The Just Energy Transition Partnership (JETP) is opening up a major opportunity for Vietnam to secure financial support from abroad, including funding from the UK, to achieve its ambitious climate, green transition and sustainable development goals.
JETP is a multilateral financial cooperation mechanism designed to help some emerging economies that rely heavily on coal power to make an equitable transition to clean energy. In early December, Prime Minister Pham Minh Chinh announced a plan to mobilize resources for this agreement at the COP28 conference in Dubai, UAE.
The energy transition has become a particular focus after Vietnam committed to net zero emissions by 2050, announced by Prime Minister Pham Minh Chinh at COP26 in November 2021. The national power development plan (Power Master Plan 8), approved in May, sets targets to phase out coal-fired power, promote renewable energy and reduce greenhouse gas emissions.
According to Deputy Director of the Electricity and Renewable Energy Authority Pham Nguyen Hung, the Power Master Plan 8 brings great opportunities for investment in green energy in Vietnam. It is estimated that to achieve this goal, Vietnam will need about 135 billion USD in investment by 2030 and an additional 500 billion USD in the period 2030-2050.
Power Master Plan 8 also aims to promote a just energy transition with a share of renewable sources reaching 71.5% by 2050 and reducing greenhouse gas emissions to below 170 million tons by 2030. The World Bank estimates that Vietnam needs a total of US$368 billion by 2040 to achieve net-zero emissions and combat climate change.
Opportunities with capital flows from the UK
Vietnam is actively seeking foreign funding to meet its climate goals. In late August, Vietnam approved a JETP implementation plan, with an emphasis on a resource mobilization strategy to attract international financial support and technology transfer to accelerate the green transition.
Under the JETP with the International Partnership Group, including the UK, at least US$15.5 billion will be mobilised over the next three to five years through a combination of appropriate financial instruments to boost Vietnam’s green-neutral economic growth. With the UK-Vietnam Free Trade Agreement (UKVFTA) coming into effect in early 2021, Vietnam has a great opportunity to strengthen its relationship with the UK and earn billions of dollars for its green transition journey.
The 500kV Vinh Tan transformer station in Binh Thuan plays an important role in transmitting renewable energy to Ninh Thuan and Binh Thuan provinces. Photo: Huy Hung
Vietnamese Trade Counsellor in the UK, Mr. Nguyen Canh Cuong, shared that British businesses have advantages in the field of renewable energy, including wind and solar power, sustainable agriculture, environmental pollution treatment and green finance. British businesses are also trying to strengthen cooperation in the framework of the 2020 Summit on Vietnam's green economic path.
Bradford University expert Dao Duc Cuong emphasized that Vietnam's current situation is similar to that of the UK in the first decade of the 21st century. Therefore, this is a valuable opportunity for Vietnam to learn from and cooperate with the UK in the field of clean energy development.
Several investors, including those from the UK, are making efforts to invest in Vietnam’s renewable energy market. In mid-May, British International Investment, a UK-based development finance institution and impact investor, announced plans to invest $15 million in a fund focused on developing energy transition infrastructure for Southeast Asia, including Vietnam.
Need for strong reform
Vietnam ranks second among developing economies in attracting international investment in renewable energy, with $106.8 billion registered for renewable energy projects between 2015 and 2022, accounting for 32% of total project value. However, larger-scale reforms are needed, as noted in a report by the United Nations Conference on Trade and Development.
Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan shared at the 13th APEC Energy Ministers Meeting in August that the Vietnamese Government always encourages and creates favorable conditions for foreign investors to participate in developing renewable energy projects in Vietnam, while enhancing the transfer of energy-saving technology.
Senior economist Vo Tri Thanh stressed that with limited public resources, the most important thing for Vietnam is to create an attractive business environment to attract investment. In the electricity sector, Thanh stressed that transparency in electricity prices is an important factor in attracting investment.
Mr. Thanh also recommended that Vietnam should not over-subsidize traditional primary resource consumption sectors such as coal, oil and gas, and instead use these resources to encourage green energy transition. In addition, he also emphasized the importance of improving policies to support disadvantaged groups, such as poor households, so that they can access clean energy.
The Ministry of Industry and Trade is actively developing a Direct Power Purchase Agreement (DPPA) to attract investment in renewable energy development. According to Power Plan 8, Vietnam has set a target of increasing the proportion of renewable energy use to 30.9% - 39.2% of total energy sources by 2030 and 67.5% - 71.5% by 2050./.
Mai Linh
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