Global coal use must be phased out if we are to minimize temperature increases associated with climate change. Most new coal plants are being built in the Asia Pacific and rely on overseas finance, with Indonesia and Vietnam the leading recipients. However, the politics of coal plant finance are changing, with many projects cancelled in recent years. This article explores the factors that led to coal plant cancellations in Vietnam and Indonesia. Based on new data of coal plant finance and elite interviews, we find fuel switching, public opposition, and national planning were the dominant reasons for cancellations in Vietnam, while Indonesia’s reasons were more diverse. Vietnam also had a larger number of cancellations than Indonesia, which has a more entrenched domestic coal mining sector. These findings suggest that Vietnam is farther along the coal phaseout agenda than Indonesia. We further provide provisional explanations for these patterns.

Globally, coal is the largest global contributor to heat-trapping carbon dioxide and is a major source of harmful particulate air pollution. As a consequence, coal use must be reduced dramatically if we are to minimize temperature increases associated with climate change as well as the health consequences of air pollution (Victor et al. 2019; Zhao and Alexandroff 2019). That entails both preventing the construction of new coal plants and, ultimately, phasing out existing ones. However, more than 500 GW of new coal plants around the world were under construction or planned in 2020 (Shearer et al. 2020; Carbon Brief 2020). Most new coal plant proposals—about 80 percent—are located within the Asia Pacific (Shearer et al. 2020). An increasing fraction of these plants are reliant on overseas finance and construction services, with Vietnam and Indonesia the leading recipients. Indonesia and Vietnam have 31.2 gigawatts (GW) and 30.9 GW coal power capacity operating and under development, ranking them fourth and the fifth in the world, respectively, behind China, India, and Turkey (Shearer et al. 2020). As many multilateral lending institutions have suspended provision of finance for coal, the primary leading financiers are government-supported and private-sector banks in China, Japan, and South Korea, three countries with notable geopolitical competition across a wide range of interests.

The domestic politics of coal plant construction in Vietnam and Indonesia are changing, as are the international politics of coal plant finance. We are interested in the set of circumstances that might facilitate a faster transition away from coal, both by countries that are currently building new coal-fired power plants and by those that are investing in them. We develop a theory of interdependent coal plant construction that predicts when countries will turn decisively against coal, depending on whether coal is out of favor in both recipient countries and suppliers of finance. Establishing "shoots" of green industrial policy to support alternatives to coal, therefore, depends upon understanding—and ultimately, altering—entrenched international economic relationships and domestic political processes governing energy development (see Allan, Lewis, and Oatley, this issue).

To that end, we have collected a new data set that brings together data on the status of coal plant construction from Global Energy Monitor (GEM) along with data on coal plant finance from a variety of sources. We have coded the reasons for coal plant cancellations, both for projects that had found finance and for those that did not. This exploratory analysis identifies reasons for coal plant cancellations and changes in finance and, at the same time, helps us understand the changing politics of coal plant construction in Vietnam and Indonesia. The analytical focus not only on initial plans but on cancellations as well, which presumably face a higher threshold for decision-making, reveals the strength of incumbency of pro-coal institutions, allowing us to make more parsimonious conclusions.

Over the past few years, Vietnam and Indonesia have cancelled several projects for a variety of reasons, related to administration/permitting issues (including environmental and land permitting and related judicial procedures); fuel switching (i.e., replacing coal plants with substitute generation capacity); national planning (including changes in expected demand growth); and supply issues of coal plant inputs, such as fuel. We also coded a secondary category of whether public opposition was present. First, we find that Vietnam has cancelled more plant capacity than Indonesia (though Indonesia cancelled more capacity where funding had been identified). Second, in Vietnam, we find that fuel switching and national planning were the dominant reasons for cancellations, with the Vietnamese government increasingly looking to natural gas and renewables as a source of electricity and reassessing whether construction of new coal plants made economic or political sense. Third, we find that Indonesia’s reasons were more diverse, with administration/permitting issues the leading cause, followed by national planning, supply issues, and fuel switching. Fourth, we found that public opposition is more frequently cited as a reason for cancellation in Vietnam than in Indonesia. Fifth, we found that Vietnam tends to cancel projects earlier in the project cycle than Indonesia, in particular for all but one case, prior to securing financing. Our findings support the work of recent fieldwork-based scholarship that finds strong support for coal in both countries and provides some signs of policy change in Vietnam (Gallagher et al. 2021). The limited role of public opposition in Indonesia suggests a more embedded coal sector interest lobby (Toumbourou et al. 2020), consistent with expectations for countries with large domestic coal reserves (Zhao and Alexandroff 2019).

