(Bloomberg) — Vietnam is set to follow Indonesia and South Africa with a climate financing package of at least $11 billion to shift its economy away from coal and boost the rollout of renewable energy sources.
Vietnam and its donor countries, led by the European Union and the UK, are aiming to announce the Just Energy Transition Partnership funding deal — which could total as much as $14 billion — at the EU-ASEAN summit on Dec. 14, according to people familiar to the matter. Between $5 billion and $7 billion will come from public loans and grants, with the rest from private sources.
About 85% of the package has been done, but the issue of decarbonizing the country’s power sector still needs to be finalized, one of the people said. Vietnam was understood to have been analyzing Indonesia’s deal, announced earlier this week, and key members of the country’s leadership still need to be won over, the person said.
Negotiations have also been clouded by concerns about how much of the funding would be grant-based and how much debt Vietnam is willing to take on, even at highly concessional rates. It’s also not clear that a deal can be reached without the release of environmental activists currently jailed in the Southeast Asian nation on what supporters call trumped-up charges.
Read more: Biden, Jokowi Unveil $20 Billion Deal to End Coal in Indonesia
Vietnam’s package is set to be the third in a series of blockbuster deals to help large coal-reliant middle-income countries accelerate their transition to low-carbon economies. South Africa’s $8.5 billion agreement was the first, announced at last year’s COP climate summit, with an investment plan signed off at this year’s meeting in Egypt. Indonesia’s $20 billion pact was unveiled at the Group of 20 gathering in Bali this week.
Two similar energy transition packages are in the pipeline for Senegal and India, which is hosting the G-20 next year.
Coal makes up about half of Vietnam’s energy supply, yet its 2,000 miles of coastline are seen as ideal for generating wind power. The partnership will also involve technical assistance on how to streamline renewable regulations as the country aims to reach carbon neutrality by the middle of the century.
Like the Indonesia deal, some of private finance is expected be provided by the Glasgow Financial Alliance for Net Zero, a group of 550 financial institutions with $150 trillion in assets.
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Freeland meets with provincial, territorial finance ministers in Toronto
TORONTO — Deputy Prime Minister and Finance Minister Chrystia Freeland is hosting an in-person meeting Friday with the provincial and territorial finance ministers in Toronto to discuss issues including the current economic environment and the transition to a clean economy.
The meeting will focus on the economic situation both domestically and globally, according to a federal source with knowledge of the gathering, including discussions on how to provide incentives and supports to be competitive with the U.S.’s Inflation Reduction Act.
U.S. President Joe Biden’s Inflation Reduction Act includes electric-vehicle incentives that favour manufacturers in Canada and Mexico, as well as the U.S.
The incentives, which were already revised to include Canada and Mexico after originally focusing on the U.S., are now facing criticism from Europe about North American protectionism.
The source, who spoke on the condition they not be named to discuss matters not yet made public said the ongoing challenges with health care in Canada will also come up at the meeting. More substantive discussions on that will be held next week when the prime minister meets with premiers on Feb. 7.
In her opening remarks, Freeland said it’s essential for Canada to have its rightful place in the transition to a clean economy, calling it one of the biggest challenges of the moment.
We are in a situation with a lot of economic uncertainty globally, said Freeland, adding that later in the day, the ministers will have a discussion with Bank of Canada governor Tiff Macklem.
“I think that conversation with the governor will be useful and important for all of us,” she said.
Despite the need to address health care challenges, Canadian jobs and the transition to a clean economy, Freeland said the government recognizes it also has to contend with real fiscal constraints.
Freeland will hold a closing news conference at 3:30 p.m. local time.
The meeting comes at a tense time for many Canadian consumers, with inflation still running hot and interest rates much higher than they were a year ago.
The Bank of Canada raised its key interest rate again last week, bringing it to 4.5 per cent, but signalled it’s taking a pause to let the impact of its aggressive hiking cycle sink in.
The economy is showing signs of slowing, but inflation was still high at 6.3 per cent in December, with food prices in particular remaining elevated year over year.
Interest rates have put a damper on the housing market, sending prices and sales downward for months on end even as the cost of renting went up in 2022.
Meanwhile, the labour market has remained strong, with the unemployment rate nearing record lows in December at five per cent.
— With files from Nojoud Al Mallees in Ottawa and James McCarten in Washington
This report by The Canadian Press was first published Feb. 3, 2023.
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