[Press Release]Japan Must Not Support Vung Ang 2 Coal Power Plant in Vietnam

Fossil Fuels

Press release (PDF)
> Petition texts are below

Today, Japanese environmental NGOs submitted a petition for the cancellation of the Vung Ang 2 Coal-fired Power Generation Project in Vietnam to the Japanese public and private sectors. The petition was signed by 127 organizations from more than 40 countries and regions . The recipients include the Japan Bank for International Cooperation (JBIC) and three megabanks that are considering financing the project, Mitsubishi Corporation, and Prime Minister Shinzo Abe.

The construction of a new coal-fired power plant not only accelerates climate change, but also brings environmental pollution such as air pollution to the site. Environmental pollution and health hazards due to existing factories and power plants have already been reported in the project site. Please see the petition letter below for the details.

“It is proven that the emission concentration of air pollutants from Vung Ang 2 is several times higher than that of power plants constructed in Japan. Various problems in the Environmental Impact Assessment (ESIA) have also been pointed out in an analysis study by the Environmental Law Alliance Worldwide (ELAW),” said Ayumi Fukakusa of Friends of the Earth Japan.

“The fact that proper participation and consultation of affected people haven’t been ensured and no alternatives have been considered, violates JBIC and the Nippon Export and Investment Insurance (NEXI)’s guidelines for environmental and social considerations, and the World Bank Group’s International Finance Corporation (IFC) Performance Standards. It also violates the Equator Principles adopted by the Japanese private banks.”

Kimiko Hirata, International Director of Kiko Network and Chairperson of Climate Action Network Japan added: “Vung Ang 2 is one of the symbolic projects to reveal that Japan continues to support coal fired projects even now. Private banks and developers that are involved pursue the projects in contradiction to their policy committing to move away from new coal projects. In order to face the climate crisis and to support Vietnamees’ transition to sustainable and clean energy, this project shouldn’t be overlooked and immediately stopped.”

Lidy Nacpil, Co-coordinator of The Asian Peoples’ Movement on Debt and Development (APMDD) and Demand Climate Justice (DCJ) stated: “Super Cyclonic Storm Amphan recently hit the Bay of Bengal and many communities in Bangladesh and India are suffering severe loss of livelihoods, homes and even of lives. This is one example of how impoverished people in developing countries are affected by the climate crisis. Financing more coal means even greater suffering and devastation. Japan must stop financing coal and should instead support renewable energy and just solutions to climate change.”

“According to our research, Japan has been providing seven times more subsidies to fossil fuel than renewable energy. As the Japanese government prepares unprecedented levels of public finance in response to COVID-19, it is critical they use this recovery stimulus to support a just transition from fossil fuels that strengthens the development of resilient, clean energy economies,” said Bronwen Tucker, Research Analyst of Oil Change International.

“The Japanese government committed to conducting a review of its coal export policy with the goal of tightening the environmental conditions on which Japan will finance coal plants abroad. But Japan should be ending its support for all coal plants and related infrastructure, rather than just tightening the qualifications for that support.”

Eri Watanabe of 350.org Japan added: “The four private banks that are considering financing Vung Ang 2 have adopted a policy of not financing coal-fired power plants in principle. There are however serious loopholes in these policies, and Vung Ang 2 is likely to fall into this policy exception. In order to achieve the 1.5-degree target of the Paris Agreement and to avoid catastrophic climate breakdown, the banks should not easily apply such exceptions. As the signatories of the United Nations’ Principles for Responsible Banking, they should be fully phased out of coal-fired power at an early stage in order to ensure the consistency with the Paris Agreement and to avoid the risk of stranded assets."

>PDF with full signatories and footnotes

Petition calling on Japanese government, companies and banks
to withdraw from the Vung Ang 2 coal-fired power plant in Vietnam

26th May 2020

Shinzo Abe, Prime Minister of Japan
Taro Aso, Minister of Finance
Hiroshi Kajiyama, Minister of Economy, Trade and Industry
Toshimitsu Motegi, Minister of Foreign Affairs
Shinjiro Koizumi, Minister of Environment
Tadashi Maeda, Governor, Japan Bank for International Cooperation
Atsuo Kuroda, Chairman and CEO, Nippon Export and Investment Insurance
Takehiko Kakiuchi, President and CEO, Mitsubishi Corporation
Mareshige Shimizu, President and CEO, Chugoku Electric Power Co.
Kanetsugu Mike, President and CEO, MUFG Bank
Koji Fujiwara, President and CEO, Mizuho Bank
Makoto Takashima, President and CEO, Sumitomo Mitsui Banking Corporation
Masaru Hashimoto, President, Sumitomo Mitsui Trust Bank

We the undersigned 127 organizations are urging you to withdraw from the planned Vung Ang 2 coal-fired power plant project in which you are involved in central Vietnam. The construction of new coal-fired power plants not only exacerbates the climate crisis, it will also delay the transition to a decarbonized society, and make it more difficult to achieve the international targets of the Paris Agreement. Serious environmental pollution and health impacts have already been reported near the planned site due to existing power plants and factories, so construction of a new coal-fired power plant there would only aggravate the situation. Japanese private companies and banks as well as government bodies that are considering investing in and supporting Vung Ang 2 should withdraw from this project.