On the finance side, international investors and campaigners have targeted the countries’ biggest coal financiers, China, Japan, and South Korea. Sustained pressure from international and domestic advocates has diminished coal’s attractiveness. However, where China has belatedly shifted policy on lending for coal, the governments and private sector in Japan and South Korea have announced changes that would restrict finance for new coal plants (Edwards and Bard 2021). In a companion paper, we explain Japan’s and South Korea’s greater willingness to move away from coal finance than China (Davidson et al., n.d.). Together, we are able to provisionally explain where Indonesia and Vietnam are in terms of the coal phaseout agenda. In contrast to Vietnam, Indonesia has greater domestic support for coal and a more limited role of public opposition in plant cancellations. Given the country’s greater reliance on coal finance from China, we conclude that the coal phaseout agenda is less far along in Indonesia than in Vietnam.

As scholars have recognized, the phaseout of coal plants and the clean energy transition are profoundly political endeavors, as they have significant distributional consequences and are underpinned by policy (Brauers and Oei 2020; Graaf and Sovacool 2020; Kelsey 2019; Moe 2016). In countries with mature coal industries, the challenges of phaseout are mostly about the adjustment costs for coal-dependent communities, legacy industries, and their employees (Jakob et al. 2020b; Kalkuhl et al. 2019; Oei et al. 2020). In developing countries, where the coal sector is newer and there is rising energy demand, whether new coal plants are built is the more salient question. Some developing countries, such as India, have both mature coal sectors and large new coal plants planned.

While declining costs for renewables have led private-sector actors to increasingly select solar and wind for new capacity additions, market forces alone will not lead to coal phaseout (Allan, Lewis, and Oatley, this issue; Shidore and Busby 2019). Fossil fuels have long enjoyed government support, including preferential access to credit and land and a supportive regulatory environment (Hadden 2020). For developing countries, choices of energy development are markedly political, subject to pulling and hauling by affected interest groups and government policy (Hochstetler 2020; Jakob et al. 2020a; Lamb and Minx 2020). This is no less true in the countries of interest in this article, Indonesia and Vietnam, where coal interests are deeply embedded (Gallagher et al. 2021; Setyowati 2021; Dorband et al. 2020). If climate change concerns demand a fast pace of decarbonization, intentional industrial policy will be required to both scale up clean energy and shift away from carbon-intensive resources.

Furthermore, these choices are not confined to national borders, as the availability of foreign finance and technical capacity may affect whether new coal plants are built (Hopewell 2019; Kennedy 2018; Kong and Gallagher 2021; Meckling and Hughes 2018; Mori 2020). As climate change concerns have accelerated, anti–fossil fuel norms have emerged, with international campaigns seeking to stop lending by banks and international financial institutions for fossil fuels, particularly coal (Blondeel et al. 2019; Blondeel et al. 2020; Brown and Spiegel 2019; Daggett 2020; Green 2018; Neville 2020; Park 2005). In many instances, those campaigns, with echoes of the transnational advocacy boomerang model, have made common cause with local activists opposing coal plants for their potential impacts on air quality, agriculture, fishing, and tourism (Keck and Sikkink 1998).

