Context
Viet Nam’s energy needs are rising by 8% annually and pose a significant challenge to meeting its climate targets of reaching net zero GHG by 2050 and phasing-out coal in 2040s. Industrial energy accounts for over 50% of GHG emissions within the country.
The textile and apparel (T&A) and food and beverages (F&B) sectors together account for 60% of energy consumption within light industries, or 21% of total industrial energy use. Textile and apparel is Vietnam’s second largest export, accounting for approx. 16% of total GDP and employing around 2.5 million people, 5% of the total labour force. Food and beverages processing accounts for around 5% of national GDP and 5% of the country’s labour force. Both industries are growing quickly: T&A is expected to increase by 67% by 2025 with the Free Trade Agreement with the EU coming into effect, while F&B is estimated to increase by 8.65% by 2026.
Goals and approach to transformational change
The project will support 300 targeted facilities in the T&A and F&B sectors to apply decarbonisation solutions such as the electrification of energy intensive processes and introducing energy efficient technologies to reduce CO₂e emissions by 10-15%. Furthermore, the project will develop sectoral decarbonisation roadmaps, strengthen existing platforms to disseminate best practices, and mobilise diverse actors to drive decarbonisation across the target sectors.
Components and support mechanisms
The Financial Cooperation (FC) component consists of two main interventions, an innovation grant and a green credit line. The green credit line will address the barriers posed by high capital costs for decarbonisation solutions and simplify application procedures, the innovation grant seeks to stimulate the uptake of high-CAPEX and novel technologies that require additional support to be adopted, such as heat pumps. The project expects to leverage EUR 50 million from other donors (AFD) and additional EUR 10 million from the private sector.
The Technical Cooperation (TC) component will build the capacities of local banks by helping develop tailored loan criteria for decarbonisation investments, integrate ESG and gender into credit appraisal processes, and will support target industrial facilities to undertake GHG inventories, energy audits, feasibility studies, and business management advisory.
Long-term impact
Thorough its lifetime, the project expects to mitigate 654,041 tCO₂e and 1.7 MtCO₂e ten years after its end. Additionally, the project anticipates significant direct and indirect reductions in GHG emissions amounting to 3.4 MtCO₂e over the lifetime of the technology.
