Developing countries require support on green transition

The US has withdrawn from the Paris Agreement, for the second time. In 2017, Trump signed a similar decree and then Joe Biden reversed it. However, during Trump’s first term, carbon emissions decreased and then increased slightly in 2021-2022 when Biden took office. This set a precedent for other countries to protect short-term economic interests instead of prioritising long-term environmental benefits.

The US has cancelled electric vehicle (EV) targets and revised emissions regulations. The 50 per cent EV production target by 2030 is an important driving force for carmakers to shift to clean technology. By reversing this target, the US government will cause the industry to lose the incentive to innovate, prolonging dependence on fossil fuels.

Since Q3/2024, major carmakers worldwide have adjusted their plans to extend the deadline for all EV production by 3-5 years. While China is still accelerating, the US-China trade conflict will cause many difficulties for the EV industry in the next four years. This could lead to the loosening of standards, and increasing emissions from the transport sector, one of the largest contributors to climate change.

The US is boosting oil production, which is also a consequence of the cancellation of the EV manufacturing policy. The increase in fossil fuel exploitation increases dependence on oil and natural gas, slows the development of renewable energy, increases greenhouse gas emissions, and puts additional pressure on global emission reduction targets.

The increase in US oil production could create downward fluctuations in global energy prices, especially if the Russia-Ukraine conflict reaches some sort of temporary peace settlement this year.

However, there is no need to be too pessimistic. Although the US is still the world’s economic leader, its influence is being shared by other major economies. Surely, the US will slow down the pace of the global clean energy transition.

However, states such as California, New York, and New Mexico as well as large corporations can still maintain their commitment to greening through local policies and long-term business strategies. This partly mitigates the negative impact of the executive order and still promotes the development of green technology, but not as synchronously as before.

In Asia, China is strengthening its role. It will continue to boost green technology production and take advantage of the US withdrawal to increase exports of renewable energy technology. Being in the BRICS bloc, China has some advantages to break out, although the US will try to restrain it with economic measures.

Going forward, China will not confront directly but use roundabout ways for its goals, for example, the Belt and Road Initiative to utilise the construction of clean energy infrastructure in developing countries.

Developed countries such as Japan and South Korea remain committed to greening. However, they will be more cautious and consider the reactions of powerful countries before making strong statements.

In Europe, geopolitical instability have disrupted the greening process in the short term, due to temporary dependence on fossil fuels. However, in the long term, pressure to reduce dependence on Russia will accelerate the move to renewables. Europe will still play a pioneering role in green tech research and development.

The big challenge is to maintain internal consensus among member states regarding the allocation of energy transition costs as the gap between European economies is very significant. Germany, France, and Nordic countries will have to convince weaker countries to follow the long-term path, while these large countries are struggling in the short term.

The US moves will weaken international cooperation in the environment issues, which will significantly affect Vietnam. As a developing country, Vietnam needs a lot of financial and technological support from developed countries to achieve sustainable development goals in the national strategy on green growth towards 2030. If international support for renewable energy projects decreases, the transition to a green economy will struggle.

Vietnam’s energy demand has increased due industrialisation and urbanisation. Specifically, in the past 10 years, the volume of coal imports has increased by 20 times while oil has reversed from a trade surplus to a trade deficit. The US administration’s oil exploitation policy and determination to end wars in Europe and the Middle East will reduce oil prices on the global market, thereby benefiting Vietnam in the short term by reducing energy import costs.

However, falling fossil fuel prices will reduce the competitiveness of renewable energy, making it harder for domestic projects to call for investment.

The US loosening of emission regulations and cancellation of EV production targets may have an indirect impact on Vietnam’s exports. Industries assembling and manufacturing EV components, and environmentally-friendly products will be at risk of declining global demand. Once the US market is not interested in green products as much as before, Vietnamese businesses aiming for sustainable development will find it challenging.

The new US policies will have a significant impact on the global green trend. However, as an irreversible trend, the global green economy will grow strongly in regions with strong policy support like Europe, and China. The US will not be left out of the game. After a period of protectionism for its domestic extractive industry, the US will re-enter the race following the business style favoured by the current president.

The race between the US, Europe, and China in green technology will determine the direction of the green economy. China, backed by global initiatives, will consolidate its position in green technology. Europe, despite geopolitical challenges, will maintain its pioneering role in renewable energy research.

Vietnam remains committed to green economic development and energy transition. The government has issued plans such as encouraging renewable energy, developing clean technology, and enhancing resource efficiency to enhance resilience to global fluctuations.

Green consumption is rapidly gaining momentum in Vietnam thanks to increased awareness of environmental protection and sustainability, impacting consumer purchasing habits and presenting both opportunities and challenges for businesses, particularly small- and medium-sized enterprises (SMEs).

A workshop on how startups can harness resources for green and digital transformation took place on November 26 at TECHFEST 2024 in Haiphong.