Green transition and renewable energy development (RE) is one of Vietnam’s national goals to achieve the net-zero emissions by 2050 as an international commitment of the country.

Through participation in the United Nations Framework Convention on Climate Change – UNFCCC (1992), successfully signing in the Just Energy Transition Partnership – JETP (2022), participating in new generation FTAs in the fields of investment, trade, and energy, Vietnam is expected as a new destination for RE investment. However, the investment in RE field has not been attractive and effective due to the lack of synchronous, clear, and stable mechanisms, policies, and laws. Thus, by the experience gained in the practical legal consulting process, in this Article, the author points out several legal issues and barriers of attracting and supporting the RE investment activities in Vietnam, thereby giving suggestions for completion of policies and laws to improve its efficiency.

Vietnam is facing to the climate change issues in their process of economic development as the same as many other countries in the world. Recognizing the impact of climate change on the economy, since 2013, the Central Executive Committee of Vietnam has declared the dual mission of economic development and combating climate change in the Resolution No. 24-NQ/TW. Vietnam has joined the United Nations Framework Convention on Climate Change “UNFCCC (1992)”, thereby made the commitment to achieve net-zero emissions by 2050 at the 26th Conference (COP 26) and continuously affirm this commitment at COP 27 and COP 28.

To realize the international commitments at COP 26, the Prime Minister approved the National Strategy on Green Growth for the period 2021-2023, vision 2050 and the National Strategy on Climate Change period toward 2050, in which the key solution is to promote circular economy, green economy and RE development. The year 2022 marks an important historical milestone when Vietnam successfully signed the Political Declaration establishing the Just Energy Transition Partnership (JETP) with the international partner group (IPG), through JETP, many countries as Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, the European Union, Denmark and Norway will help Vietnam to realize its goal to net-zero by 2050.

With international commitments and national strategies regarding RE development, Vietnam has attracted international attention to its potential and investment opportunities in RE sector, in the context that the Country itself has a great need to mobilize financial resources, technology and international experience to RE sector. However, in the process of investing and providing legal support to investors and State agencies in RE field, we realize that foreign investors still consider investing in RE in Vietnam for reasons related to policy and laws. Therefore, although there is a great need and potential to attract foreign investment in RE field, Vietnam has not yet fully exploited its opportunities and strengths. This problem is challenging Vietnam to reach the international commitment to Net zero by 2050 and the national strategic of green growth.

  1. Difficulties and barriers on attracting and supporting the foreign investors to invest in RE field

Regarding investment methods and procedures: To attract financial and technological resources in RE field, in recent years, Vietnam has made great efforts to complete the system of legal documents on public-private partnerships (PPP) with the expectation that PPP is a solution to attract domestic and international investment in RE sector. However, in practice, the investors are not really interested in PPP because of the uniformless and contradictions between the provisions of the PPP Law 2020 and other laws, especially regulations regarding the process of planning and approving PPP projects, investor capacity criteria, technology standards applied to projects, standards and methods for evaluating bids to select investors, project implementation, investment guarantees, PPP model contract, etc. have not been completed and do not harmonize the interests between the subjects involving in the investment project. This is also the reason why the public sector itself are facing to many difficulties and confusion in the process of researching, preparing, and implementing the PPP projects. It also creates fear for domestic and international investors to make decision to invest in RE field. Up to now, the investors still tend to choose the private investment method and are not interested in projects using public capital or cooperate with the public sector, even the method of private investment still has many obstacles regarding the lack of synchronous and detailed mechanisms, policies, and legal regulations.

Regarding incentives, investment supports and guarantees in RE field: There are currently many policies and regulations on tax incentives for RE projects, but there is a lack of unified regulations and detailed instructions on the definitions of RE, lack of standards and regulations to define the criteria of “high technology”, “large scale” in RE area, etc. are major barriers of both investors and authorities to complete the procedures of enjoying incentives. Currently, the regulations on duration of enjoying CIT incentives and loss transition are shorter than the actual implementation time of the project.

The mechanisms and specific regulations on investment support, especially necessary support from the State in simplifying administrative procedures, accessing capital, site clearance, and solving social problems related to RE projects is also unclear, thus, Vietnam loses the attractiveness of the investment environment in the field of RE.

Vietnam is also in the process of completion of internalization of principles of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Free Trade Agreement and the Investment Protection Agreement between Vietnam and the European Union (EVFTA /EVIPA). Currently, there are new regulations on investment guarantees in the Investment Law and several laws regarding the right to be protected in property ownership, business and investment activities in cases of changing laws; dispute resolution mechanisms in business investment activities, etc., but these regulations are still general and have not been effectively implemented.

Regarding the electricity buying and selling mechanism of RE projects: The price of electricity from RE sources is currently higher than that of traditional energy sources as thermal power, hydroelectric power, etc., but the Investors only negotiate on electricity trading conditions through Vietnam Electricity Group (EVN), which is the sole organization currently assigned by the State to purchase all electricity output from RE sources. Many RE projects such as wind power, solar power, and waste power do not really enjoy incentive and support mechanisms as the State’s policy as: FIT prices cannot be applied; lack of a clear mechanism of bidding of investor selection, lack of a synchronous power network infrastructure, sets of standards for assessing technology and investor capacity, and lack of specific, specific support mechanisms and clear regulations. in administrative procedures, acceptance, payment, etc.

Regarding payment and risk sharing mechanism: The characteristic of most RE projects is the participation of many entities, including the State, investors, domestic and international banks and credit institutions, electricity buyer (EVN) and the people. The PPP Law has new regulations on the revenue risk sharing mechanism, but mainly applies to transport infrastructure projects. There are currently no specific regulations on risk and revenue sharing mechanisms for RE projects. Therefore, most of investors in wind power, solar power and waste power projects in Vietnam are suffering losses by themselves when there are objective difficulties or problems related to the implementation of policies and laws.

  1. Suggestions for completion of policies and laws to improve the effectiveness of attracting and supporting foreign investment in RE field

Firstly, the Party and the State already issued the master policies and orientations for RE development, but to achieve the international commitments and the national strategies to net-zero and green growth, the Country need to urgently complete the specific policies to ensure the consistency of the national laws to principles, international commitments, FTAs on energy, climate change combat and investment protection.

Secondly, in the process of consulting and providing legal support to investors in RE field, we recognize the need of having a separate law on Renewable Energy to unify the existing regulations which are scattered in various specialized and non-synchronized laws such as: Environmental Protection Law, Planning Law, Investment Law, Electricity Law, Land Law, Construction Law, etc.

Thirdly, in the process of building and completing the mechanisms, policies and legal regulations for RE field, it is necessary to promote the role of consulting organizations and units, especially lawyers and consultants having deep knowledge and practical experiences in RE investment field, to give efficient advise and support to both competent state agencies and investors in accessing the market and solving problems, obstacles regarding investment procedures, investment guarantees, enjoying investment incentives, resolving investment disputes, etc.

About Vietthink:

Vietthink Law Firm was established in 2008, is one of the leading prestigious law firms in Vietnam in the fields of consulting on investment, energy, M&A, business, intellectual property, Vietthink is also a pioneering law firm in Vietnam providing legal consulting services in new fields such as: digital economy, green economy, renewable energy, environmental protection, digital assets, fintech. In 2023,Vietthink was honored in the Legal 500 List – Top project and energy consulting law firms in the Asia-Pacific region.

Authors: LLM., Lawyer Nguyen Thanh Ha Vice Director of Vietthink Law Firm, Vietnam

*This article is published on Vietnam Lawyer Journal, March 2024 Edition, Page 33-35, “Research, Discuss” Section.


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