Assessing the Environmental

and Socio-economic Impacts

for Climate and Green growth
Actions in Three Vietnamese
Provinces
–
The Green Economy Model
September 2020
About us
 System-wide implications of low carbon
development 
• The concept of “Low Carbon Development”
includes two main topics: (i) low carbon and
(ii) development.
– “Low carbon” implies the reduction of emissions.
– “Development” points to the need to achieve
economic growth and social empowerment.

3
 System-wide implications of low carbon
development 
• On the other hand, “Low Carbon
Development” goes beyond the use of these
two topics. It highlights of these are
interconnected with one another:
– How low carbon investments affect development?
– How development influences the potential to
reduce emissions?
• We have created a system map (or Causal Loop
Diagram) to better understand these
relationships at national level. 4
Systems Approach to policy analysis
Using a systemic approach: informed
by stakeholders, based on science

gdp
 gdp
+
consumption

+
demand of natural
resources
 gdp
+
consumption

+
demand of natural
resources

natural capital
+
natural capital
natural capital
growth extraction
natural capital
depletion
 gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
natural capital +
natural capital
growth extraction
natural capital
depletion
 gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
natural capital +
natural capital
growth extraction
natural capital
depletion
 physical capital
+
investment depreciation
+
productivity
R
(tfp)
+ +
gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
natural capital +
natural capital
growth extraction
natural capital
depletion
 employed
population
job creation retirement
+
R

physical capital
+
investment depreciation
+
productivity
(tfp) R
+ +
gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
+
natural capital
natural capital
growth extraction
natural capital
depletion
 R
employed
+ health population
+ job creation retirement
wages +
education public +
+ + R
expenditure
R training +
private +
+ physical capital
profits +
investment depreciation
+
+
productivity
R
(tfp)
+ +
gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
natural capital +
natural capital
growth extraction
natural capital
depletion
 R
employed
human capital
human capital + + + health population
retirement
+ + job creation
growth wages
education public +
+ R
+ expenditure
R training +
private +
+ physical capital
profits + depreciation
+ + investment
+
productivity
R
(tfp)
+ +
gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
+
natural capital
natural capital
growth extraction
natural capital
depletion
 R
employed
human capital
human capital + + + health population
retirement
+ + job creation
growth wages
education public +
+ R
+ expenditure
R training +
private +
+ physical capital
profits + depreciation
+ + investment
+
productivity
R
(tfp)
+ +
gdp
+ +
consumption

+
R
demand of natural
resources

natural capital
+
natural capital
natural capital
growth extraction
natural capital
depletion
 R
human capital employed
human capital + + + health
job creation
population
retirement
growth + +
wages +
education public
+ + R
expenditure
R training +
private +
+ physical capital
profits + depreciation
+ + investment
+
productivity
(tfp) R
-
+ +
+ gdp
B
+ +
consumption
ecological ecosystem B
scarcity services
- + +
R
demand of natural
resources

natural capital
+
natural capital
natural capital
growth extraction
natural capital
depletion
 R
employed
human capital
human capital + + + health population
retirement
+ + job creation
growth wages
education public +
+ R
+ expenditure
R training +
private +
+ physical capital
profits +
investment depreciation
+ +
+
productivity
(tfp) R
-
+ +
+ gdp
B
+ +
consumption
ecological ecosystem B
scarcity services
- +
+ R
demand of natural
resources
+
green gdp +
- +
natural capital
+
natural capital
natural capital
growth extraction
natural capital
+ <human capital
depletion
+ growth>
natural capital
reductions

natural
+ capital additions
Systems analysis: value addition?
Systems analysis: value addition?
Systems analysis: value addition?
Systems analysis: climate impacts?
Climate

Climate

Climate

Climate
Systems analysis: value addition? (2)
 Systems approach to policy analysis
total value added
400 B
Population
80,000
300 B
Governance
0

Pesos/Year
60,000
200 B
-.075
Person

40,000
100 B

Dmnl
-.15
20,000
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year) -.225
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 total value added : Bita 28Aug - BAU
Time (Year) total value added : Data
-.3
Population : Bita 28Aug - BAU 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Population : Data Time (Year)

Population Governance : Bita 28Aug - BAU

GDP
Agriculture Land
3000
Culture,
education
2250

1500
Ha

750

0
Agriculture
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year) Employment
Agriculture Land : Bita 28Aug - BAU
Agriculture Land : Data
Tourism Fishing

ornamental fishing
35.04

Water quality 31.28

fallow / Forest Land

Ton/Year
27.52
247,000

246,500 Forest Biodiversity 23.76

20
Ha

246,000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Biodiversity Time (Year)
245,500 1.098 ornamental fishing : Bita 28Aug - BAU
water quality index
245,000 .9
1.023
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year)
.85
Dmnl