How, then, can we think about whether new coal plants will be constructed? Here, on the recipient side, a number of factors might be relevant. The first are economic factors, such as the declining costs of alternative fuel sources, slow energy demand, or domestic fiscal constraints that individually or together make coal plants less attractive, necessary, or affordable.1 A second set of explanations are political factors related to local and central government opposition or support for plant construction. All else equal, coal plants are likely to be built in countries where there is both local and central government support for plant construction and are unlikely where both are opposed. As longtime incumbents supported by the state and local political actors, coal interests are likely to be more politically powerful than backers of other fuel sources (Aklin and Urpelainen 2018; Breetz et al. 2018; Hochstetler 2020), particularly in countries, such as Indonesia, that have abundant domestic coal reserves that provide foreign exchange in addition to employment benefits and domestic energy (Atteridge et al. 2018; Dutu 2016; Zhao and Alexandroff 2019). For central governments, while economic factors inform their priorities about plant construction and fuel sources, regime type and electoral pressures also shape their choices. Authoritarian governments may be relatively insulated from citizen pressure and interest groups, with decisions driven more by central government ideology, which can cut in different directions. Democracies may be more subject to interest group pressure, but fossil fuel interests might be more powerful than supporters of other fuel sources. Authoritarian governments may move more decisively away from fossil fuels if the leadership so desires but more slowly if the regime is ideologically committed to fossil fuels. As China discovered with air pollution, even authoritarian regimes need to legitimate their rule and may respond to citizen pressure when it suits the leadership.

This last point raises a third dimension: the importance of ideas about development where expanded coal use has historically been seen as key to industrialization and poverty reduction (Kalkuhl et al. 2019). Declining costs of renewables and domestic and international pressure to decarbonize can help inform leaders’ ideas about how development objectives can be met.

On the finance side, again a number of factors might be relevant: first, democratic countries may give activists more freedom to mobilize; second, authoritarians might delay their decisions to shift away from coal but could be more decisive than democracies; third, countries with internationally integrated firms might be more vulnerable to external investor pressure; and fourth, countries that have long-standing concerns about their international reputation might be more sensitive to demands to move away from coal.

We identify the intersection of political economy of recipient and financing countries in the continuum of support for coal—what we call gray interests (see Table 1). Depending on the balance of factors on the recipient and supply sides, the intersection of these two streams might lead to continued coal plant expansion (what we call gray status quo), no or limited new plant construction, or possibly a halt and closure of the coal sector (green shoots) and possibly some incoherence with recipients in favor of coal but finding limited finance (gray demand) or finance being available but finding limited domestic support (gray supply). For countries that receive external finance from multiple countries, a decision by any one of the financiers to move away from coal might lead to substitution by other countries to provide coal finance, a point to which we return in our discussion of Indonesia and Vietnam.

Table 1.

Intersection of Support for Coal in Financing and Recipient Countries

Recipient CountriesFinancing Countries
Coal out of FavorCoal in Favor
Coal plant construction out of favor Cell 1—Green shoots: Few to no coal plants constructed Cell 2—Gray supply: Coal plants constructed if external actors can find local allies; otherwise, few plants constructed
Coal plant construction in favor Cell 3—Gray demand: Coal plants constructed if local finance can be mobilized or new sources of foreign finance can be found Cell 4—Gray status quo: Significant coal build-out expected
Recipient CountriesFinancing Countries
Coal out of FavorCoal in Favor
Coal plant construction out of favor Cell 1—Green shoots: Few to no coal plants constructed Cell 2—Gray supply: Coal plants constructed if external actors can find local allies; otherwise, few plants constructed
Coal plant construction in favor Cell 3—Gray demand: Coal plants constructed if local finance can be mobilized or new sources of foreign finance can be found Cell 4—Gray status quo: Significant coal build-out expected

This typology is a useful heuristic to assess whether countries are likely poised to phase down coal plant construction, either because of changes in recipient countries, changes in financing countries, or both. While placement of cases in particular cells is notional, we can identify what policy developments would allow us to recode cases. First, green shoots occurs if financing and recipient countries decisively turn against coal, with public- and private-sector actors formally announcing policies ending support or permitting for new coal plants and cancelling coal plants already in the pipeline. If some, but not all, financiers announce an end to coal, this would constitute a westward trajectory but not a shift between cells. On the recipient side, if we observe a preference for renewables or gas in new plant construction while coal is not formally excluded from new contracts, this constitutes a northward trajectory in our typology. There are multiple pathways to the outcomes in Table 1, and the reasons countries might turn against coal are part of wider theoretical questions we explore later.

