1. Adaptation to climate change

Agriculture and forestry

Climate change poses an increasingly severe threat to Vietnam’s agriculture, forestry, and fisheries. Rising temperatures are likely to shorten plant growth cycles in the North, and severe water shortages could lead to significant reductions in annual yields. The most productive agricultural area of the country, the Mekong Delta, faces growing threats from sea-level rise and associated saltwater intrusion, which could render the production of some crops impossible.

Agricultural losses due to climate change in Vietnam are projected to reach 5.6–6.2 percent by 2030 and 7.6–10.6 percent by 2050, depending on the climate scenario.

The forest sector contributes significantly to the country’s economy. Vietnam was one of the first countries in the world, and the first in Asia, to institute a system of payments for forest environmental services (PFES). Since 2008, its PFES program has paid out nearly $400 million to farmers and communities helping to prevent deforestation and forest degradation. Despite great economic progress and decreasing deforestation rates, the forest sector in Vietnam faces challenges from competing land uses, overexploitation of resources, and insufficient capacity for forest governance and management. As a result, deforestation and forest degradation rates continue in parts of the country, such as the Central Highlands.

Changing temperature and precipitation patterns and increasing concentrations of atmospheric CO2 are likely to have significant impacts on both natural and degraded forests. Forest fires, insect outbreaks, wind damage, and other extreme events are expected to impose substantial economic costs on the forest sector.

Recommendations

There is need to prioritize and promote adaptation to increase farmers’ resilience to climate change. Key adaptation strategies with economic and other co-benefits include:

• Repurpose agricultural subsidies on inputs (mainly on the use of water and fertilizers) to support the adoption of resilient agriculture production practices. Expenditure realignment is required to increase public spending on research and development of drought-resistant and salt-tolerant crop varieties and other innovations to boost productivity. Subsidies can be redirected from water and fertilizers into training, local infrastructure, and services to help farmers switch to improved seeds/breeds and adopt practices that bring climate benefits while maintaining or increasing productivity. Increasing the share of public expenditure for operations and maintenance of irrigation and flood-control infrastructure can ensure their durability and reduce the frequency and cost of rehabilitation. The focus of these adaptation measures should be on the most productive agricultural landscapes, particularly coastal low-lying areas such as the Mekong Delta, which are particularly vulnerable to the effects of climate change.

• Rehabilitate and upgrade and make irrigation infrastructure and make it more resilient to climate change to reduce system losses and expand irrigation infrastructure in selected areas: Rainfed agriculture is highly vulnerable to droughts and increasingly unreliable precipitation, and floods and salinization can create problems for irrigation systems. Along with making irrigation systems more climate-resilient, it is important to establish last-mile connections between irrigation infrastructure and low-income farmers’ land, and to provide some irrigation for vulnerable rainfed smallholders. Initial baseline costs for such investments are estimated at up to $2 billion to 2030.

• Adopt ecological redlining to curb the expansion of agriculture into forested areas: Agricultural expansion continues to be the main direct cause of forest loss in Vietnam, with construction of rural infrastructure, in particular roads, also contributing. Agricultural expansion at the expense of forests is often the result of poor planning or fiscal policy privileging food production over the protection of ecosystem services. To curb further expansion of agriculture into forested areas, it is necessary to ensure that intensification occurs with more sustainable production, as well as protection and sustainable management of forests.

• Support large-scale investments in agriculture by strengthening cooperative farm models and facilitate the entry of big operators: In Vietnam, small farms remain an important part of the sector, but many are constrained in their capacity to invest in climate adaptation. Capacity-building of farmer organizations (cooperatives) is needed so they can be more commercially oriented and transact effectively with large entities. This is also an opportunity to promote climate-smart agriculture (CSA) practices among farmers. Small farmers would also benefit from the adoption of enabling policy and institutional frameworks to promote the digital transformation of the sector (to promote efficiencies in payments and logistics). This is an area in which Vietnam currently lags many of its peers. Improved weather risk forecasting and early warning systems are also crucial.

• Improve access to finance for smallholder agriculture by removing caps on bank lending and allowing warehouse receipts and crops as collateral.

• Invest in afforestation and reforestation, with a focus on mangroves.

2. Climate change mitigation

Agriculture

The agriculture sector is the second-largest contributor of GHG emissions in Vietnam, at about 19 percent of total emissions in 2020. Rice production accounts for about 48 percent of those emissions, followed by enteric fermentation in livestock production (15.3 percent), synthetic fertilizer application (12.9 percent), and manure management (9.5 percent). A unique feature of the sector’s GHG emissions is that more than 70 percent are methane and nitrous oxide, not carbon dioxide (CO2). Methane and nitrous oxide both have far shorter atmospheric lifetimes than CO 2, but they are also many times more potent, so reducing them would have a rapid and powerful impact in reducing near-term warming.

The NZP decarbonization strategy for the agricultural sector is anchored in three key measures: (i) reducing fertilizer and pesticide use by 14 percent to decrease the emissions intensity of crop production; (ii) changes in cattle feed, herd health, and breeding practices to achieve a 14 percent emissions reduction per unit in livestock; and (iii) a 50 percent increase in subsidies for forest services to stimulate reforestation and increase carbon sinks. These measures will require significant new investment by both the private and public sector, estimated at about $15.6 billion over the period 2022–2040.

Recommendations

• Repurpose public expenditure in agriculture to support the adoption of lower-emitting crop varieties and production technologies. Vietnam has yet to make agricultural support conditional on environmental objectives, and it imposes no tariffs for water use in irrigation that would discourage inefficient extraction. To promote sustainable agriculture that is climate-resilient and low-emitting, Vietnam will need to strengthen institutions at both the central and provincial levels, leverage private sector financing, and promote market incentives — including helping farmers and actors along the agri-food system to access carbon financing. Important investments will be needed in climate-smart value chain infrastructure, water and energy saving technologies as well as digital technologies to promote efficiencies in the production, processing and distribution of food and other agricultural products.

• Invest in and scale up the use of low-carbon technologies in rice production such as alternate wetting and drying (AWD). Instead of burning agricultural residues in the field, rice straw could be used for co-firing in coal power plants, which could reduce GHG emissions by three percent. Initial estimates using the International Rice Research Institute’s investment model suggest that investing $1.4 billion to implement AWD and related techniques could reduce emissions from rice production by 6.8 MtCO2 e relative to BAU by 2030. Similarly, an evaluation of a recent pilot program using digital sensors to promote water-use efficiency in rice production showed farmers saved up to 47 percent of water compared with continuously flooded irrigation, and up to 20 percent compared with manually managed AWD.

• Scale up investment in carbon sinks to achieve net-zero targets: The value of ecosystem services provided by primary tropical forests in Vietnam is estimated at $2,077 per hectare per year, on average. Climate regulation services that include carbon sequestration are estimated at $381 per hectare. Measures to reduce emissions from land use, land-use change, and forestry are relatively low-cost compared with those in the industry, transportation, and energy sectors. Some measures, such as reforestation, forest conservation, and sustainable soil management, are considered win-win solutions, with broad climate, ecological, and development benefits. In addition, activities in conservation, protection and sustainable management of existing forest areas can potentially benefit from carbon payments under Reducing Emissions from Deforestation and Forest Degradation (REDD+) programs.