Problems with the Vung Ang 2 project

Inconsistent with the long-term goals of the Paris Agreement
The plan for the Vung Ang 2 project is the construction of two 660-megawatt generating units with ultra-supercritical(USC) technology. Even though USC is referred to as high efficiency, electricity generation from coal releases more carbon dioxide emissions than any other means of electricity generation.

The impacts of climate change are steadily worsening, putting many lives at risk. There is very limited time left for action to avoid further damage from climate change, so we must rapidly end our reliance on coal power, which is such a large emitter of greenhouse gases.

The new construction of coal-fired power plants is inconsistent with the 1.5 degree Celsius target of the Paris Agreement. New construction today will lock in enormous greenhouse gas emissions for many decades to come. OECD countries are being called upon to phase out their use of coal by 2030, and other countries by 2040. Japanese public and private sector actors should actually be promoting sustainable projects that are consistent with the Paris Agreement, including decentralized renewable energy.

Environmental pollution in the planned project area
Major environmental pollution accidents have already occurred near the planned site of Vung Ang 2. The release of pollutants from a Formosa Ha Tinh Steel Corporation’s steel plant in 2016 has been described as Vietnam’s worst-ever environmental disaster, causing marine pollution along the coast for 200 kilometers and with serious repercussions for fisheries in the region.

Meanwhile, the Vung Ang 1 coal-fired power plant, with financing from the Japan Bank for International Cooperation (JBIC), MUFG Bank, and Sumitomo Mitsui Banking Corporation (SMBC), is already in operation, and there have been reports of damage from dust believed to be from this plant, as well as negative health impacts since the plant started operating. Moreover, it has been pointed out that Vung Ang 2 will emit air pollutant concentrations several times higher than power plants built in Japan. Analysis by the Centre for Research on Energy and Clean Air revealed that emissions from this plant will be five to ten times above Japanese standards.

Problems with the Environmental Impact Assessment
Many problems have been identified with the environmental and social impact assessment (ESIA) report prepared by the proponent of the Vung Ang 2 coal-fired power plant. Independent analysis by the Environmental Law Alliance Worldwide (ELAW) found that the ESIA should be rejected due to serious flaws, among them being that it:

  1. Failed to examine alternatives that prevent or minimize adverse environmental impacts of the proposed thermal power plant;
  2. Used the wrong choice of an air pollutant dispersion model that renders meaningless predictions of air quality impacts;
  3. Applied weaker emission standards for the project than those used internationally;
  4. Allowed continued wet handling of ash contrary to international guidelines;
  5. Allowed discharge of thermal effluent in excess of international guidelines; and
  6. Erroneously dismissed potentially significant impacts to marine species.

Furthermore, media have reported that local officials held a meeting in October 2019 where residents were urged to sign papers agreeing to sell their farmland even though the price was not set, and that some families that were relocated for construction of Vung Ang 1 had not been told that whether they would have to be relocated once more for Vung Ang 2. Such reports are signs that there was a failure to ensure proper information disclosure and obtain consent from residents.

A failure to consider alternatives to coal-fired power generation and to ensure appropriate participation and consultation for affected people in planning involuntary resettlement action plans and measures against the loss of their means of livelihoods would be violation of the JBIC and Nippon Export and Investment Insurance (NEXI) Guidelines for Confirmation of Environmental and Social Considerations, as well as performance standards of the International Finance Corporation (IFC). They would also be in violation of the Equator Principles, which the Japanese private sector banks have adopted.

Risk of stranded assets
A September 2019 report by Carbon Tracker, a UK think tank, concludes that the economic viability of not only new construction of coal-fired power plants in Vietnam but also existing plants is questionable, because the cost of new construction of solar power generation will be lower than operating costs of existing coal-fired power generation by as early as 2022.

It is also evident that progress is significantly behind schedule on several coal-fired power plants currently under construction and planning in Vietnam. Further delays are also occurring due to the impacts of COVID-19 . The cost increases from these delays coupled with declining costs of renewable energy mean that Vung Ang 2 risks becoming a stranded asset.

We need a green recovery based on renewable energy
Many people are now being affected by the global spread of the COVID-19 pandemic. It is an urgent global challenge to recover from the damage caused by COVID-19, but climate change is also an urgent challenge. The long-term impacts of climate change are a critical concern, so COVID-19 recovery plans must also help our efforts to address climate change.

Today reportedly one person in every ten of the global population has no access to electricity. Access to electricity is seen as a crucial measure to address poverty, so some proponents use this to justify the need for coal-fired power plants. However, many rural villages that have no access to electricity also have no connection to the electrical grid, so a better strategy for them would be to use decentralized renewable energy.

