Rich countries offer Vietnam $15 billion to switch from coal

Rich nations have offered Vietnam a $15.5 billion package to help pay for the country’s transition from coal to renewable energy, the latest deal totaling $44 billion aimed at weaning developing economies off fossil fuels.

The financial package, which mirrors agreements reached with Indonesia and South Africa, includes $7.75 billion in public funding over the next three to five years and an additional $7.75 billion in private financing.

The G7 countries of America, Great Britain, Germany, France, Italy, Canada and Japan, as well as Denmark and Norway and the EU bloc have supported this package.

In contrast, Vietnam has agreed to limit electricity sector emissions to 170 megatons of carbon dioxide per year by 2030, generating less than half of its electricity by then, compared to the current target of 36 percent. Produce renewable resources.

The country has also pledged to increase its maximum coal-fired capacity to 30.2 GW by 2030, down from the current target of 37 GW, in a move that will limit the country’s coal project pipeline.

In comparison, Indonesia, one of the world’s largest emitters of greenhouse gases, has committed to cap electricity sector emissions to 290 megatonnes per year by 2030 and to produce about a third of its energy from renewable sources by 2030. slow

Dutch Prime Minister Mark Rutte, left, and Vietnamese Prime Minister Pham Minh Chinh in The Hague earlier this week after meetings that included discussions on climate and water management © Sem Van der Wal/EPA-EFE/Shutterstock

In an initiative launched at the UN COP26 summit last year, emerging nations were given incentives to move away from the dirtiest fossil fuels. An $8.5 billion deal was recently signed with South Africa and a proposed $20 billion package for Indonesia was presented at the Group of 20 meeting in Bali last month.

UN Secretary-General Antonio Guterres said the agreement between developed economies and Vietnam, South Africa and Indonesia was a “vital tool” to “unlock the emissions reductions the world needs in the 2020s”.

John Kerry, the US climate envoy and former secretary of state, said Vietnam’s commitments to “accelerate the transition from coal to renewable energy” show the country’s “seriousness in achieving a green transition for its people”.

“We look forward to partnering with Vietnam to foster inclusive economic growth to strengthen the fight against the climate crisis,” said Kerry, who helped draft the package in Vietnam, where he served during the war.

Private sector participation is expected from lenders and investors who form part of the Glasgow Financial Alliance for Net Zero, a coalition of more than 500 financial institutions, including Citibank, Deutsche Bank, HSBC and Standard Chartered. Institutions will benefit from contributions to their net zero goals as well as financial expansion.

The initial funding will be provided by Asian Development Bank and International Finance Corporation.

US officials said Washington will work with Vietnam and other parties in the coming months to implement the agreement, including identifying investments, financing opportunities and providing technical assistance.

A State Department official said the government will continue to work with Vietnamese authorities to ensure “meaningful investments” are made in the country’s transmission grid and new renewable projects are connected.

However, the cooperative plan known as fair energy transfer has not been implemented without problems for the countries involved.

South Africa’s Cyril Ramaphosa government said last month that the structure of its $8.5 billion financial package relies heavily on loans that add to the country’s debt burden.

Officials said only 4 percent of the total package came in the form of grants, with the rest a mix of government and multilateral loans and credit guarantees.

Climate capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Curious about FT’s environmental sustainability commitments? Learn more about our science-based goals here

Leave a Comment