Good Morning Vietnam, Energy-wise

Published onApril 27, 2018

During a recent family vacation in Vietnam, I learned that the country is a microcosm for several major trends in energy consumption in the developing world: (1) there’s a thriving middle class, (2) hot and humid weather is driving air conditioning demand and (3) rural electrification rates are very high. (We also loved the food, culture and beaches, and we were gripped by the poignant remnants of the American War, as it’s known locally. I highly recommend it as a vacation destination if that’s your thing.)

Let’s start with some basic facts: Vietnam has seen extraordinary growth in per capita energy consumption over the past several decades. Since 1990, the earliest year for which data are available for most countries, total per capita energy consumption in Vietnam has more than doubled. (All the country-level data in this post come from the World Bank Development Indicators.) This puts Vietnam in the top 3% of countries in the world in terms of growth in per capita energy consumption. Of the countries with more than 5 million people, only China and Thailand have had more rapid growth. What might be fueling this growth? Certainly, energy consumption grows with general development. But that’s not the whole story in Vietnam. It has definitely experienced rapid growth in per capita GDP, but it’s energy consumption has grown faster relative to GDP than many other countries. (In econ-speak, it’s income elasticity of energy consumption has been high.)