By Vijay Jayaraj
Vietnam of 21st This century is completely different from the war ravaged country of the previous century. As an industrial hub, Vietnam is now a major exporter of finished goods and has thriving cities with economic activity.
The main reason for the economic transformation is the country’s energy sector. However, this is now threatened by international climate policies that seek to transform the country’s reliable and affordable energy sector into an unstable and expensive one.
At a crossroads, the country has a choice between accelerated economic growth and pseudoscientific political agendas that don’t care about the welfare of its citizens. Recent domestic developments suggest that Vietnam will not give up the most reliable and affordable source of energy: coal.
Vietnam’s Industrial Growth and Poverty
Vietnam has experienced significant economic progress in recent decades. The poverty rate in Vietnam has decreased 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) has fallen from 16.8 to 5% and more than 10 million people have been lifted out of poverty.
One of the main drivers of economic growth in Vietnam is the rapidly expanding export sector. Vietnam has become a major producer of textiles, footwear and other manufactured goods.
In other words, Vietnam depends on the industrial sector for economic progress. In 2021, the industry contributes 2.68 trillion Vietnamese dong to gross domestic product, the largest contributor of all sectors according to Statista. What drives these industries?
Coal fuels economic progress
Analysis of economic growth points to a strong energy sector marked by increasing coal use. Domestic coal consumption increased from 27.8 million tons in 2011 to 38.77 million tons in 2015 and 53.52 million tons in 2021, thus doubling in the period 2011-2021. The correlation between coal consumption and poverty reduction is clear.
This means that the supply of fossil fuels to those industries pretty much determines the level of prosperity of the country’s people. However, the country is far from achieving its goal of comprehensive poverty reduction. world banks speak that “significant progress has been made in poverty reduction, but the ultimate challenges in tackling poverty remain.” For example, nearly “40% of the middle class in 2016 slipped into the lower economic quintile in 2018.” Therefore, Vietnam cannot abandon the energy mix of coal, oil and natural gas that has made economic progress so far.
As a result, the country has reversed its previous commitments to reduce coal consumption and is on track to increase coal imports and use.
Than Spree to continue
Vietnam Coal-Mineral Industry Group forecasts growth 6.1 percent in national coal demand from 2022 to 2025.
About 90% of coal consumed in the country will go to power generation and the cement, fertilizer and metal manufacturing industries. Electricity demand is expected to grow from less than 300 terawatt-hours (TWh) in 2020 to a range 572-632 TWh in 2030. This requires doubling the country’s electricity production.
The country is on a mission to build nearly a dozen new coal power plants. Based on Reuters“According to the government’s latest baseline scenario, coal will remain Vietnam’s most important energy source through 2030 with over 36 gigawatts (GW) of installed capacity and up to 11 new coal-fired power plants. will be built in the coming years, up from about 21 GW in 2020 and 30 GW in 2025.”
Vietnam has established partnerships with the US, UK, Japan and Europe to find ways to reduce fossil fuel use. However, analysts think the Just Energy Transition project is worth $15.5 billion very vague and lack of information on how to achieve this goal or what measures will be taken in the short term to peak fossil fuel emissions by 2030.
The reality – based on Vietnam’s economic growth trajectory and expanding coal-fired power generation – is that fossil fuel use will last beyond 2030 and beyond.
This commentary was first published at iPatriotFebruary 2, 2023, and can be accessed here.
Vijay Jayaraj is a research associate at CO2 Alliance, Arlington, Virginia. He holds a master’s degree in environmental science from the University of East Anglia, UK and resides in India.
card: Vijay Jayaraj, Vietnamese energy, Vietnamese industry
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