The preceding discussion begs the question of why recipient countries need or want foreign finance to build coal plants rather than mobilizing domestic resources. Countries like Indonesia and Vietnam may lack the expertise and/or capital to build large-scale electricity infrastructure projects like coal plants. They thus will partner with foreign actors to build new power plants, with foreign players potentially playing different roles as exporters of manufacturing equipment, providers of loans and credit risk insurance, investors, and/or utility operators (Trencher et al. 2020). Many projects historically have been backed by sovereign guarantees by host countries to reassure foreign lenders that they will be paid even if something goes wrong. Moreover, lending countries have made projects attractive to borrowing countries and exporting firms alike by providing low-cost loans and export credit insurance to subsidize project costs and minimize risks for exporters. Until recently, these projects have been perceived as safe investments for foreign firms seeking to export equipment and build coal plants overseas (Interviews 8 and 11). Successful coal projects still require negotiations and alignment of decision makers in host countries where plants will be built and foreign governments that underwrite the finance. Indeed, researching the coal sector, others have noted that the two key obstacles to coal phaseout are “political incentives to preserve coal use in states with a largely domestic market, and the commercial incentives for technologically advanced coal markets to support global coal capacity expansion” (Zhao and Alexandroff 2019, 511). These incentives play out differently in the countries explored here.

Foreign companies have partnered with host countries in different ways. The most basic form is an engineering, procurement, and construction (EPC) project where foreign firms build but do not own the plants. In recent years, foreign firms have become more involved as co-owners and plant operators. In Indonesia and Vietnam, the process begins with a memorandum of understanding (MOU) or tender bid for projects, and that process in turn connects project developers with financing institutions, then moves through permitting, and typically ends with a power purchase agreement (PPA) between host governments and providers (see Appendix A for a discussion of these steps). While expanding the resources to bring a mega-project together, transnational collaborations also offer many opportunities for projects to stall or eventually fail. This article therefore aims to explore the reasons why these transnational coal projects could be cancelled.

To identify the state of plant construction in Indonesia and Vietnam, we built on a data set of coal plant construction developed by Global Energy Monitor (GEM), supplemented with data on coal finance from a variety of sources. Based on the GEM Global Coal Plant Tracker (GCPT) database, we were able to identify the size, location, status, and finance provider (where it could be identified) for every proposed coal-fired unit 30 megawatts (MW) and larger that has been proposed since 2010. The status of coal projects includes announced, pre-permit development, permitted, construction, operation, shelved, and cancelled projects. Announced is defined as proposals that have been announced as planned but have not yet moved forward in seeking permits or financing. Pre-permit development refers to projects that have submitted a prefeasibility study and are actively doing studies and submitting applications toward permits, environmental and otherwise. Permitted are projects that have received all necessary environmental approvals to begin construction. Construction means that physical construction, such as concrete pouring and boiler erection, have begun. Operating denotes that the unit has been commissioned. Shelved means a project has been formally put on hold or there is no evidence of activity for two years or more. Cancelled means a project has been called off by the sponsor or host government or there is no evidence of activity for four years or more.

We merged GEM’s data on coal plant construction with plant-level analysis of finance drawing on the China finance tracker from Boston University and the Global Coal Public Finance Tracker (GCPFT) on the GEM website. The Boston University database covers all overseas financing by the China Development Bank and the Export-Import Bank of China from 2000 to 2019. The GCPFT covers all public financing for coal plants under development since 2013. Additionally, our analysis includes project financing data on each coal plant in Indonesia and Vietnam available on the IJ Global website (a global database on project financing), as well as financing information listed on the wiki pages of each coal plant, compiled by GEM.

