By Vijay Jayaraj
Vietnam and other Asian countries are on a coal spree! Given the dynamics of energy consumption in their rapidly developing industrial sector, it is no surprise that these countries have backed away from their big promises at international climate conferences to reduce carbon dioxide emissions from fossil fuels.
Vietnam's projected gross domestic product (GDP) growth rate in 2024 is 5.8%, the sixth highest in Asia. One of the largest contributors to GDP is the industrial sector (38 percent), particularly manufacturing. S&P Global has noted significant improvement in Vietnam's manufacturing sector in the fourth quarter of 2023 and expects Vietnam to perform well this year.
Electricity is a cornerstone of manufacturing operations in Vietnam. In 2023, coal produced more than 40% of all electricity in the country, while the country's abundant hydropower reserves contributed about 30%. Natural gas accounted for about 10%.
However, there is expected to be a deficit in hydroelectric power generation in 2024 due to lower rainfall. At the same time, generating electricity with natural gas is made more difficult by forecast higher gas prices. Bloomberg reports that state-owned PetroVietnam Gas “recently decided not to purchase cargo for June due to high bid prices.”
The hard work of covering electricity needs must now be done by coal. The country is urging coal miners to maximize production before demand peaks in the summer months. The country's prime minister also called for an increase in coal exploration, signaling continued interest in medium- to long-term dependence on coal.
Vietnam's move to increase coal consumption was inevitable. It cannot continually risk a large gap between demand and supply when dams fail or gas prices skyrocket. The growth rate of electricity demand of expanding industries is increasing at a reasonable pace, and energy security is crucial to ensure a positive trend in the manufacturing sector.
Similar pattern across Asia
A similar phenomenon is developing across Asia. The regional coal resurgence is due to rapid economic growth in these countries. China, the world's largest coal consumer, saw consumption increase in 2024. Earlier this year, reports reported the construction of dozens of new coal-fired power plants in China. In 2023, the country accounted for 95% of the world's new coal-fired power plant construction. There are a total of 1,142 coal-fired power plants in operation in China, five times more than in the USA
India, another major player in the Asian energy market, also saw an increase in coal imports and production. India has increased infrastructure spending and expects demand for coal-based steel and raw materials production to recover. Indonesia has 254 operating coal-fired power plants and 40 new power plants under construction. Japan is also a large coal consumer and has been the largest importer of Australian coal in recent years.
Like Australia, the United States was a major source of coal imports for these Asian countries. S&P Global says: “US metallurgical coal exports have experienced growth in recent years, driven by Asian demand. The potential for volume growth by sea depends on the expansion of blast furnace steel production and met coke production in India, China and Southeast Asia.” New mines such as Arch Resource's Leer South and Allegheny Met's Longview mine, led by AMCI, POSCO and Itochu, will be added play a role in meeting this demand from Asia.
It is ironic that US miners are able to meet Asian needs while their own government rejects them as a fuel source for cheap electricity!
The progress on recent emissions reduction targets for U.S. industry, as well as the Biden administration's limits on natural gas export capacity, is quite astonishing given the continued expansion of fossil fuel capacity by various Asian countries.
The quality of life of millions of Americans could well decline with no environmental benefit, while the quality of life of Asians improves.
This commentary was first published on May 8, 2024 at Real Clear Energy.
Vijay Jayaraj is a research associate at the CO2 Coalition, Arlington, Virginia. He holds a master's degree in environmental science from the University of East Anglia, UK
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