Newsletter
Vietnam Environment Spotlight September 2021
Freshfields' Vietnam Environment Spotlight keeps you up-to-date with the key business and legal developments in this sector. Please contact us if you would also like to receive our Vietnam M&A Spotlight, Vietnam Infrastructure Spotlight or our Vietnam Competition Law Spotlight.
Preliminary note: A new Environmental Working Group of the Vietnam Business Forum has recently been established. Please contact either the Secretariat at info@vbf.org.vn if you are interested in joining or us at Freshfields if you would like further information. A Freshfields representative sits on the Steering Committee.
LEGAL UPDATES
New Environmental Protection Law
A new Law on Environmental Protection of Vietnam (EPL) will become effective on 1 January 2022. Some key changes to note:
- There will be a new classification of development projects, based on their potential environmental impact, into high-risk, medium risk, low-risk and zero-risk groups. The level of environmental risk of each project will determine the environmental regulatory tools that will be applicable to the project, ranging from EIA (preliminary and full assessments), environmental licences and environmental registration.
- The “environmental licence” (a new licensing mechanism) will serve as a master that covers various environmental aspects of a project. Under the current law, a number of smaller permits/registrations might have to be obtained (e.g., certificate of completion of environmental protection facilities, permit for discharge of waste water to water resources, or registration of hazardous waste discharge).
- For the first time, the EPR (extended producer responsibility) approach will be used in managing solid waste. The new law imposes specific waste handling responsibilities on producers via engaging in mandatory recycling activities or, alternatively, making payments to the “Environmental Protection Fund” which will be used to support waste recycling activities.
- The new law sets out a general basis for emissions trading activities. Detailed mechanism(s) for those activities will be developed in decrees and circulars to be issued by the Government and the Ministry of Natural Resources and Environment (MONRE).
The law introduces a new concepts, mechanisms or instruments for financing environmental protection activities, including “green credit facilities” and “green bonds”.
In July 2021, MONRE released drafts of a master decree implementing the new EPL and another decree on reduction of greenhouse gas (GHG) emissions. Various stakeholders have been providing their comments on these drafts. The goal is for the Government to issue the final decrees before the effective date of the new EPL.
MARKET UPDATES
Coal continues
Climate activists blasted South Korean builder Hyundai Engineering & Construction for its decision to continue its 1,200-megawatt Quang Trach 1 coal power project along with Mitsubishi and Vietnam’s Construction Corp. Source: The Korea Herald
Rethinking coal and fossil fuel
While the pressure on the environment and issues like climate change are increasing, it remains difficult for Vietnamese companies and the government to turn away from fossil fuels completely. However, experts warn that while a strong reliance on them will only increase related problems. Source: Vietnam Investment Review
Winding down coal
The Asian Development Bank (ADB), Citibank, HSBC and, Prudential have hatched a plan for Asian coal-fired plant closures. The group plans to create public-private partnerships to buy out the plants and wind them down within 15 years, before the end of their design life, giving workers time to retire or find new jobs and allowing countries to shift to renewable energy sources. Source: Reuters
Some international lenders, funds, and insurers are joining a growing list of financial institutions across the globe retreating from coal-fired power plants, particularly projects in Vietnam and other Asian nations. Source: Vietnam Investment Review
Winding up wind
Societe Generale is working with the ADB to finance a wind power project in Vietnam that helps accelerate the energy transition in Southeast Asia. The US$ 173 million green project financing is certified by the Climate Bonds Initiative and includes an approximate US$ 81 million syndicated ‘B’ loan in which Societe Generale participated. Source: Societe Generale
Wind farm financing
In May 2021, the ADB signed a US$116-million green loan to build and operate three wind farms in Vietnam. The project will generate an average of 422 gigawatt-hours of electricity and avoid an average of 162,430 tons of CO2 emissions annually. Source: The Star
Green hydrogen from offshore wind power
Vietnam is located on international maritime routes with many seaports. These are favourable factors to attract foreign investment to develop offshore wind power projects and to combine them with green hydrogen projects, exporting to potential markets such as Japan, the Republic of Korea and EU countries. The Ministry of Industry and Trade needs to study and direct Vietnam Electricity to issue regulations on the transmission and distribution system that will enable stable operation of the power system amid abundant wind and solar power sources. Source: Vietnam Plus
Looking into the hydrogen future
Green hydrogen green should be included in Vietnam's national strategy. Many applications of hydrogen have only recently been studied, so currently the development of hydrogen technology has not been deployed on a large scale. With an increasing number of studies and initiation projects, the use of this fuel's enormous ecological potential will be expected over the next few decades. Innovative uses for hydrogen technology are penetrating into various manufacturing, storage and distribution business sectors. Source: Vietnam Energy Magazine
Hydrogen in the present tense - US hydrogen company eyeing in Vietnam
U.S. hydrogen fuel cell maker Plug Power is planning to expand its businesses in China, Vietnam and South Korea, through a joint venture with conglomerate SK Group. Source: Nikkei Asia
Green bonds
Issuances of global green bonds has surpassed US$1 trillion since inception in 2007, according to Climate Bonds green bond database. Appetite from emerging markets is also on the rise. Vietnam has affirmed its commitment to promoting green and sustainable financial markets and accelerating the development of a green bond market in Vietnam. Source: Vnexpress International
Many financial institutions operating in Vietnam are taking bold steps to finance and facilitate green and eco-friendly loan packages as an essential part of their sustainable investment and net-zero pledges. Source: Vietnam Investment Review
Green credit
The International Finance Corporation provided a 100 million USD long-term loan for the Orient Commercial Joint Stock Bank to increase the private sector’s contributions to green and sustainable growth in Vietnam. Private enterprises are seeking financing for renewable energy, energy efficiency, and climate-smart solutions, which can help them grow sustainably while contributing to reducing GHG emissions. Source: Vietnam Plus
Green peace
Greenpeace is urging Samsung to use 100 per cent renewable energy in South Korea and Vietnam – Samsung’s two biggest production bases – to meet its net-zero commitment and climate goals. Source: Vietnam Investment Review
Plastics polluters to pay
Plastics remain one of the most-used materials for consumer goods packaging. To curb the ever-growing amounts, Vietnamese enterprises will be made more responsible for their packaging and its recycling. Vietnam will be instituting new environmental policy approaches based on the polluter-pays principle, in which the producer’s liability extends across a product’s entire life cycle. Source: Vietnam Investment Review