"fallow / Forest Land" : Bita 28Aug - BAU .9489

"fallow / Forest Land" : Data
.8
.8744

.75
.8
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
.7 Time (Year)
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Biodiversity : Bita 28Aug - BAU
Time (Year)
water quality index : Bita 28Aug - BAU
 Systems approach to policy analysis
total value added
400 B
Population
80,000
300 B
Governance
0

Pesos/Year
60,000
200 B
-.075
Person

40,000

`
100 B

Dmnl
-.15
20,000
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year) -.225
0
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 total value added : Bita 28Aug - BAU
Time (Year) total value added : Data
-.3
Population : Bita 28Aug - BAU
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Population : Data
Time (Year)

Population Governance : Bita 28Aug - BAU

GDP
Agriculture Land
3000
Culture,
education
2250

1500
Ha

750

0
Agriculture
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year) Employment
Agriculture Land : Bita 28Aug - BAU
Agriculture Land : Data
Tourism Fishing

ornamental fishing
35.04

Water quality 31.28

fallow / Forest Land

Ton/Year
27.52
247,000

246,500 Forest Biodiversity 23.76

20
Ha

246,000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Biodiversity Time (Year)
245,500 1.098 ornamental fishing : Bita 28Aug - BAU
water quality index
.9
245,000
1.023
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Time (Year)
.85
Dmnl

"fallow / Forest Land" : Bita 28Aug - BAU .9489

"fallow / Forest Land" : Data
.8
.8744

.75
.8
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
.7 Time (Year)
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Biodiversity : Bita 28Aug - BAU
Time (Year)
water quality index : Bita 28Aug - BAU
income +
gdp
 +

income consumption
+
gdp
 +

income consumption
+
gdp
+

+
production
 +
consumption
income +
gdp R1

+
production
 + +

investment income consumption

+
gdp R1

+
production
 + +

investment R2 consumption
income +
gdp R1

+
production
+

innovation and cost

+ competitiveness
 + +

investment R2 consumption
income +
+ gdp R1
+
mobility +

+
production
+

innovation and cost

+ competitiveness
 + +

investment R2 consumption
income +
+ gdp R1
+
mobility - +

+ B1
congestion societal costs
+

+
B2
-production
+

innovation and cost

+ competitiveness
 + +
investment R2 consumption
income +
+ gdp R1
+
mobility - +

+ B1
congestion societal costs
+
+ +
energy +
B2
consumption -production
+

innovation and cost

+ competitiveness
 + +

investment R2 consumption
income +
+ gdp R1
+
mobility - +

+ B1
congestion societal costs
+
+ + +
energy +
+ B2 B3 production
consumption -
air pollution +
+

innovation and cost

+ competitiveness
 + +

investment R2 consumption
income +
+ gdp R1
+
mobility - +

+ B1
congestion societal costs
+
+ + +
energy +
+ B2 B3
consumption -production
air pollution +
+
- B4
innovation and cost
+ competitiveness
 + +

investment R2 consumption
income +
+ gdp R1
+
mobility - +

+ B1
congestion societal costs
+ - food
+ + + quality -
energy + -
+ B2 B3
consumption -production
air pollution + B5
+ +
waste
- B4
generation
innovation and cost
+ competitiveness +
water
pollution
Orange: intervention areas for LDS (selection)

+ +

investment R2 consumption
income +
+ gdp R1
+
energy smart mobility - + healthy food
efficiency mobility system
- +
+ B1
societal costs +
congestion + - food + sustainable
+ + clean + quality - agriculture
-
energy energy +
+ B2 B3 -
consumption - production
-
air pollution + - + B5
+
waste
- B4
B6 generation
affordable reduce,
innovation and cost recycle,
energy + +
competitiveness reuse
+ +
+ + water
pollution
Orange: intervention areas for LDS (selection)

