Major international deal struck for $15.5bn of clean energy transition finance for Vietnam
The UK and other wealthy nations have agreed on a Just Energy Transition Partnership (JETP) with Vietnam, aiming to mobilise more than $15bn of public and private finance to accelerate the nation’s transition away from coal.
The JETP was confirmed by the UK Government on Wednesday afternoon (14 December), with Prime Minister Rishi Sunak and Climate Minister Graham Stuart confirming their support alongside leaders from the EU, US, France, Germany, Italy, Canada, Japan, Norway and Denmark. It is intended to support Vietnam, which relies on coal for 47% of its power supply, to deliver its 2050 net-zero goal while maximizing the economic and social benefits of the energy transition.
Collectively, the nations participating in the JETP have committed $7.75bn to the initiative. It is envisioned that this will be matched by private sector finance leading to a total investment of more than $15bn. The national governments involved in the initiative will call on members of the Glasgow Financial Alliance for Net Zero (GFANZ) to consider accelerating support for the energy transition in Vietnam. GFANZ, which launched last year, now convenes finance sector players collectively managing more than $153trn of assets. Also engaged in the JETP are the International Finance Corporation and the Asian Development Bank.
Vietnam has set out several new energy sector targets that it believes it can deliver with the support of the JETP. It wants to see annual emissions from the power sector peaking by 2030, moving the previous 2035 target forward. This will result in national emissions peaking by 2030, also.
Vietnam will limit its peak coal capacity to 30.2GW of generation. This means that some projects in the pipeline will need to be downsized or cancelled.
Additionally, a new 2030 renewables target has been set. Vietnam was set to see renewables accounting for 36% of its electricity generation mix in 2020, but will now aim for at least 47%. Hydropower is its main renewables market and meeting the new target may require a broader look at other technologies.
Vietnam is in the top 30 highest emitting countries in the world in terms of annual emissions, largely because of its coal reliance. The successful delivery of the targets made under the JETP will result in the mitigation of 500 million tonnes of greenhouse gas emissions by 2035. For context, the UK’s annual net emissions in 2020 totalled around 405 million tonnes.
European Commission President Ursula von der Leyen said the JETP “will help Vietnam to build a 21st century power sector, energising its economic growth and bringing environmental and health benefits to its citizens”.
She said: “We will work together to show how emerging economies can accomplish the clean energy transition that their people and our planet so desperately need. With investments from international partners, Viet Nam can boost renewable energies and enhance its energy security and autonomy.”
Vietnam now has 12 months to develop and adopt a Resource Mobilisation Plan for the JETP.
The JETP model was first launched at COP26 in Glasgow in November 2021. There, the Governments of France, Germany, the UK, the US and the EU committed to mobilise an initial $8.5bn for the first phase of a five-year programme of energy transition investment in South Africa. The UK’s commitment was $1.8bn. An update, one year on, was published last month.
South Africa put itself forward as the first nation to benefit from a JETP in recognition that its energy supply is dominated by coal and crude oil. In 2018, these fossil fuels accounted for more than 80% of primary energy supply.
A second JETP was then announced by Indonesia as it hosted this year’s G20 summit in Bali in November. Nations committed $10bn to the JETP and are seeking private finance to match this pledge.
UN Secretary-General Antonio Guterres has called JETPs “a crucial tool to unlock the emissions cuts our world needs in the 2020s”. The UN is calling for a 45% reduction in global emissions by 2030 if the Paris Agreement’s 1.5C trajectory is to be delivered. The reduction in a 2C trajectory would need to be 30%.
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