Digital growth and green growth need to be integrated: expert

Professor Trần Thọ Đạt. Photo courtesy of Trần Thọ Đạt

Trần Thọ Đạt

Over the past three years, the global economy has had to deal with three challenges: the pandemic causing the worst economic crisis since the Great Depression, inflation, and the more severe impact of climate change.

Fundamental changes are driving climate change and the digitisation of the economy, posing increasing challenges to the environment and sustainable development. Digital economy and green economy are the most important topics on the agenda of environmental policy and sustainable development in recent years. In this context, the integration between the digital economy and the green economy, therefore, leads to new models and creates opportunities for sustainable development.

Although the concept of “Green Growth” as a new growth path appeared much later than “Digital Growth” they are currently coexisting and will surely accompany for many decades to come. Besides the economic and social impact as a new growth source, the environmental impact of digital growth is receiving much more attention. The profound changes in the digital economy are having both positive and negative impacts on economic and social activities, especially on the environment.  

In summary, the environmental impacts of the digital economy are divided into four groups: impacts of the ICT sector, impacts of electronic applications, impacts of e-commerce and social and economic impacts from where policies and agendas that incorporate the environmental impact of the digital economy have been proposed. The consideration of the creative and dynamic use of digital growth and the digital economy for the benefit of not only economic, but also environmental and social values ​​has led to the concept of “digital growth sustainability” as a solution to environmental problems.

The coexistence and integration of digital growth and green growth at the macro level is shown in the extent and mechanism of the potential impact of internet development on total green productivity based on panel data showing the growth of the internet has a positive and significant role in promoting green total factor productivity. There is some empirical evidence that ICTs reduce carbon emissions and are a positive promoter of economic growth. Empirical results have also explored the impact of digital transformation on environmental pollution, arguing that the Internet of Things enables more resource-efficient manufacturing, improving recycling processes. Predictive studies show that the adoption of digital devices and programs can increase energy efficiency in various sectors and increasing investment in ICT can reduce energy demand quantity. The parallel development and interlinking between the digital economy and the green economy is not only of practical importance but also of great theoretical value, as it provides new evidence to decipher the “paradox of Solow productivity theory” in the traditional growth model, which still has no solution.

Green economy and digital economy are the most appropriate and mainstream developments in the current period, ensuring the goal of fast and sustainable development in the first half of the 21st century. Policymakers have recognised the need to prioritise the development of the digital economy to achieve the goal of green growth, unifying the view of global action to address the issues of climate change rather than just regionally or locally in economic growth strategies, including the digital economy. Accompanying the economic recovery, especially after the pandemic, with the increasing trend of the size and proportion of the digital economy in the traditional economy, related digital economic structures are expected to be new growth engines to address the uncertain future of the environmental crisis.

The digital economy has become an increasingly important contributor to the gross domestic product of countries, especially during the post-COVID-19 recovery. Assessing the environmental impact of the digital economy is particularly important because it provides the basis for defining and coordinating digital economic development policies with the environment, creating constructive collaboration between the digital economy strategy and the environment. Up to now, environmental policies and strategies have not been linked with economic and social development policies in general, and the digital economy, although recently there have been many efforts to take a closer look.

Viet Nam can become the second largest digital economy in Southeast Asia in 2025, while the country’s e-commerce market will draw more large-scale businesses. In China in 2020, the digital economy accounted for 40 per cent of GDP, while in Viet Nam in 2022 it is expected about 11-12 per cent, so the growth potential is huge. The strategic goal of Viet Nam's socio-economic development is for the digital economy to account for 20 per cent in the year 2025 and 30 per cent of GDP by 2030. The digital economy consists of three components: ICT digital, internet digital and the sectoral digital economy. The internet digital economy and the sectoral digital economy are two components that still have an extremely low share in GDP compared to the world average. These two components have a low "environmental" impact, so they need to be promoted in a strategy that integrates with the green economy.

Since COP26, Viet Nam has been seriously and swiftly taking action to realise its commitments as seen in the establishment of a national steering committee for implementing its pledges made at the conference, and the Prime Minister is head of this committee. Economic transformation is needed to reach net-zero greenhouse gas emissions by 2050, and the question of how these commitments can be met and the corresponding economic transformation managed becomes ever more central. The country is working hard to perfect the relevant legal framework, build detailed plans, measures, and roadmaps, and mobilise investment resources for climate-resilient infrastructure to carry out the commitments.

To exploit the potential for simultaneous development of the digital economy and the green economy, achieve the goals set out in the "National Strategy for the Development of the Digital Economy and Digital Society to 2025, with a Vision to 2030", and the "National Strategy on Green Growth for the period 2011-2020 and a Vision to 2050", it is necessary to implement a number of solutions to integrate the digital economy and the green economy as follows:

- Have the best preparation for the ability to integrate these development trends for leaders at all levels of state management agencies, sectors, localities and the business sector, especially small and medium enterprises. Along with that, sectors and localities need to integrate projects and activities to develop the digital economy with solutions to promote the implementation of the Green Growth Strategy.

- While accelerating the completion of an institutional framework suitable for the digital business environment, it is necessary to refer to and link to complete the framework to promulgate green technical norms, standards, and guidelines, complete and soon issue a set of green growth measurement indicators at the national level. It is necessary to add a number of green growth indicators to the system of socio-economic development indicators in general and the goals of digital economy and digital society development, to soon complete and apply the set of green growth indicators into the development of a five-year socio-economic development plan.

- In the plan to increase investment, especially public investment to synchronously upgrade essential and widespread infrastructure and digital services, it should be linked with the development of budget allocation and management plans serving the implementation of the green growth strategy. In addition, perfecting financial policies to support green growth in a reasonable and consistent manner, including taxes, fees, subsidies, support funds, sanctions, and green criteria.

- The government needs to strengthen environmental protection supervision and law enforcement, raise the cost of pollution emissions of enterprises, and force enterprises to improve the level of green innovation, improve systems and infrastructure and related mechanisms to encourage green innovation and raise the sense of social responsibility.

- Enterprises implementing digital transformation need to proactively seize opportunities, optimise business models, deploy digital technology integration, promote the development of production and business solutions based on digitisation, participate more effectively in the global supply chain, improve management capacity suitable for new production, business, and cooperation models. In the process of digital transformation and green innovation, it is necessary to take advantage of reducing internal and external costs, promoting the division of professional labour in enterprises, strengthening the link between digital transformation and green innovation in business plans, improve social responsibility, contribute to promoting the spillover effects of digital transformation and green technology innovation. — VNS

 Prof. Trần Thọ Đạt is the Chairman of Academic Board, National Economics University