What are the opportunities for new environmental products?

H&M pledged to develop a carbon-neutral supply chain for its manufacturing and processing factories owned or subcontracted by its suppliers, as well as these suppliers’ own suppliers by 2030.

>> What are the foundations for producing and exporting more environmental products?

The first opportunity arises from Vietnam’s revealed comparative advantage that has emerged in recent years, especially in renewable energy. Vietnam is already a main player in solar equipment, but it can position itself in wind-related technologies and electrical equipment. "One major step for Vietnam to consolidate its export capacity and leadership in this area is to diversify its export markets. This would protect it from being unduly affected by policies enacted by trading partners (importers) that might affect this trade. Opportunities lie in growing markets such as the African Continental Free Trade Area", WB said.

Meanwhile, FTAs can also provide new opportunities for green trade. For instance, the EU Green Deal CBAM creates opportunities for low carbon intensive products such as computers, electronic and optical equipment, which can be further explored. In fact, when CBAM is implemented, computer and electronics production is expected to increase by 0.6 percent compared to the EU Green Deal, amounting to 0.8 billion dollars.

Furthermore, greening traditional exports should also be considered. Vietnam should take advantage of FTA and global value-chain membership opportunities to promote sustainable production across all of its export products.The increased demand for environmentally friendly products in destination markets and

ESG commitments by major corporations in more advanced countries should act as an additional incentive for Vietnam to take advantage of these opportunities to further improve its environmental standards across the board. "This will help its exports have an early edge in marketing and establish their products as environmentally friendly in major developed markets," WB stressed. In WB’s opinion, some of the traditional exports where this greening is possible are:

First, the textile, apparel, and footwear sectors will have an opportunity soon to improve their carbon and environmental footprints. For example, H&M, a global garment manufacturer that has 31 suppliers in Vietnam, pledged to develop a carbon-neutral supply chain for its manufacturing and processing factories owned or subcontracted by its suppliers, as well as these suppliers’ own suppliers (e.g., fabric mills, fiber processors, spinners, or tanneries) by 2030. Nike has announced similar plans that will affect more than 100 of Nike’s suppliers in Vietnam. The sector is already working toward substantive energy savings. For instance, the International Finance Corporation (IFC) Mekong Climate Smart Manufacturing Advisory project has helped textile and footwear industries manage energy in an integrated manner. This means that they address energy demand by improving efficiency and energy supply by using distributed renewable energy (RE) generation (for example, rooftop solar). By providing hands-on advice for new technology and investment, industries and suppliers can save up to 25% on energy consumption and 48% on their water consumption, while adding profits through productivity and product quality improvement.

>> What are the opportunities for Vietnam in greening trade?

Second, the food and beverage sector’s production value is estimated at US $33.6 billion and contributes to 8 percent of the country’s annual average GDP. However, the food and beverage sector’s energy intensity is 173.59 tons of oil equivalent per a billion dollars, the highest among ASEAN countries. Energy is a significant cost driver in industrial production, accounting for 30% of total costs.With an annual export value of US$9 billion (2018), aquaculture processing is an important export earner in Vietnam. This subsector has high energy consumption and GHG emissions. It can also potentially achieve energy savings of 30 to 40 percent by enhancing the use of materials and energy and recycling and re-using products or waste. Livestock and pig farms also have a high potential for decarbonization opportunities by generating either power or heat energy from biogas.

Third, cement, construction materials, and chemicals are energy-intensive industries that can help save up to 30% of grid power.This can be done through the application of fuel switching, including using industrial waste, hazardous waste, or both as fuel for clinker kilns and to create waste heat for power generation. However, to date, only a few cement companies have applied waste heat to power generation systems, despite the existence of regulations since 2015 requiring its use.