Thursday, November 15 2018


Better green finance for better environment: Swedish recommendations

Update: October, 24/2018 - 07:00
Associate Professor Gustav Martinsson talks with Việt Nam’s press. - VNS Photo Khoa Thư
Viet Nam News

Investing in renewable energy is an emerging trend in Việt Nam in response to worsening environmental destruction and the gradual disappearance of essential livelihoods. Việt Nam News talks with Gustav Martinsson, associate professor of financial economics at the Sweden Royal Institute of Technology, about green finance and international experiences that show how Việt Nam’s Government can catch the new wave.

What do you think is the most important issue when talking about the transition from fossil fuel to renewable energy?

I think the most important thing is a structural problem: we don’t put a price on carbon. There is a need for political action, meaning decision makers must do what they can to fix this problem so that companies cannot make profit from industries that release a lot of carbon to the atmosphere.

Sweden’s transition to renewable energy mirrors what Việt Nam is trying to do. What do you think is the greatest challenge to this project?

The biggest challenge to me is securing political will from decision makers. Companies and organisations are not going to want this change. What is good for the climate in the long run might be against their short term interests and profits. Therefore, you should be prepared for that.

The Government can issue some regulations or taxes but then you will need to have formal mechanisms to accelerate that change and try to make it through dialogue.  

In transitioning into renewable energy, there are two parts to the job. The first is to encourage investment in renewables and the second is creating a mechanism to punish or discourage dirty fuels. What is your comment on that?

I agree that we should encourage investment in renewable energy.

However, I would not say that you should do one first and then the other. There is actually new interesting research coming out on exactly how to do the combination. I think the standard now is to think about the goal. Because the market for renewable energy is now small, you will need subsidies to make it more profitable for investors to invest there, before turning to hardline measures with taxes and punishment.

You can first start with subsidising renewable energy and not punishing the use of carbon. The combination can be a little bit different depending on what the country sets up.

At the moment, coal-fire plants still supply a large part of Việt Nam’s energy, though they create many environmental issues. What do you think of the status quo?

Coal is the number one enemy to the environment. And I think we should keep in mind that it is not that cheap. It has to be subsidised currently. Therefore, cutting off subsidies will make coal less competitive. On the other hand, we need something to replace coal. Globally, renewable energy is becoming cheaper and more competitive compared to coal. It is an opportunity for us to enact the combination, both growing renewables and reducing greenhouse emissions.

What advantages does Việt Nam have in its green energy transition compared to Sweden?

In terms of green energy, Sweden has no one to follow and we have to invent ourselves.

Therefore, I think one of the biggest advantages that countries like Việt Nam should focus on is looking at the best practical examples of how to make the change.

Energy policies are needed but I think you should build a policy framework in which renewable energy versus coal, for example, is put into consideration.

Because the incentive system is crucial. If you can make profit from coal, you will keep doing it unless profit is higher for renewable energy.

Sweden destroyed ourselves with air pollution as we did not know better at the time. It means that you do not need to make the same mistake Sweden did and you can avoid that by starting to implement green solutions early on.

How should the Government perform its monitoring role in the green transition?

I think the government embraces the power of making decisions. We should be very careful in making policy.

Taxing is not for forbidding, but also about creating force for transition. We could forbid the use of carbon directly but we need energy to sustain and develop the economy.

Also, there are a lot of lobbying and interest groups that do not want the transitions to happen. The problem is not unique to Việt Nam.

Sweden had industries depending heavily on fossil fuel in the past but we had policies to change it. In the 70s, the oil price was increasing and turned out to be very expensive then we had to look elsewhere for alternatives. Sweden together with other countries initiated a carbon tax in 1991. That is how companies change; they have to adapt when the cost go up.

The decision came from the government as the private sectors did not want it, at all. But they have to adapt to the regulations and find new solutions to make money.

To ensure a just transition to green energy, companies have to be transparent about their impacts on the environment. How can Việt Nam’s Government improve data disclosure?

It is relatively new and in Sweden, the government puts a lot of pressure to have companies show information. Exactly how that works is specific to each country. In my country, we have a long tradition for information sharing so companies’ reports of financial issues are very comprehensive already and we have a very high trust in the number in there. If the information is not true, the company will be punished by law. If we have the culture of data disclosure it will be easier but there is one global initiative called the Climate Taskforce whose mission is to provide governments with frameworks of how data disclosure is performed. – VNS

Send Us Your Comments:

See also: