ Switzerland published in the scientific journal Nature on May 15 said that theconcentration of CO gas in the atmosphere is now at its highest level in the past 800,000years Therefore, the main cause of Earth's climate change is believed to be an increase inactivities that generate greenhouse gas emissions g overexploitation of greenhouse gassinks such as biomass, forests, and other marine, coastal and terrestrial ecosystems Inorder to limit climate change, the Kyoto Protocol aims to limit and stabilize six majorgreenhouse gases: CO2, CH4, N20, HFCs, PFCs and SF6

+ CO, emitted when burning fossil fuels (coal, oil, gas) and is the main source ofanthropogenic greenhouse gases in the atmosphere CO, also generated from industrialactivities such as cement production and steel rolling

+ CH4 is generated from landfills, fermenting feed in the intestines of ruminants, gassystems, natural oil and coal mining

+ N2O emissions from fertilizers and industrial activities

+ HFCs are used instead of ozone depleting substances (ODS) and HFC-23 is a product of the production of HCFC-22

by-+ PFCs are generated from aluminum production

+ SF6 is used in insulating materials and in the production of magnesium

1.4 SIGNS OF CLIMATE CHANGE.

+ Warming of the atmosphere and the Earth in general

+ Changes in the composition and quality of the atmosphere are harmful to the habitat ofhumans and organisms on Earth

+ The rise in sea level due to melting ice, leading to inundation in lowlands and smallislands in the sea

+ The movement of climate zones that exist for thousands of years in different regions ofthe Earth leads to the danger of threatening the life of living species, ecosystems andhuman activities

+ Changes in activity intensity of atmospheric circulation, water cycle in nature and otherbiogeochemical cycles

+ Changes in biological productivity of ecosystems, quality and composition of thehydrosphere, biosphere, and geosphere Evidence of climate system warming is shown inthe increase in average global air and ocean temperatures, melting of ice and increasingmean sea level becoming common Eleven of the past 12 years (1995 2006) are classified

as the hottest years on record (since 1850) The 100-year trend in temperature increases(from 1906 to 2005) is 0.74°C (0.56°C to 0.92°C), larger than the trend shown in thesecond assessment report 3 of the IPCC is 0.6°C (0.4°C to 0.8°C) (1901-2000) Theincrease in temperature is becoming more common globally and increases more in thehigh latitudes in the north Land areas warm up faster than ocean areas Changes inatmospheric concentrations of greenhouse gases, aerosols, land cover and solar radiationhave altered the energy balance of the climate system Global anthropogenic greenhousegas emissions have increased by about 70% since the pre-industrial revolution, between

1970 and 2004

CHAPTER 2: THE NATURE OF CLIMATE CHANGE IN THE

PUBLIC ECONOMY

2.1 THE NATURE OF CLIMATE CHANGE

2.1.1 CLIMATE CHANGE IS AN EXTERNALITY

Climate change arises from the emission of greenhouse gases resulting fromhuman economic activities, such as energy usage, industry, agriculture, land usage andtransportation The amount of greenhouse gases causes the atmosphere to warm up andthe climate to change Climate change causes damage to many aspects in society, such asincreased disease and death, loss of jobs and reduced income from agriculture andfisheries, loss and damage to property, etc due to increased temperature, sea level rising

or extreme climate events (storms, floods, )

However, producers who emit greenhouse gases are not responsible forcompensating those who suffer In this sense, economics considers anthropogenic climatechange as a prime example of negative externalities (although in some cases climatechange can have some positive effects on a few countries which located in high-latituderegions through increased agricultural productivity, reduced death and winter heatingneeds, and a tourism boom driven by warmer temperatures)

Climate change is a negative global externality Countries emit greenhouse gases

in varying amounts, but the impact of an extra unit of greenhouse gas emissions onclimate change does not depend on where it is emitted Because no matter where thegreenhouse gases are emitted, they are absorbed into the atmosphere and spread aroundthe globe, and changes in the local climate system depend on the global climate system.Therefore, climate change affects all countries and every individual globally; but thosewho cause damage are not responsible for compensating those who suffer damage

Thus, human-caused climate change from greenhouse gas emissions inproduction activities has made the market unable to allocate resources efficiently from asocial point of view This cannot be remedied without government policies.

2.1.2 CLIMATE CHANGE MITIGATION AND ADAPTATION IS A PUBLIC GOOD.

Climate change mitigation needs to be implemented to limit the magnitude, rate

of increase and worst impacts of climate change in the long term and, if not implemented,climate change will exceed the adaptability of natural systems and socio-economicsystems in the long run Adaptation to climate change is essential in both the short andlong term in order to reduce damages and to take advantage of opportunities that benefitfrom climate change

Climate change mitigation is an example of a public good, because all climatechange mitigation activities have the characteristics of a public good that is non-excludability and non-rivalry No individual can be prevented from benefiting fromclimate change mitigation for a stable climate, and an individual's enjoyment of a stableclimate does not reduce other individual's ability to benefit

Climate change adaptation, when implemented by the public sector, is alsocharacterized by public goods as non-excludability and non-rivalry For example, whenthe government builds climate-resilient infrastructure (for example, upgrading roads toadapt to flooding or building sea dykes to adapt to sea level rise), nothing may preventany individual from benefiting from climate-resilient infrastructure, and the enjoyment ofone individual does not impair the ability of others to benefit

Economics explains why markets cannot supply goods such as climate changemitigation and adaptation at the socially desirable levels The non-excludability and non-rivalry in consumption of a public good that is "reducing greenhouse gas emissions" hasmade producers realize that if they supply it, it is not possible to obtain the full cost of thesupply so they will not supply or supply at a less than socially desirable level The “free

rider” problem in this case did not encourage the participation of the private sector inclimate change response activities.

Then the next question is when the market fails, can the government providepublic goods, then force individuals to pay through contributions in taxes or fees.Obviously, in terms of reducing greenhouse gas emissions, the government can intervenethrough public policies However, climate change mitigation and adaptation is a globalpublic good

For climate change mitigation, even countries with similar concerns aboutclimate change and other countries all benefit from climate change mitigation, manycountries are still unwilling to reduce greenhouse gas emissions voluntarily, because nocountry can be excluded from getting the benefits of climate protection through activitiesthat reduce greenhouse gas emissions, regardless of whether they contribute; and theenjoyment of the benefits of one country does not affect the enjoyment of the benefits ofanother

For climate change adaptation, some activities have the characteristics of theglobal public goods For example, improving the information system on climate change,researching and developing plants and animals that are able to adapt to different climateconditions, and sharing best experiences on climate change adaptation in a global levelwill benefit everyone in all countries, regardless of whether they contribute to the costs,and the enjoyment of one person's benefits does not affect the benefits of another

2.1.3 CLIMATE CHANGE IS THE BIGGEST MARKET FAILURE.

Climate change has several differences from other types of market failure,specifically:

+ Firstly, climate change is a global market failure in terms of both causes, consequencesand ways of responding (mitigation and adaptation) This requires economic analysis ofclimate change to be considered from a global perspective