Essays on the economics of energy in Vietnam

Abstract

Outside of the introduction and conclusion, this thesis contains four core chapters that focus on the following themes: (i) the energy-GDP relationship from a macroeconomic perspective, (ii) the household welfare impact of environmental protection taxes, (iii) the economics of coal-fired power plants, and (iv) the impact of international trade on firms' energy efficiency. This thesis, thus, provides a comprehensive picture of the energy sector in Vietnam from different aspects. These topics deal with important issues for the world at large and particularly for Vietnam and other developing countries increasingly affected by pollution and climate change. Chapter 2 examines the energy-GDP relationship by constructing a multiplier analysis model using the 2018 social accounting matrix of Vietnam. This model controls for linkages across sectors and the level of inter-dependence between the energy sector and other sectors in the economy. Results show that the impact of changes in sectoral GDP on energy consumption varies across sectors. The elasticity of energy consumption with respect to GDP is, on average, 0.95, which is relatively higher than the world average. The results suggest that there are significant opportunities for innovation activities and a transformation into green energies, and cross-sectoral linkages must be taken into account in development policies. Chapter 3 investigates the impacts of energy taxes on household welfare in Vietnam by fitting household survey data to a multi-good partial equilibrium model. The study finds that a tax on energy goods (coal, gasoline, electricity, and other fuels) reduces consumer welfare, and that the size of the effect varies across households and household groups depending on their elasticity of substitution between energy and non-energy goods. Households with one of the following features are worse off than their counterparts: those with a male household head, married household head, those in the ethnic majority group, those with household members in the Communist Party, non-farm households, and those without electricity support from the government. The study finds that energy taxes are neither strictly regressive nor progressive and also discusses the importance of complementary programs, including the use of tax revenue to support poor households. In Chapter 4, I explore the economics of coal-based power generation with a focus on environmental taxes. Despite the growing prominence of other cleaner energies, coal has been the dominant source of power supply in Vietnam. This study conducts a cost-benefit analysis and indicates that coal-fired power projects are not profitable if carbon taxes are introduced to replace the existing energy taxes. Given the current tax rates, the government has sacrificed environmental quality for economic development. In addition, the economics of coal-fired power plants are very sensitive to changes in coal price and electricity price, while they are less sensitive to variations in operating and maintenance costs. The relative importance of parameters in the sensitivity analysis provides policy implications for the government to control and manage the electricity market more efficiently. Finally, Chapter 5 examines the impact of Vietnamese firms' participation in international supply chains on their energy efficiency as proxied by energy intensity. I employ endogenous switching regression models to control for heterogeneity and self-selection bias. The empirical results confirm that self-selection does exist, i.e., firms with below average energy intensity self-select into exporting, and participating in international supply chains could improve the energy efficiency of both exporters and non-exporters, though with different magnitudes across the two groups. The findings provide important policy implications in relation to Vietnam's international trade activities and trade agreements.