Developing renewable energy in Vietnam Through the lens of equality and sustainability

Babeth Ngoc Han Lefur, country director, Oxfam in Vietnam

As climate change is progressing at an even greater pace than expected by various climate modelling scenarios, the Intergovernmental Panel on Climate Change (IPCC) is urging countries to take robust action to cut down greenhouse gas (GHG) emissions to limit the average global temperature increase to no more than 1.5 degrees Celsius by 2030. In September 2019, people in more than 150 countries were stepping up to support young climate strikers and demand an end to the age of fossil fuels and ensure a rapid, equitable energy revolution. The climate crisis will not wait, so neither should we. The 25th session of the Conference of the Parties (COP 25) to the United Nations Framework Convention on Climate Change (UNFCCC) in December 2019 calls for action and champions to demand more ambition from nations to fight the climate crisis. This is also an invitation to elevate care for the environment into a national theme where all have a role to play.

Vietnam’s high-level delegation is going to join the COP 25 with strong commitments in climate change adaptation and mitigation. In its Nationally Determined Contributions (NDC), Vietnam set the target of an 8 per cent reduction in CO2 emissions, through measures such as land-use change, forest management and reforestation, low-carbon rice farming practices, and renewable energy development. It is expected that by 2030, 47.3 billion kilowatt-hours of electricity in the country will come from wind and solar energy. Under the revised Power Development Plan 7 (PDP 7) of state-run Electricity of Vietnam (EVN), renewable energy will account for a modest 10.7 per cent of the national electricity output in 2030 (see Figure 1).

This year, the development of renewable energy in Vietnam has made significant progress (see Figure 2). Notably, with a record level of solar power facilities put into operation, Vietnam has become a very active and attractive renewable energy market in Southeast Asia. This, on one hand, contributes to the reduction of GHG emissions that Vietnam has committed in the NDC. However, this incredible development is also posing new challenges for the steady development of the national grid, as well as land use, electricity pricing, human and financial resources, and especially for equitable and sustainable development, that is, to ensure that no one is left behind because of losing their livelihoods, jobs, or agricultural land in the process.

Oxfam in Vietnam recommends three sets of solutions to work towards the development of an inclusive and sustainable renewable energy industry in Vietnam.

Sustainable livelihood and equality for all stakeholders

The development of renewable energy, especially wind and solar energy, requires vast areas of land to be repurposed. People can lose their agricultural land if it is acquired and handed over to enterprises to develop renewable energy projects. Currently, there are no specific regulations to provide an explicit rate for land compensation or land price to pay landholders. The process of converting agricultural, forest, and aquaculture land into land for renewable energy generation does not engage people who are directly affected but are only subjects to the agreement between provincial governments and investors. The lack of engagement of local communities and civil society organisations undermines the rights of local people to voice their concerns. As a consequence, affected landholders are put in a disadvantaged position, receiving low land compensation rates while losing their vital production resources. This might also lead to conflicts between farmers and investors.

Recent studies by Oxfam found that women play leading roles in key value chains in the agriculture, forestry, and aquaculture sectors. The loss of production land threatens to undermine the role of women in the household economy and thus further deepens existing gender inequality, as well as intensifying social conflicts in the future, those conflicts can already be observed between investors and local people in renewable energy projects in the central provinces of Binh Thuan and Ninh Thuan in 2019.

Currently, there are many different models for electricity sector stakeholders to join hands to reduce GHG emissions, including the conversion of low-productivity lands for renewable energy development, purchase of production land from local people, land leasing, and the use of land as shares. Among these models, using land as shares is the most sustainable mechanism.

People with land can become shareholders in renewable energy projects by contributing their plots of land, therefore, enterprises do not have to incur enormous amount of capital upfronts for land compensation, and people can participate in the protection and development of renewable energy areas, which would also mean protecting their own productive assets. This way, people can earn dividends from electricity projects, and at the same time have a source of monthly income based on their own land and do not have to forgo the land permanently. This model requires a process of testing, cost-benefit analysis, repurposing of land use, and provision of guidelines for provincial governments to work with investors. Most of all, this shareholder model requires a participatory process that includes landholders throughout the process of developing renewable energy projects.

Green finance for renewable energy development

According to the Ministry of Planning and Investment, from now until 2030, Vietnam needs about $30 billion for renewable energy development. The current green finance mechanism is a good way to attract the participation of the private sector. However, no green finance model is in place to facilitate climate change mitigation.

In Vietnam, there is currently no existing green financing mechanism for climate change mitigation. Commercial banks are willing to provide loans to enterprises and households to develop renewable energy. However, the lending interest rate of these loans is now 12 per cent, which is higher than the commercial lending rate. This is not fair because enterprises and people applying new technology to reduce GHG emissions and protect the environment should enjoy a lower rate of interest than commercial loans. This would incentivise the people and enterprises to contribute to the promotion of renewable energy.

Vietnam is part of the Climate Vulnerable Forum (CVF), which is the group of the world’s most disaster-prone, climate-vulnerable countries. There are 10 Asian members: Afghanistan, Bangladesh, Bhutan, Cambodia, Mongolia, Nepal, the Philippines, Sri Lanka, Timor-Leste, and Vietnam. With their people experiencing some of the worst impacts of climate change – from super cyclones to extreme flooding, displaced communities, and disappearing arable land – CVF governments and their citizens know that inaction is no longer an option. Despite having done very little to cause climate change, the CVF is taking impressive steps to tackle it. On the international stage, it has been a leading moral voice for greater ambition, successfully advocating for the inclusion in the Paris Agreement of a global goal to limit temperature increase to 1.5 degrees Celsius, under the motto “1.5 degrees to thrive”.

In 2015, CVF member states created the Vulnerable 20 (V20) Group of Finance Ministers, to bring together the finance ministers of all CVF countries (which now number more than 20). The V20 is focused specifically on mobilising financial resources for climate action. It has called on international financial institutions to align their operations with the Paris Agreement, the 1.5 degrees Celsius limit, and with their member economies’ 100 per cent renewable energy vision in support of sustainable development.

Vietnam needs to adjust the renewable energy targets in the revised PDP 7 and its Strategy of Renewable Energy Development to be consistent with the CVF vision of 100 per cent renewable energy by 2050. It should also avoid borrowing for new coal plants or lifetime extensions for existing plants.

Most importantly, although the development of renewable energy to replace coal and fuel energy is essential, the development process requires consideration of sustainable livelihood solutions for the local communities and an approach for mutual benefits between investors and local people.