The CPF will purchase carbon credits generated by the World Bank-funded Renewable Energy Development Project (REDP) under the UN’s Clean Development Mechanism.
(VOV) – Vietnam and the World Bank’s Carbon Partnership Facility (CPF) on December 20 signed the first emission reductions purchase agreement for renewable energy development.
The CPF, with Sweden, Norway and Spain as Buyer Participants, will buy the first three million metric tons of carbon credits generated through small hydropower development under REDP, creating a revenue stream for the projects.
The REDP is a US$202 million credit from the International Development Association (IDA), the World Bank Group’s concessional lending window.
World Bank Vietnam Country Director Victoria Kwakwa said the finance program demonstrates the relationship between climate change mitigation and renewable energy development. She said she believes the carbon credits will help create a revenue stream that can encourage more private investment in renewable energy.
To date, the Vietnam Ministry of Industry and Trade (MoIT) has received around 20 applications to develop small hydropower projects under the REDP. The REDP is expected to add 250 MW installed capacity of renewable energy to the grid, with a total of 965 GWh of electricity per year and also expand local employment opportunities and increase reliability of the electricity supply especially in rural areas.
About 15-25 subprojects, which have total investment cost in the range US$5-20 million each, may be financed by the REDP. The program will green Vietnam’s national electricity grid on a commercially sustainable basis by addressing barriers to renewable energy and providing financial support, including carbon revenue provided by the CPF to improve the financial viability of the projects.
The REDP could finance an additional 15-25 subprojects, each requiring investment worth US$5-20 million. The program aims to minimise Vietnamese electricity production’s environmental impact by tackling systemic barriers to the proliferation of renewable energy. Carbon revenue from the CPF makes the projects more financially viable.
MoIT Deputy Minister Le Duong Quang said supporting renewable energy development delivers benefits to the country’s citizens. The agreement with CPF will encourage Vietnam to explore other ways of using carbon credits as it pursues its economic development and climate change mitigation goals.