For every cancelled unit in the data set (139 in total), two coders independently reviewed the descriptions on the GEM wiki pages and identified one primary reason (fuel switch, administration/permitting, national planning, supply, or unknown) as well as a secondary category indicating whether identified and significant public opposition existed in relation to the unit. Fuel switch refers to the specific replacement of a coal plant plan with a similarly sized alternative fuel source. Administration or permitting refers to the cancellation of a plant in the process of seeking administrative approvals. National planning refers to plants whose only indication of cancellation was the removal from national planning documents, which can be due to various reasons, such as low demand growth or broader fuel diversity priorities (discussed later). Supply refers to issues related to access to coal, because of either the lack of a coal mine source or transportation issues to the plant. We assessed intercoder reliability and reviewed together any divergent plants, resulting in consistent coding results for every unit, which is described further in Appendix B.

To assess ground-level dynamics in both host countries and providers of finance, we also carried out thirteen interviews with both governmental and nongovernmental actors, though broader fieldwork was foreclosed by the coronavirus outbreak (see Appendix C for an anonymized list of interviewees). Five interviews were with researchers in Indonesia and Vietnam; the remainder were with activists, researchers, and practitioners familiar with Japanese coal finance.

Both Indonesia and Vietnam are large developing countries with dynamic economies and growing energy needs. Indonesia is a fragile democracy, with its multi-island geography creating large pressures for federalism and local control. Vietnam is a Communist authoritarian regime with a strong tradition of central planning. Despite these differences, both have been enthusiastic supporters of building new coal plants as central to their economic development needs (Dorband et al. 2020). One major difference between them is that Indonesia is the world’s second largest coal exporter, having exported more than US$21 billion in coal in 2019, compared to Vietnam, which imported more than US$ 2.2 billion of coal that year and had modest coal exports of US\$ 177 million (Workman 2020).

As of January 2020, Indonesia had commissioned 32 GW of coal power capacity since 2010 and has another 11.9 GW under construction—an amount that exceeds all countries except China, India, and Turkey. Indonesia also has 19.4 GW of coal power in various stages of preconstruction planning. In Vietnam, meanwhile, the coal fleet has grown rapidly, adding 76 percent (14 GW) of its 18.5 GW of coal-fired capacity in the past six years. An additional 8.7 GW are under construction, and 22.3 GW are in various stages of preconstruction planning. Since 2014, when our data set commences, more than 43 GW of planned coal power has been cancelled in Vietnam and 23 GW in Indonesia; in all, nearly half (45%) of the coal power capacity proposed in Vietnam has been shelved or cancelled, and 23 percent in Indonesia.2Figure 1 shows the stages of coal plant capacity planning from 2014 through 2019 in semiannual increments.

Figure 1

Stages of Coal Plant Capacity Planning in Indonesia and Vietnam, 2014–2019

Figure 1

Stages of Coal Plant Capacity Planning in Indonesia and Vietnam, 2014–2019

Much of the two countries’ coal plant development has been supported by finance from overseas actors. Of projects under construction, at least 98.8 percent and 79.4 percent in Vietnam and Indonesia, respectively, are financed by foreign countries, highlighting the crucial role of foreign finance in getting projects under way (see Tables 2 and 3). Considering all plants operating and under development, overseas financing data were identified for 40 percent (78.7 GW) of 195.6 GW in Indonesia and Vietnam. Plants without identified overseas funding have not completed a financing agreement (e.g., in earlier stages of development), not made finance information publicly available (particularly cancelled plants), or funded the plant domestically.

Table 2

Financing by Country for Coal Power Capacity (megawatts) in Indonesia by Plant Status (through 2019)

