Facing donors, Vietnam urged to rethink coal-fueled growth

By Lam Le, Ha Phuong   October 27, 2016 | 01:00 am GMT+7
Facing donors, Vietnam urged to rethink coal-fueled growth
The energy industry is the biggest contributor of greenhouse gas emissions in Vietnam, accounting for a third of the total in 2010, at 41.1 metric tons of CO2 equivalent. This is set to quadruple by 2020. Illustrative photo by Reuters/David Gray

International partners say what Vietnam desperately needs is better policy.

International development partners and donors have called on Vietnam to commit to bigger greenhouse gas emission reductions, warning that fueling growth with coal will hurt the country with high environmental costs later.

“No doubt adaptation is necessary but the less we invest in mitigation today, the more it will cost in adaptation in the future,” said Cecile Leroy, who attended a high level meeting in Hanoi on Tuesday as a representative of the European Union.

Renewable energy and economic growth can go hand in hand, she said, pointing out that emissions in Europe have been reduced by 20 percent since 1990.

Under a high emission scenario, nearly 40 percent of the Mekong Delta could be wiped out by the end of the century, according to projections by the Ministry of Natural Resources and Environment.

The risk is lower in a scenario of moderate climate change, which is only possible if the world successfully limits global temperature rises to 1.5-2 degrees Celsius above pre-industrial levels, as agreed in the Paris Agreement last December. Achieving the target means the world must reduce carbon emissions by 40-70 percent by 2050 compared to 2010.

But according to the Intergovernmental Panel on Climate Change, a scientific body of the United Nations which advises governments, even if the world manages to keep this promise, median crop yields could drop by as much as 2 percent every decade, and fishery resources around the world could be displaced, affecting catches in Vietnam.

The country itself is currently committed to reducing its greenhouse gas emissions by 8 percent by 2030 compared to business as usual.

While its carbon emissions per capita are relatively low, 1.7 metric tons in 2013 versus an average of 3.5 metric tons in low and middle-income countries, there's an alarming trend of increased emissions compared to other countries in Southeast Asia.

These neighbors have also committed to much bigger cuts in greenhouse gas emissions.

*Singapore's green house gas (GHG) emission reductions by 2030 compared to 2005.

**Business as usual is a baseline case, which assumes that future development trends follow those of the past and no changes in policies will take place.

***Malaysia is excluded because it targets reduction in GHG emission intensity. 

Outdated and energy intensive technology in power generation, industrial production and transport are to blame for Vietnam’s relatively high carbon intensity, said Pham Van Tan, deputy director general of the Department of Meteorology, Hydrology and Climate Change. Carbon intensity is the amount of carbon emissions released per unit of gross domestic product.

The energy sector is by far the biggest emitter in Vietnam, according to the environment ministry's 2015 technical report.

The energy industry is the biggest contributor of greenhouse gas emissions in Vietnam, accounting for a third of the total in 2010, at 41.1 metric tons of CO2 equivalent. This is set to quadruple by 2020. 

Under a national energy plan, by 2030, half of the country’s power will come from coal, compared to 19.8 percent in 2013.

To meet that demand, Prime Minister Nguyen Xuan Phuc has already allowed three energy giants -- PetroVietnam, Vietnam Electricity and mining group Vinacomin -- to import 70 million tons of coal by 2030. But coal imports may or may not be crucial: the Ministry of Industry and Trade has estimated that Vietnam's coal reserves are already enough to generate power for several centuries.

Renewable energy, excluding hydropower, on the other hand, will contribute only 10.7 percent of electricity production in 2030 compared to the current 3.7 percent.

It is in this context that United Nations Resident Coordinator Pratibha Mehta called on the Vietnamese government to research and review its emissions targets "carefully."

"Vietnam must review the long-term effects of the use of coal for electricity generation and in industry," Mehta said. "Vietnam lags behind most countries in the region in terms of solar and wind power installations […] despite huge potential.”

The message was echoed by representatives of other development partners at Tuesday's meeting.

Vietnam's environment minister Tran Hong Ha agreed that the country "should abandon traditional industries that are heavily dependent on natural resources."

"We should switch from black to green energy sources," he said.

Vietnam has said greenhouse gas emission reductions could be 25 percent by 2030, instead of the committed 8 percent, if there is international support and adaptation continues to be its main focus.

“Vietnam considers adaptation important because of the serious climate change impacts,” said Tan of the meteorology and climate change department. "In the short term, for Vietnam to deal with such impacts and develop, we have to adapt."

"Mitigation is important but it requires huge resources," Tan said, adding that the country needs to consider carefully whether and how foreign loans could be used for renewable energy.

He told VnExpress International that even though renewable energy will likely be cheaper with time, it’s still expensive for Vietnam.

“Vietnam’s electricity demand rises very fast, at more than 10 percent per year while in China it's only 2 percent. So it’s easier for China to move to renewable energy.”

Growing budget deficit and public debt are placing further strain on Vietnam’s capacity to commit to more mitigation efforts, according to Nguyen Xuan Thao, deputy director general of Department of Debt Management and External Finance.

“To switch to renewable energy, we’ll have to import the technology. So it’s very important to seek private funding but the question is how,” said Thao.

She pointed out that even the Paris Agreement is not specific about funding mitigation projects, which is an important issue for developing countries like Vietnam, which is also dealing with a decline in official development assistance (ODA) resources.

The Delegation to the European Union in Vietnam argued that a transition to renewable energy doesn’t require huge government funding but a suitable policy that will encourage the private sector to jump in.

Martin Hoppe, First Counselor of the German Embassy, said “it’s expensive going down the coal path if you consider environmental costs.”

Hoppe suggested Vietnam introduce feed-in tariffs, a kind of subsidy, for renewable energy to encourage the private sector and households to invest in green power.

Currently, Vietnam offers no subsidies or tax credits for renewable energy. When it comes to power prices, coal power costs nine cents per kilowatt-hour, while for solar, the price is around 13 cents.

Under the Support Program to Respond to Climate Change (SP-RCC) for 2016-2020, a policy dialogue platform that brings together the Vietnamese government, donor partners and NGOs, Vietnam is expected to work on new legislation to encourage wind and solar power projects.

So far, the country has secured $1.2 billion for the upcoming SP-RCC term from the Japan International Cooperation Agency (JICA), the World Bank and the French Development Agency (AFD) to fund climate change-related investment, capacity building and policy actions.

Minister Ha said Vietnam will ratify the Paris Agreement before the COP 22 Marrakech Climate Change Conference on November 7.

The Paris Agreement will enter into force on November 4 and so far the world's biggest polluters including the U.S., China and the European Union have already ratified it.

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