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Energy demand and factor substitution in Vietnam: evidence from two recent enterprise surveys

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  • Phu Viet Le

    (Fulbright University Vietnam)

Abstract

Vietnam’s economy is one of the most energy-intensive economies in the world, facilitated by long-standing government policies indirectly subsidizing energy prices through various state-owned enterprises in the energy sector. A consequence of this is that firms are using too much energy in production. This raises a crucial issue as to whether Vietnam can continue its development trajectory in the new era with rising energy prices and increased awareness of the use of fossil fuels and environmental pollution. In this context, understanding energy use patterns and firms’ behaviors regarding cheap energy prices is critical to forming appropriate energy policies and management practices. Using large-scale firm-level data, we have found explicit evidence of firms’ substitution of energy for capital inputs. This effect is present in both the short term and long term and in many energy-intensive industries. These results indicate that there is substantial benefit in appropriate pricing of primary energy and electricity, while also providing credit incentives for capital investment in more energy-efficient equipment. Reducing the rate of growth of energy demand, averaging approximately 10% annually, will have significant macroeconomic impacts. A quicker transition to less energy-intensive economic growth will also help to protect both the environment and public health.

Suggested Citation

  • Phu Viet Le, 2019. "Energy demand and factor substitution in Vietnam: evidence from two recent enterprise surveys," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-17, December.
  • Handle: RePEc:spr:jecstr:v:8:y:2019:i:1:d:10.1186_s40008-019-0168-9
    DOI: 10.1186/s40008-019-0168-9
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    References listed on IDEAS

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    Cited by:

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    2. Julian Augusto Casas Herrera & Jhancarlos Gutiérrez-Ayala, 2021. "Territorial Analysis of the Elasticities of Substitution of Production Factors in the Colombian Manufacturing Industry (1992–2018)," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 94, pages 223-255, Enero-Jun.
    3. Minh Nguyen Dat & Kien Duong Trung & Phap Vu Minh & Chau Dinh Van & Quynh T. Tran & Trung Nguyen Ngoc, 2023. "Assessment of Energy Efficiency Using an Energy Monitoring System: A Case Study of a Major Energy-Consuming Enterprise in Vietnam," Energies, MDPI, vol. 16(13), pages 1-15, July.
    4. Phuong V. Nguyen & Khoa T. Tran, 2020. "Explicating energy saving intention from the prospect of small medium enterprises," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(2), pages 716-734, December.
    5. Vo, Duc Hong & Vo, Long Hai & Ho, Chi Minh, 2022. "Regional convergence of nonrenewable energy consumption in Vietnam," Energy Policy, Elsevier, vol. 169(C).
    6. Do, Thang Nam & Burke, Paul J. & Baldwin, Kenneth G.H. & Nguyen, Chinh The, 2020. "Underlying drivers and barriers for solar photovoltaics diffusion: The case of Vietnam," Energy Policy, Elsevier, vol. 144(C).

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