Rich nations have pledged billions of dollars to help Vietnam cut its coal consumption but are struggling to seal a deal with the Southeast Asian country ahead of a global climate summit next week, two sources familiar with the talks said.
Vietnam would be the world’s second country to benefit from a commitment by rich nations to provide funds for so-called just energy transition after the United States, European Union, Britain, France and Germany agreed last year to invest $8.5billion over three to five years in South Africa to help it cut carbon emissions.
But domestic politics in Vietnam are holding up the deal, according to Western sources, while the financial offer, that is mostly made up of loans and only marginally grants, may also make it less appealing.
No agreement with Vietnam by the middle of next month would be seen as a major blow to UN and G7 efforts to involve coal-reliant countries in the fight against climate change, after little progress was achieved with India, the second largest consumer of coal after China.
Vietnam is among the world’s top 20 consumers of coal, and its carbon emissions are expected to increase exponentially as the country of 100 million people grows quickly, unless it rapidly shifts towards renewables and other less polluting sources of energy.
At last year’s COP26 climate summit, Vietnam committed to phasing out coal-fired power by 2040 – a plan that would, however, require significant investment and the support of wealthier nations.
To back Vietnam’s commitment, rich countries have offered it about $2 billion in cheap loans and are considering more, but smaller, financial support in handouts, a European Union official told Reuters.
However, the official who declined to be identified because the talks are confidential and still going on, said that there was a risk that a deal with Vietnam would not be concluded by next month.
“We are quite far away from an agreement,” the official said, noting that talks in Hanoi last week between a delegation of EU experts and their Vietnamese counterparts failed to achieve a breakthrough.
A second Western source confirmed it was uncertain whether progress could be made in time for the COP27 global climate summit in Egypt, which is due to begin on November 6.
The European Commission, the EU executive, declined to comment on the matter. The EU is leading, together with Britain, the talks with Vietnam on behalf of G7 donors.
Vietnam’s government did not respond to requests for comment.
Resisting the transition
The EU official said talks were hampered by internal Vietnamese divisions as conditions linked to funding could limit the power of some authorities.
“Some forces” in Vietnam were resisting the transition away from coal, US Special Presidential Envoy for Climate John Kerry told a news briefing this week, warning that countries that did not move faster “are really going to fall behind economically”.
Among projects Western nations have offered to support, according to the EU source, are upgrades of Vietnam’s power grid to reduce leaks, the building of more offshore wind farms and hydropower infrastructure, and the expansion of rail networks in big cities as an alternative to cars and motorbikes.
But Vietnamese negotiators have shown little interest in foreign investment in the power grid and wind energy, the source said.
A deal was expected to be reached by the COP27 summit, according to the sources and internal EU documents seen by Reuters.
A draft statement prepared by European Union officials ahead of a summit of EU and Southeast Asian countries in December took the deal for granted.
“Just Energy Transition Partnerships (JETP) have been agreed between G7 members, including the EU, and Vietnam and Indonesia, respectively,” said the EU draft text dated October 6.
“The formal launch of the JETPs could take place at the margin of COP27 in Sharm el Sheikh for Vietnam,” says a second internal EU document dated Oct. 12 that included details on EU plans to start negotiations on a similar deal Indonesia.
The partnership with Indonesia could be agreed at a G20summit on November 15-16 in Bali, the document said. But it may not involve Western funding, the EU official said.
