TOKYO—A Japanese-led group said it would extend nearly $1.8 billion in loans to build a coal-fired power plant in Vietnam, bucking criticism about the project’s impact on climate goals.
Plans call for a total of 1.2 gigawatts of electricity output at the plant in central Vietnam’s Vung Ang district. Investors include Tokyo-based trading company Mitsubishi Corp.
The government-owned Japan Bank for International Cooperation said Tuesday it would lend slightly more than a third of the total $1.767 billion in financing for the project. It said the project would “contribute to economic development in Vietnam through the stable supply of electricity.” Japanese commercial banks and the Export-Import Bank of Korea are also providing financing.
The project has become a flashpoint in the debate over whether rich nations should continue supporting coal-fired power in developing nations with growing electricity demand.
Critics of the project include a group of international investors and Japan’s own environment minister, Shinjiro Koizumi, who is considered a potential future prime minister. In January, Mr. Koizumi said the project couldn’t gain the understanding of the international community.
An October letter signed by Nordea Asset Management, a unit of the Nordic region’s biggest lender with more than $200 billion in assets under management, and other investors called on companies involved in the Vietnam project to pull out. It said the plant was incompatible with the Paris climate accord.
“To build a coal-fired power plant with that scale is just incomprehensible,” said Eric Pedersen, Nordea’s head of responsible investments, in response to Tuesday’s move by Japan. “This looks like the last spasms of old-fashioned industrial policy where you just keep doing what you’ve been doing.”
Mr. Pedersen said he didn’t believe the Vietnam plant would operate long enough to make back the money invested in it, given rising international pressure against coal.
Japanese Prime Minister Yoshihide Suga, a supporter of the Paris accord, said Dec. 14 that “all countries must take bold action” to tackle the threat of climate change. However, the government in July said it would continue to finance coal-fired power plants in countries where other options cost more or carry national-security risks.
Japan and Vietnam enjoy close ties and share concerns about China’s rise. Vietnam was the first country Mr. Suga visited after taking office in September.
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