Funding CountryAnnouncedPre-permit developmentPermittedConstructionShelvedCancelledOperatingTotal
China 2,200 1,000 1,980 3,841 7,730 10,951 27,702
Japan 1,000 3,994 1,000 2,770 8,764
South Korea 1,000 528 400 1,928
UAE 1,250 1,250
Singapore 1,096 80 1,176
Germany 1,000 1,000
Malaysia 660 660
Slovakia 120 120
Netherlands 30 30
Without funder 6,260 3,890 1,000 2,455 10,990 13,470 17,957 56,022
Total 9,460 6,920 2,980 11,914 11,990 22,970 32,418 98,652
Funding CountryAnnouncedPre-permit developmentPermittedConstructionShelvedCancelledOperatingTotal
China 2,200 1,000 1,980 3,841 7,730 10,951 27,702
Japan 1,000 3,994 1,000 2,770 8,764
South Korea 1,000 528 400 1,928
UAE 1,250 1,250
Singapore 1,096 80 1,176
Germany 1,000 1,000
Malaysia 660 660
Slovakia 120 120
Netherlands 30 30
Without funder 6,260 3,890 1,000 2,455 10,990 13,470 17,957 56,022
Total 9,460 6,920 2,980 11,914 11,990 22,970 32,418 98,652

Source: Global Energy Monitor.

Table 3

Financing by Country for Coal Power Capacity (megawatts) in Vietnam by Plant Status (through 2019)

Funding CountriesAnnouncedPre-permit developmentPermittedConstructionShelvedCancelledOperatingTotal
China 1,800 3,230 1,860 3,400 1,800 6,744 18,834
Japan 600 1,200 1,860 2,320 330 4,245 10,555
South Korea 600 1,200 2,860 1,980 6,640
Without funder 492 5,510 3,910 100 2,500 42,845 5,560 60,917
Total 2,892 10,540 8,830 8,680 4,300 43,175 18,529 96,946
Funding CountriesAnnouncedPre-permit developmentPermittedConstructionShelvedCancelledOperatingTotal
China 1,800 3,230 1,860 3,400 1,800 6,744 18,834
Japan 600 1,200 1,860 2,320 330 4,245 10,555
South Korea 600 1,200 2,860 1,980 6,640
Without funder 492 5,510 3,910 100 2,500 42,845 5,560 60,917
Total 2,892 10,540 8,830 8,680 4,300 43,175 18,529 96,946

Source: Global Energy Monitor.

China, Japan, and South Korea are the leading suppliers of external coal finance to Indonesia and Vietnam, providing 97 percent of the 74.4 GW of coal power supported by overseas finance to Indonesia and Vietnam from 2000 to 2019.3 Altogether, financial institutions in China, Japan, and South Korea financed or proposed to finance 105 coal-fired units totaling 38.4 GW of coal power in Indonesia (Table 2) and 73 coal-fired units totaling 36.0 GW in Vietnam (Table 3).4 Of this capacity, 22.3 GW (55%) reached financial close in Indonesia and 20.3 GW (56%) in Vietnam; the rest remains in negotiation or has stalled.5 China has been the lead provider of finance for coal to both Indonesia and Vietnam, followed by Japan and then South Korea.

Among project cancellations, Indonesia was much more likely to cancel a project after identifying a finance source: about 46 percent of proposed capacity (9.5 GW) that had identified finance was eventually cancelled in Indonesia, in contrast to only 1 percent (330 MW) in Vietnam.6 While Indonesia is more likely to secure a financing agreement with lender countries, projects still face large risks for diverse reasons, including administration or permitting (26%), national planning (5%), fuel switching (2%), supply issues (6%), and unknown reasons (7%).

Administration or permitting are the major cancellation reasons in Indonesia for units with and without financing. Cronyism and corruption in the Indonesian power sector may be associated with some of these administrative reasons for plant cancellation (Atteridge et al. 2018). One Indonesian respondent noted, “Any step of the licensing process in Indonesia may well encounter difficulties depending on whom they encounter and/or how much they are asking to be paid” (Interview 1).

