Trade-intensive Vietnam to extend fossil gas consumption

By Vijay Jayaraj

21st-century Vietnam is very different from the war-ravaged country of the last century. As an industrial hub, Vietnam is now a major exporter of manufactured goods and has cities thriving with economic activity.

The main reason for the economic transformation is the country’s energy sector. However, this is now being threatened by international climate politics trying to transform the country’s affordable and reliable energy sector into an unstable and expensive one.

At a crossroads, the country faces a choice between increased economic growth and pseudo-scientific political agendas that ignore the well-being of its citizens. Recent developments in the country indicate that Vietnam will not give up its most reliable and affordable energy source: coal.

Vietnam’s Industrial Growth and Poverty

Vietnam has made significant economic advances over the past few decades. The poverty rate in Vietnam has declined significantly since the 1980s, although it is still higher than in many other Southeast Asian countries. Between 2010 and 2020, “The World Bank poverty rate ($3.20/day) fell from 16.8 percent to five percent, and over 10 million people were lifted out of poverty.

One of the main drivers of economic growth in Vietnam has been a rapidly expanding export sector. Vietnam has developed into a major producer of textiles, shoes and other finished goods.

In other words, Vietnam depends on its industrial sector for economic advancement. In 2021, according to Statista, industry contributed 2.68 trillion Vietnamese dongs to gross domestic product, the largest contribution of any sector. What drives these industries?

Coal drove economic progress

Analysis of economic growth indicates a robust energy sector characterized by increasing use of coal. Domestic coal consumption increased from 27.8 million tons in 2011 to 38.77 million tons in 2015 and to 53.52 million tons in 2021, doubling between 2011 and 2021. The link between coal consumption and poverty reduction is evident.

This means that the supply of fossil fuels for these industries pretty much determines the prosperity of the people in the country. However, the country is a long way from universal poverty reduction. The World Bank says that “there have been significant advances in poverty reduction, but the challenges of the last mile in reducing poverty remain.” For example, about “40 percent of the middle class slipped into an economically disadvantaged group in 2016-2018.” So Vietnam cannot afford to forego the coal, oil and natural gas energy mix that has enabled its economic progress to date.

In doing so, the country has reversed its previous commitments to reduce coal consumption and is on track to increase coal imports and use.

Coal storm continues

The Vietnam National Coal and Mineral Industries Group forecasts a 6.1 percent growth in national coal demand between 2022 and 2025.

Around 90 percent of domestic coal consumption is used in power generation and industries that produce cement, fertilizers and metals. Electricity demand is expected to increase from less than 300 terawatt hours (TWh) in 2020 to 572-632 TWh in 2030. This requires doubling the country’s electricity production.

The country has a mission to build nearly a dozen new coal-fired power plants. According to Reuters, “Under the government’s most recent baseline scenario, coal will remain Vietnam’s main energy source through 2030, with more than 36 gigawatts (GW) of installed capacity and up to 11 new coal-fired power plants to be built in the coming years, up from about 21 GW in 2020 and 30 GW in 2025.”

Vietnam has formed a partnership with the US, UK, Japan and Europe aimed at reducing fossil fuel use. But analysts say the $15.5 billion Just Energy Transition project is very vague, lacking information on how it will be achieved or what short-term actions will be taken to achieve fossil fuel emissions by 2030.

The reality – based on Vietnam’s economic growth trajectory and the expansion of coal-fired power plants – is that fossil fuel use will extend beyond 2030 and well into the future.

This comment was first published on iPatriot on February 2, 2023 and can be found here.

Vijay Jayaraj is a Research Associate at the CO2 Coalition, Arlington, Virginia. He holds a Masters in Environmental Sciences from the University of East Anglia, UK and is based in India.

tags: Vijay Jayaraj, Energy in Vietnam, Vietnam Industry

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