+ +

investment R2 consumption
income +
+ gdp R1
+
energy smart mobility - + healthy food
efficiency mobility system
- +
+ B1
societal costs +
congestion + - food + sustainable
+ + clean + quality - agriculture
-
energy energy +
B3 -
consumption - + B2
-production Land use
air pollution Land productivity
+ - + B5
+ • Production inputs
waste • Mechanization
- B4
B6 generation • Climate impacts
affordable reduce,
innovation and cost recycle, Markets
energy + +
competitiveness reuse
+ +
+ + water
pollution
 + +

investment R2 consumption
income +
renovated
homes, schools + gdp R1
and hospitals
+
energy smart mobility - + healthy food
efficiency mobility system
better
- +
public + B1 better health healthier
less pesticides and
transport
for current societal costs food
+ fertilizers
alternatives congestion + -
and future
food + sustainable
+ + clean
generations
+ quality - agriculture
-
energy energy +
B2 B3 -
cleaner - +
consumption energy -production
more
charging
points for
air pollution + - + B5
e-cars + cleaner air, water, soil
waste
- B4 B6 generation
affordable reduce,
innovation and cost recycle,
energy + +
competitiveness reuse
+ more reusable or +
environmentally-friendly + recyclable + water
products in our shops packaging,
less waste
pollution
cleaner air, water, soil
 + +

investment R2 consumption
income +
renovated
homes, schools + gdp R1
and hospitals
smart +
energy mobility - + healthy food
efficiency mobility system
better
- +
public + B1 better health healthier
less pesticides and
transport
for current societal costs food
+ fertilizers
alternatives congestion + -
and future
food + sustainable
+ + clean
generations
+ quality - agriculture
-
energy energy +
B2 B3 -
cleaner - +
consumption energy -production
more -
charging air pollution + - + B5
points for
+ lulucf emissions
e-cars cleaner air, water, soil
waste
- B4
B6 generation
affordable reduce,
innovation and cost recycle,
energy + +
competitiveness reuse
+ more reusable or +
+ + water
environmentally-friendly recyclable
+
products in our shops packaging,
less waste
pollution + ghg emissions
cleaner air, water, soil
+
 <energy
+ efficiency>
+ + +
employment <clean energy>
R2 consumption + +
investment income + +
renovated <sustainable
homes, schools + gdp R1
agriculture>
and hospitals
+
energy smart mobility healthy food
- +
efficiency mobility system
better
- +
public + B1 better health healthier
less pesticides and
transport
for current societal costs food
+ fertilizers
alternatives congestion + -
and future
food + sustainable
+ + clean
generations
+ quality - agriculture
-
energy energy +
+ B2 B3 -
cleaner -
consumption energy -production
more -
charging air pollution + - + B5
points for
+ lulucf emissions
e-cars cleaner air, water, soil
waste
- B4
B6 generation
affordable reduce,
innovation and cost recycle,
energy + +
competitiveness reuse
+ more reusable or +
environmentally-friendly + + water
recyclable
+
products in our shops packaging,
less waste
pollution + ghg emissions
cleaner air, water, soil
+
 <energy
+ efficiency>
+ + +
employment <clean energy>
R2 consumption + +
investment income + +
renovated <sustainable
+ R1
homes, schools
gdp agriculture>
and hospitals
+
energy smart mobility + healthy food
-
efficiency mobility system
better
- +
public + B1 better health healthier
less pesticides and
transport
for current societal costs food
+ fertilizers
alternatives congestion + -
and future
food + sustainable
+ + clean
generations
+ quality - agriculture
-
energy energy +
+ B2 B3 -
cleaner -
consumption energy -production
more -
charging air pollution + - + B5
points for
+ lulucf emissions
e-cars cleaner air, water, soil
waste
- B4
B6 generation
affordable reduce,
innovation and cost recycle,
energy + competitiveness reuse +
+ more reusable or +
environmentally-friendly + + water
recyclable
+
products in our shops packaging,
less waste
pollution + ghg emissions
cleaner air, water, soil
+
 Key sectors
Sectoral coverage
1. Population
2. Infrastructure and public services: education, health care and roads
3. Economic value added (GDP) for agriculture (various crops and livestock),
industry and services (with detail on tourism)
4. Employment
5. Government and households accounts
6. Land cover and land use (e.g. agriculture, forest)
7. Energy demand and electricity supply (several technologies)
8. Waste generation (wastewater, MSW, industrial waste)
9. GHG emissions (energy, land management, LULUCF, waste, IPPU) and carbon
sequestration
10. Climate change (trends and impacts)
GEM: Integration of COVID-19
 GEM: Integration of COVID-19
COVID-19 impacts in the GEM include:
– Impacts on employment due to imposed lockdowns, or reduction
of production due to halted trade
– A reduction of productive capital (e.g. due to bankruptcy, medium
term impact)
– Reduced consumption and investment, both private and public
– Increased public spending to facilitate economic recovery (recovery
scenario)
 GEM: Integration of COVID-19
• COVID-19 impacts in the model are calibrated to match the
existing (e.g. IMF) forecasts on real GDP growth and
employment.
• A SIN function is used to simulate the number of infection waves
(generally 2 to 4) with impacts ending between 2022 and 2024.
• The relative impact on employment (%) is translated into
impacts on private consumption and hence savings. This affects
private investment, which in turn curbs economic growth.
• Impacts on government revenues are simulated endogenously in
the simulation model as a consequence of reduced investment
and GDP.
• The government stimulus package to support economic
recovery can also be tested.
Model overview
 Green Economy Model (GEM)
• Conceived using Systems Thinking (ST), built using System
Dynamics (SD)
• Integrates social, economic and environmental drivers of
change
• Forecasts outcomes of policy and investment
– Across (i) sectors and (ii) actors, (iii) dimensions of development, (iv)
over time (semi-continuous simulation from 2000 to 2050) and (v) in
space (with GIS).
• Generates societal (integrated) CBA by project and policy
package, with “what if” scenarios to support policy
formulation and assessment
• Applied, in customized form, to more than 30 countries
 Overview of the
modeling approach
Sectoral coverage
1. Population
2. Education
3. Health care
4. Roads (and other infrastructure)
5. Economic value added (GDP)
6. Government accounts
7. Households accounts
8. Land cover
9. Agriculture production
10. Water demand and supply
11. Energy demand and supply
12. Electricity supply
13. Air emissions and carbon sequestration
 Underlying method
• Uses System Dynamics (SD)
• Model fully customized to the local context
• Runs differential equations, and models
accumulation over time with stocks and flows
• Captures feedback loops, delays and non-linearity
• Simulates from the past (e.g. year 2000), to
support structural and behavioral validation
• Generally defined as “white box”
 Approach to solve equations
• The model is built using Vensim
• While the software allows to optimize the system,
generally the model is run in “simulation mode”
• GEM generates “what if” scenarios to forecast the
outcome of action and inaction
• Users can review the outcomes across sectors,
actors, dimensions of development and over time,
and decide to introduce new policies and
investment to create a stronger policy package
 Treatment of time
• Time is explicit and the time step is generally
month or year
• Simulations generally run from 2000 to 2050-
2060 (depending on the lifetime of the
investment simulated)
• Results can be annualized, using CBA and
project financing models (e.g. to estimate the
IRR of an investment)
 Integration of physical and
monetary values
• The model includes various sectors
• Each module includes physical variables (e.g.
hectares of land, number of jobs, MWh of
energy consumed)
• Based on physical indicators, monetary ones
are estimated (e.g. agriculture GDP is a
function of physical production and value
added per ton)
Key sources of emissions climate mitigation
assessments
• Energy (consumption and production)
– Residential, commercial, industrial, transport
– Oil, gas, coal, biomass and waste, electricity
• LULUCF
– Land cover change
– Land use practices
• IPPU: industrial processes
• Waste: municipal solid waste and organic waste
 Thank you!

