Vietnam raises 2030 coal consumption plan as G7 climate supply stalls

The updated draft, dated November 11, was circulated by Vietnam’s Ministry of Industry as climate negotiators from the Group of Seven failed to reach a financing agreement with Vietnam on a “Just Energy Transition Partnership” at the COP27 global climate summit held Sunday in Egypt ended.

The Ministry of Industry did not respond to a request for comment.

The latest plan echoes a draft released last month that would have slowed growth in coal consumption by the end of this decade. A meaningful decrease in coal capacity would not occur until 2045.

In Vietnam, one of the world’s 20 largest coal consumers, plans for electricity development over the next ten years have been contentious for some time.

This has made the task of climate negotiators, led by EU diplomats, more difficult. They are hoping for a deal with Vietnam at a summit in Brussels next month.

According to the government’s latest baseline scenario, coal will remain Vietnam’s main energy source until 2030, with more than 36 gigawatts (GW) of installed capacity and up to 11 new coal-fired power plants to be built in the coming years, up from approx. 21 GW in 2020 and 30 GW in 2025.

However, coal’s share of electricity generation capacity will fall from 34% in 2020 to less than 28% by the end of the decade.

In its October draft, the government wanted to limit coal capacity to about 30 GW by the end of the decade, according to documents seen by Reuters.

GRAPHIC – Vietnam’s energy plan

Coal consumption has surged worldwide since Russia’s invasion of Ukraine in late February sent prices of other fossil fuels skyrocketing.

Renewable energy production, which has increased rapidly recently, is expected to rise to just 21 GW by 2030 in the latest plan, compared with 26 to 39 GW in the October draft, although an exponential increase is expected by mid-century with a installed capacity of more than 200 GW of wind, solar and hydrogen power plants. The figures exclude hydropower, traditionally an important source of energy in Vietnam.

“Solar and wind power have developed too quickly in Vietnam and this has created problems due to the country’s limited power grid,” the document said.

By 2050, coal would no longer be part of Vietnam’s energy mix, while gas and liquefied natural gas would rise from negligible amounts now to around 44 GW.

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Vietnam’s CO2 emissions are expected to grow exponentially as the country of 100 million grows rapidly unless it quickly switches to renewables and other less polluting energy sources.

EU officials and other Western negotiators had hoped that Vietnam would become the second country to agree to a financing plan to accelerate the reduction of coal consumption, after a similar deal was reached with South Africa last year.

The EU, which is co-leading negotiations on behalf of the G7 with Britain, considered a deal at the COP27 summit possible, according to internal documents seen by Reuters.

But a series of multibillion-dollar improved offers, mostly in the form of loans, failed to win over Vietnamese negotiators. According to diplomatic and industry sources, they wanted more subsidies and more control over how the funds would be disbursed.

The country has not budged, while Indonesia announced at last week’s G20 summit in Bali an agreement with rich countries to finance the coal-to-coal transition.

Several EU officials set a new goal for a deal with Vietnam at a summit with the Association of Southeast Asian Nations in Brussels in mid-December.

However, many Vietnam-based investors and diplomats doubt a deal can be reached unless it is eased significantly, while disagreements within the Vietnamese government over energy development will remain a formidable obstacle.

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