Industry-Intensive Vietnam to Increase Fossil Fuel Consumption
By Vijay Jayaraj
Vietnam of the 21st century is completely different from the war-ravaged country of the last century. An industrial hub, Vietnam now is a major exporter of finished goods and has cities that are thriving with economic activities.
The major reason for the economic transformation is the country’s energy sector. However, this is now threatened by international climate policies that seek to transition the country’s affordable and dependable power sector into an unstable and expensive one.
At a crossroads, the country has a choice of opting between increased economic growth and pseudoscientific political agendas that have no regard for the welfare 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 undergone significant economic progress in recent decades. The poverty rate in Vietnam has decreased significantly since the 1980s, although it remains higher than in many other Southeast Asian countries. Between 2010 and 2020, “the World Bank’s poverty rate ($3.20/day) dropped from 16.8 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 become a major producer of textiles, footwear, and other manufactured goods.
In other words, Vietnam depends on its industrial sector for economic progress. In 2021, industry contributed 2.68 thousand trillion Vietnamese Dong to the gross domestic product, the largest contribution among all sectors according to Statista. What fuels these industries?
Coal Drove Economic Progress
Analysis of the economic growth points to a robust energy sector hallmarked by an 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, thus doubling between 2011 and 2021. The correlation between coal consumption and poverty reduction is obvious.
This means that the supply of fossil fuels for those industries pretty much decide the degree to which the country’s people prosper. However, the country is far from achieving universal poverty reduction. The World Banks says that “there was significant progress in poverty reduction, but last mile challenges in tackling poverty remain.” For instance, nearly “40 percent of the middle class in 2016 slid to a lower economic group by 2018.” So, Vietnam cannot afford to abandon the energy mix of coal, oil and natural gas that made possible the economic progress thus far.
Hence, the country has made a U-turn from its earlier commitments to reduce coal consumption and is enroute to increasing the importation and use of coal.
Coal Spree to Continue
The Vietnam National Coal and Mineral Industries Group has forecast a growth of 6.1 percent in national coal demand between 2022 and 2025.
Around 90 percent of domestic coal consumption will be for power generation and industries that manufacture cement, fertilizers and metals. Electricity demand is expected to increase from less than 300 terawatt-hours (TWh) in 2020 to a range of 572-632 TWh in 2030. This requires a doubling of the country’s power generation.
The country is on a mission to build nearly a dozen new coal plants. According to Reuters, “Under the government’s latest baseline scenario, coal would remain Vietnam’s most important source of energy until 2030 with more than 36 gigawatts (GW) of installed capacity and up to 11 new coal-fired power plants to be built in coming years, up from about 21 GW in 2020 and 30 GW in 2025.”
Vietnam has entered into a partnership with the U.S., UK, Japan and Europe that seeks to reduce the use of fossil fuels. However, analysts say the $15.5 billion Just Energy Transition project is very vague and lacking information on how it is going to be achieved or what measures will be taken in the short term to have emissions from fossil fuels peak by 2030.
The reality – based on Vietnam’s trajectory of economic growth and its expansion of coal-fired generation – is that the use of fossil fuels will stretch beyond 2030 and far into the future.
This commentary was first published at iPatriot, February 2, 2023, and can be accessed here.
Vijay Jayaraj is a Research Associate at the CO2 Coalition, Arlington, Virginia. He holds a master’s degree in environmental sciences from the University of East Anglia, UK and resides in India.