The G7 group of wealthy nations has extended a grant of over $300 million to Vietnam in support of their efforts to reduce coal usage.
The G7 group of wealthy nations has extended a grant of over $300 million to Vietnam in support of their efforts to reduce coal usage, according to documents obtained by Reuters. This financial package constitutes 2% of the overall commitment of $15.5 billion made by G7 countries and partners in December 2022, aimed at aiding Vietnam, a major coal user, in achieving net-zero emissions by 2050.
While Vietnam had sought a significant portion in grants and affordable financing to facilitate the transition from coal-fired power plants to renewable energy sources, donors primarily proposed expensive loans at market rates. This was due to ongoing delays in the country’s power projects.
Donor countries have encountered challenges in climate discussions with other developing partners, as similar initiatives for South Africa and Indonesia have faced hurdles in delivering concrete results.
Vietnam remains dedicated to collaboration and has outlined a draft list of reform commitments and over 400 potential projects that could receive G7 funding. These include 272 ventures related to energy infrastructure like wind and solar farms, power grid enhancements, and battery storage systems.
Before the UN Climate Change Conference commencing on November 30 in Dubai, this list requires approval from international partners who have called for more ambitious regulatory reforms and the inclusion of civil society in climate change decisions.
The authoritarian government of Vietnam has detained five environmental activists over the past two years.
As of now, the G7 offer, shared with select experts, encompasses $321.5 million in grants, primarily from the European Union and its member states, serving as the principal financial backers.
Additionally, there are $2.7 billion in concessional loans with low interest rates, with a significant portion provided by the EU, Germany, France, and the Asian Development Bank (ADB), along with a smaller contribution from Canada.
While the overall public funding has slightly increased to $8 billion, more than half comprises commercial loans at market rates, which Vietnam has been hesitant to accept, particularly amidst the current global scenario of elevated interest rates.
The remaining $7.5 billion is anticipated to come from private investors in costly loans, contingent on regulatory reforms and the quality of specific projects.
Despite the allocation of grants, some experts caution that the amount may not be sufficient to persuade Vietnam to phase out coal usage entirely. The country estimates it needs around $135 billion until 2030, and a significantly higher amount by mid-century to realize its power generation plans.
Vietnam’s approach envisions an increase in coal-generated energy until 2030, followed by a decline over the subsequent two decades. Coal’s contribution to total power output is anticipated to decrease to 20% in 2030 from 31% in 2020.