Vietnam has an electrification rate above 99%, so almost the entire population has access to electricity. However, even having an electrical grid does not mean the current approaches are best for the future. Many countries around the world are talking about a “Green New Deal.” For a recovery that also makes the transition toward societies with an emphasis on the environment and human rights, we should not be simply pushing ahead with more coal-fired power plant projects. There have also been reports that air pollution may worsen mortality rates from COVID-19. If we consider local decarbonization and the health of the Vietnamese people, there should be a shift toward society based on renewable energy.


Government of Japan and governmental financial institutions (JBIC, NEXI):
The Government of Japan and governmental financial institutions JBIC and NEXI should not be supporting the Vung Ang 2 coal-fired power plant.

To update its Infrastructure System Export Strategy, which the framework is expected to be set in June 2020, the Government of Japan has been holding discussions among the relevant ministries and agencies to revise four conditions for Japan to provide government assistance for coal-fired power plants overseas. In its Long-term Strategy under the Paris Agreement, the Government of Japan states “the Government will promote the development and investment of energy infrastructure abroad in order to contribute to the global reduction of CO2 emissions consistent with the long-term goals stipulated in the Paris Agreement.” Any support for coal-fired power plant projects would be inconsistent with that commitment.

Also, as stated above regarding Vung Ang 2, there is evidence of violations of JBIC and NEXI Guidelines for Environmental and Social Considerations, including no consideration about alternatives to coal and the failure to ensure appropriate participation and consultation with affected people when planning involuntary resettlement action plans and measures against the loss of livelihoods. Therefore, Japan should not be funding and insuring this project.

Private sector banks (MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Bank):
All four of these banks have adopted credit policies that clearly commit them, in principle, not to provide financing for new coal-fired power plants, so the Vung Ang 2 project should not be eligible for their financing. Major loopholes have been pointed out in all of their policies, but the deliberate use of such exceptions only shows that their ESG policies are very weak. The Mitsubishi UFJ Financial Group and Sumitomo Mitsui Trust Bank state that in some cases they will respond to “energy policies and circumstances in host countries,” “international guidelines,” “consideration of other available technologies,” and “context and unique features of individual cases.” Meanwhile, the Mizuho Financial Group says that it will exclude projects for which it has already committed as of the start of the new policy, and the Sumitomo Mitsui Financial Group says that exceptions may be considered for those projects which have been provided support before the revision of its. However, Standard Chartered Bank (UK) and OCBC Bank and DBS (both from Singapore) have withdrawn from this project based on their new coal exit policies. Japanese banks have no justification to be the only ones unable to exit from the project.

Also, all four Japanese banks have signed the UN Principles for Responsible Banking (PRB). Signatory banks commit to make their corporate strategies consistent with the Sustainable Development Goals and the Paris Agreement. It is clear that Vung Ang 2 is not consistent with the Paris Agreement, so actions of banks that would violate their own commitments will end up significantly damaging their credibility in the eyes of the international community and investors.

In addition, due to the many problems described above, financing for this project would not only violate the four banks’ commitments to take climate action, but also the Equator Principles, which they have all signed. Therefore, the banks should immediately terminate any further consideration of financing for this project.

Mitsubishi Corporation, Chugoku Electric Power Co.:
In its revised ESG Databook 2018 (released in 2019), Mitsubishi Corporation declared a policy not to enter into any new coal-fired power generation businesses, in principle. However, as an exception, the company says it will continue with projects on which it has “already commenced development,” using that as a justification to proceed with Vung Ang 2. However, this is inadequate as a climate action, and for the two projects on which construction has not yet begun (Vung Ang 2 and Vinh Tan 3), the company should make the decision to withdraw as soon as possible.

Amid rising concern about climate change and its impacts, there is a growing wave of divestment from companies involved in fossil fuels. In particular, a growing number of financial institutions and insurance companies are revising their credit policies relating to coal-fired power generation and coal mining developments.

In April 2019, a government pension fund in Norway sold its shares of companies associated with coal-fired power generation. Shares of Chugoku Electric Power Co. were already among those divested. This is a sign that the business environment for coal-fired power generation will become increasingly difficult when ESG investments and the Paris Agreement are also considered.

Mitsubishi Corporation and Chugoku Electric Power Co. should withdraw from this project.

Mr. Yoshihide Suga, Chief Cabinet Secretary
Mr. Kiyohiko Toyama, State Minister of Finance
Mr. Masahito Fujikawa, State Minister of Finance
Mr. Kenji Wakamiya, State Minister of Foreign Affairs
Mr. Keisuke Suzuki, State Minister of Foreign Affairs
Mr. Hideki Makihara, State Minister of Economy, Trade and Industry
Mr. Yohei Matsumoto, State Minister of Economy, Trade and Industry
Ms. Yukari Sato, State Minister of the Environment
Mr. Hirotaka Ishihara, State Minister of the Environment
Mr. Shinichi Kitaoka, President, Japan International Cooperation Agency
Mr. Takio Yamada, Ambassador to Vietnam