Following the climate financing package acquired by Indonesia and South Africa, Vietnam is set to sign a funding deal worth at least $11 billion and could go as much as $14 billion to shift the economy from coal. The partnership will also involve technical assistance in streamlining renewable regulations as the country aims to reach carbon neutrality by the middle of the century.
Despite the enviable natural potential for wind capacity, 3,000 kilometers of coastline, and winds that blow from 5.5 to 7.3 meters per second, about half of Vietnam’s energy supply is generated from coal. And since coal is the least expensive and an indigenous fuel source, it has increased its share over the past several years.
Led by the European Union and the UK, Vietnam targets to announce the Just Energy Transition Partnership funding deal at the EU-ASEAN summit on December 14, according to the Bloomberg source. Between $5 billion and $7 billion will come from public loans and grants, with the rest from private sources.
According to the same source, about 85% of the overall package has been done. However, finalizing the decarbonizing of the country’s power sector remains an issue. It was announced mid-November that Vietnam has been studying Indonesia’s deal while certain government members still need further convincing.
On top of having to win over Vietnam’s leadership, “negotiations have also been clouded by concerns about how much of the funding would be grant-based and how much debt Vietnam is willing to take on, even at highly concessional rates,” the Bloomberg reads. “It’s also unclear that a deal can be reached without releasing environmental activists currently jailed in the Southeast Asian nation on what supporters call trumped-up charges.”
Vietnam’s climate financing package is set to be the third in a series of deals to help large coal-reliant middle-income countries accelerate their transition to low-carbon economies as well as provide a jumpstart towards renewable energy sources.
First was South Africa’s $8.5 billion agreement announced at last year’s COP climate summit, with an investment plan signed off at this year’s meeting in Egypt. And the second is Vietnam’s peg, Indonesia’s $20 billion pact unveiled at the Group of 20 gathering in Bali last week.
While shifting the economy from coal is a waiting game, Indonesia Just Energy Transition Partnership (JETP) also took more than a year in the making and is probably the single largest climate finance transaction or partnership ever, a US Treasury official revealed to the media.