In Vietnam, fuel switch is the dominant cancellation reason (53% of all cancelled units), which results from varied concerns related to public budget pressure, energy security, and public opposition on environmental grounds. Vietnam became a net importer of coal in 2015, and the Vietnam government subsidized the domestic coal price to provide low-cost electricity, worsening the public budget deficit in Vietnam (Jakob et al. 2020a; Zimmer et al. 2015). Vietnam also imports liquified natural gas. For both coal and natural gas, policy makers in Vietnam see import dependence as a threat to energy security, which would be a potent factor for switches to renewables (Zimmer et al. 2015). Furthermore, environmental concerns play a role in Vietnam’s fuel switch decisions as public protests, which have been heightened after a 2017 accident at a steel plant (Jakob et al. 2020a), threaten political stability. Where specified, the dominant replacement fuel is imported natural gas, though some projects have been replaced by a combination of renewable energy and gas (see Figure 2).

Figure 2

Percentage of Cancelled Capacity in Indonesia and Vietnam by Cancellation Reason and Finance Status

Figure 2

Percentage of Cancelled Capacity in Indonesia and Vietnam by Cancellation Reason and Finance Status

By contrast, only a small proportion of coal capacity (less than 10%) was cancelled due to fuel switch in Indonesia. Economic growth in Indonesia heavily depends on coal, and the entrenched and intertwined financial interests of coal mine owners and Indonesian politicians at both national and local levels help to increase coal power capacity (Atteridge et al. 2018). Environmental groups and communities that are impacted by environmental issues associated with coal plants in Indonesia appear to have less political influence on siting decisions (Jakob et al. 2020a). This heavy reliance on coal also generates supply issues, such as coal unavailability or failure to complete accompanying coal mines, leading to 6 percent of the coal capacity cancellations in Indonesia. Finally, even as renewable energy becomes more attractive, the Indonesian state together with the state-run utility capped renewable energy tariffs at 85 percent of average local costs, delaying the fuel switch process (Hamdi 2019).

National planning is the second reason identified for cancellation in both countries. Coal power plant cancellations in Indonesia and Vietnam reflect in part the scaling back of the governments’ official power expansion plans in response to lower-than-expected economic growth. For example, Indonesia’s Electricity Supply Business Plan (RUPTL) cancelled 7.3 GW, 2.8 GW, 5.2 GW, and 0.26 GW planned coal plants in 2016, 2017, 2018, and 2019, respectively, mirroring changes in ten-year electricity demand forecasts (see Figure 3). In the GEM data, explicit references to electricity oversupply and lower-than-expected economic growth were made in connection to Jawa-5 (2,000 MW) and Sulsel-2 units 1 and 2 (2 * 200 MW).

Figure 3

Changes in Projected Electricity Demand and Project Cancellations in Indonesia

Figure 3

Changes in Projected Electricity Demand and Project Cancellations in Indonesia

In 2019, the Vietnamese government reduced its 2030 target for coal from 75 GW to 55 GW; in 2020, Vietnam’s National Steering Committee for Power Generation put forward a plan to lower the target further to 43.5 GW. Vietnam’s national planning changes may reflect a broader diversity of priorities, including the inability to obtain financing, broader trends of diversifying fuel sources, and public opposition (Do et al. 2020; Proctor 2020).

Public opposition was more frequently identified as a factor in cancellation decisions in Vietnam than in Indonesia, representing 23 percent and 7 percent of cancelled capacity, respectively (see Figure 4). In Vietnam, these cancelled units were rejected by provincial and city officials, drawing a close connection between local government and local popular opposition and support for energy projects. As a result of public opposition, these plants predominantly led to fuel switch or national planning changes. The Quang Ngai Provincial People’s Committee, the Ha Tinh Provincial People’s Committee, and Long An provincial and Ho Chi Minh City officials pushed back against the sites slated for their localities and requested that natural gas or biomass be used to fuel the plants. Ninh Bình and Bạc Liêu provincial officials asked the central government to take the coal plants in their provinces out of the national plan. Previous studies found that local Vietnamese authorities may not approve coal plants included in national plans (Do et al. 2020). The vice minister of the Ministry of Trade and Industry Hoang Quoc Vuong stated in July 2018, “It is very difficult to identify locations for coal stations because almost [all] provinces say ‘no’ to coal power plants” (Quynh 2019).