For more information

you can find me at:
andrea.bassi@ke-srl.com
 Glossary
• System Dynamics: a methodology to create descriptive models that focus on the
identification of causal relations influencing the creation and evolution of the
issues being investigated. Its main pillars are feedback loops, delays and
nonlinearity through the explicit representation of stocks and flows.
• Stock and flow variables: a stock variable represents accumulation and is
measured at one specific time. A flow variable is the rate of change of the stock
and is measured over an interval of time.
• Feedback loop: “Feedback is a process whereby an initial cause ripples through a
chain of causation ultimately to re-affect itself” (Roberts et al., 1983).
• Scenarios: expectations about possible future events. Consequently, scenario
analysis is a speculative exercise in which several future development alternatives
are identified, explained, and analyzed for discussion on what may cause them
and the consequences these future paths may have on our system (e.g., a
country, or a business).
• Intervention: any instrument (e.g. policy or investment) utilized to influence the
behavior of the system.
 Glossary
• Methodology: the underlying body of knowledge for the creation of different types
of simulation models. It includes theoretical foundations for the approach, and often
encompasses both qualitative and quantitative analyzes and instruments.
• Simulation model: a model is simplification of reality, a representation of how the
system works, and an analysis of (system) structure and data. A quantitative model is
built using one or more specific methodologies, with their strengths and
weaknesses.
• Vertical/horizontal disaggregation of models: vertically disaggregated models
represent a high degree of sectoral detail; horizontal models instead include several
sectors and the linkages existing among them (with a lesser degree of detail for each
of the sectors represented).
• Model transparency: a transparent model is one for which equations are available
and easily accessible and it is possible to directly relate structure to behavior (i.e.,
numerical results).
• Model validation: the process of deciding whether the structure (i.e., equations)
and behavior (i.e., numerical results) are acceptable as descriptions of the
underlying functioning mechanisms of the system and data.