Vietnam has just become the latest country to put in place a Just Energy Transition Partnership (JETP) with the International Partners Group (IPG) – a major step forward in realising Vietnam's Net Zero 2050 ambitions and bringing forward peaking of greenhouse gas emissions and transition from fossil fuels.
Under the terms of the Vietnam JETP, IPG members – including the EU, UK, the United States, France, Germany, Italy, Canada, Japan, Norway and Denmark – will provide an initial US$15.5 billion of public and private financing over the next three to five years to support Vietnam's goal to achieve a number of new energy transition targets.
The key ones being:
- bringing forward the projected peaking date for all greenhouse gas emissions in the country from 2035 to 2030;
- reducing peak annual power sector emissions by up to 30 percent from 240 down to 170 megatons, and bringing forward the peaking date by five years to 2030;
- limiting the country's peak coal capacity to 30.2 gigawatts, down from a current planning figure of 37 gigawatts; and
- accelerating adoption of renewables so that renewable energy accounts for at least 47 percent of electricity generation by 2030, up from the current planned generation share of 36 percent.
Successful delivery of these ambitious targets is expected to reduce the country's emissions by 500 megatons by 2035.
The Vietnam JETP was originally expected to be finalised at the COP27 Climate Summit in Egypt last month, together with the US$20 billion JETP announced for Indonesia. It was however reported that negotiations with Vietnam failed to reach a landing in time, due to the government's requirement for a larger share of the JETP funding to be in the form of grants, rather than loans.
One month on, the Vietnam JETP negotiations have finally closed, with initial funding taking the form of US$7.75 billion in pledges from the IPG members and two international financial institutions.
This is supported by a commitment from IPG members to work to mobilise and facilitate a matching US$7.75 billion of investment from an initial set of private financial institutions.
As for next steps, Vietnam will be working with the IPG member countries to develop and put in place the Vietnam JETP Resource Mobilisation Plan, which will set out the process and strategy for implementing and allocating JETP funding.
Vietnam is the third country to adopt a JETP, following the successful launch of the South Africa JETP at COP26 last year and, as mentioned, the Indonesia JETP put together at the latest COP27 Climate Summit and formally launched at the G20 Leaders' Summit in Bali a few days later.
Last month’s release of the Indonesian JETP also coincided with Indonesia and the Asian Development Bank announcing a US$250-300 million refinancing of the 660-megawatt Cirebon 1 power plant in West Java, on the condition that the facility be taken out of service 10-15 years before the end of its 40-50 year useful life.
We expect to see similar developments in Vietnam now that there is a concrete plan and funding mechanism in place to accelerate the early retirement of coal-fired power projects in the country.