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PIC Market update – 12 May 2023

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PIC tracks the latest developments in Vietnam's power sector providing insight and analysis on the market and policy.

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Vietnamese businesses to prepare for EU’s CBAM

The European Union (EU)'s Carbon Border Adjustment Mechanism (CBAM), scheduled to be implemented in 2024, will have significant implications for Vietnamese manufacturers, particularly those operating in high carbon emission sectors such as iron and steel, aluminum, and cement. Experts emphasize that Vietnamese enterprises must align with the global trend of reducing greenhouse gas (GHG) emissions in order to remain competitive in the international market. The CBAM aims to put a fair price on imports based on their environmental impact, and its implementation will directly impact the production and trade activities of Vietnamese businesses, as well as the overall economy. Source Source

JETP integration into the National Power Development Plan proposed

The integration of the Just Energy Transition Partnership (JETP) into Vietnam’s National Power Development Plan for the 2021-2030 period, with a vision to 2050 (NPDP8) has been recognized as a crucial solution for financing, technology, and achieving Vietnam's energy goals for the 2021-2030 period and beyond. This integration aims to prioritize the shift from fossil fuels to renewable energy sources to meet the economic and export requirements. Additionally, the significance of good governance, reasonable pricing, and the adoption of appropriate technologies in facilitating the energy transition process have been identified by the Vietnamese Government. (Appraisal Council meeting on NPDP8’s review and completion outcomes chaired by Vietnamese Deputy Prime Minister Mr. Tran Hong Ha on 4 May 2023) Source Source

Vietnam’s GDP growth forecast to reach 6.5 percent in 2023: OECD

Vietnam's economy is projected to experience steady growth in the near term, with GDP growth expected to reach 6.5 percent in 2023 and 6.6 percent in 2024, according to the Organisation for Economic Cooperation and Development (OECD)’s Economic Surveys: Vietnam 2023 report. The report emphasizes the importance of accelerating investments in renewable energy and implementing comprehensive policies to enhance energy efficiency, with a focus on effective public and private investments to achieve net-zero emissions by 2050. The OECD report highlights three key messages: prioritizing targeted support for vulnerable households to mitigate the impact of high energy prices in the short term, strengthening the macroeconomic policy framework through tax base expansion and social protection measures in the medium term, and improving the business climate and facilitating digital transformation to sustain high economic growth. Source Source

ADB and GEAPP announced USD35mil fund to address climate change and energy access in South and Southeast Asia

The Asian Development Bank (ADB) and the Global Energy Alliance for People and Planet (GEAPP) have introduced a new capital fund of USD 35 million to tackle climate change and energy access challenges in South and Southeast Asia. Administered by ADB, the fund will prioritize initiatives such as supporting Battery Energy Storage Systems (BESS) in Vietnam and facilitating the retirement of coal-fired power plants in Indonesia. Its objective is to attract additional capital by offering technical assistance, grant components, and concessional instruments, promoting clean energy access and transition in the region. Source

Update on ADB’s Energy Transition Mechanism progress

Initiated by ADB in 2021, the Energy Transition Mechanism (ETM) is a program aimed at addressing climate change by reducing GHG emissions in Asia and the Pacific. With over 50 percent of global GHG emissions originating from the region, which heavily relies on coal and fossil fuels, the ETM seeks to expedite the retirement or repurposing of fossil fuel power plants and replace them with clean energy alternatives using concessional and commercial capital. Initially piloted in Indonesia, the Philippines, and Vietnam, the ETM has now expanded to include Pakistan and Kazakhstan. ADB has made significant progress in the pilot countries, tailoring the ETM models to suit their unique characteristics through collaboration with stakeholders. In Vietnam, ADB conducted a pre-feasibility study and is currently engaged in discussions with key ministries to initiate a full ETM feasibility study. The goal is to accelerate the retirement or repurposing of fossil fuel power plants in Vietnam and replace them with clean energy alternatives. With respect to Vietnam’s JETP, ADB is discussing its role with the international partner groups within the JETP framework, including contributions through the ETM program and potential support to the secretariat. Source

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