Figure 4

Percentage of Cancelled Capacity in Indonesia and Vietnam That Had Public Opposition

Figure 4

Percentage of Cancelled Capacity in Indonesia and Vietnam That Had Public Opposition

Significant public opposition was rarer in Indonesia, and none of the cancellations appear to originate with subnational governments. Subnational governments in Indonesia receive a large share of coal mining revenues, and local officials benefit from coal industry funding in election campaigns (Atteridge et al. 2018). The incentive of supporting coal may become even stronger under the ongoing decentralization of governance structures in Indonesia (Jakob et al. 2020a). All three cancelled units that had public opposition in Indonesia were cancelled due to administration/permitting, and the ultimate decision may not have rested with public opposition. For example, units 4 and 5 of Indramayu power station were cancelled because the environmental permit for these units was revoked by Bandung administrative court judges. Sulsel-2 power station was cancelled due to industrial development in the Bantaeng district that did not materialize.

In addition to a higher rate of plant cancellation in Vietnam, we find a much slower rate of construction relative to Indonesia. In the study period, the annual rate of new construction was negative or flat in Vietnam for seven of the ten six-month periods between 2015 and 2019, while it was positive in Indonesia for five of ten periods (see Appendix D). These dynamics—a higher rate of plant cancellation, more public opposition in Vietnam than in Indonesia, and slower plant construction—lead us to conclude that coal is moving out of favor in Vietnam while retaining support in Indonesia.

Since the negotiation of the 2015 Paris Agreement, international efforts to phase out the use of and financing for coal have accelerated through initiatives like the Powering Past Coal Alliance. Private investors are increasingly concerned about profit losses and stranded assets if plants are retired long before investments have been recouped (BlackRock 2020).

Despite the emergence of international and local opposition, coal still has the upper hand. One study of the political economy in Vietnam concluded that coal is still advantaged over renewables because of incumbent networks between state-owned enterprises, the Communist Party, and the Energy Ministry (Dorband et al. 2020, 9). While the party apparatus and government ministries are obviously different in the Indonesian context, the privileged position of incumbents favorable to coal is a familiar story relevant not only for Indonesia but for financing countries like China and Japan (Jakob et al. 2020b).

On the recipient side, Vietnam and Indonesia also have fossil interests that have collaborated with outside financiers to build power plants, and the state has deliberately supported power plants as part of national development goals. In Indonesia’s case, ample domestic coal supplies give those interests significant political power. However, rising competition from renewables provides both countries an opportunity to revisit whether those legacy fossil fuels are the best way forward to meet their power needs. Vietnam has installed considerable amounts of solar power, particularly rooftop solar, which expanded from 764 MW to 9.3 GW between June 2020 and December 2020 (Institute for Energy Economics and Financial Analysis 2021). Vietnam’s draft 2021 Power Development Plan 8 expanded the planned capacity for both solar and wind, a movement away from prior plans that heavily emphasized coal (US Energy Information Agency 2021). These developments, along with our data on plant cancellations and construction, suggest that Vietnam is revising its development priorities and increasingly finding that renewables can attract external investment and meet its energy needs (Ha 2021).

In a comparative context, the question emerges, why has Vietnam been willing to cancel a larger share of coal projects than Indonesia? As noted, one key difference between the two countries is Indonesia’s plentiful coal reserves. The coal sector creates end user advocates in other dependent sectors, such as finance, steel, railroads, and metals production, which can “dissuade policymakers from vigorously implementing policies that might lead to the reduction in the use of coal” (Zhao and Alexandroff 2019, 512). Coal, for Indonesia, serves as a vital means to earn foreign exchange to finance other development needs. The decentralized nature of Indonesia’s democracy here may privilege interests from regions interested in the expansion of coal, both for export and domestic use. In Vietnam’s case, the country’s authoritarian regime is both more capable of cancelling projects and, interestingly, more sensitive to local actors’ opposition.

This sensitivity to local opposition may be in part because Vietnam has other reasons to limit coal. Vietnam is increasingly having to use foreign exchange to import coal, making renewables a more attractive option for energy security. The financial liability associated with imported coal may help explain Vietnam’s increasing reluctance to sign sovereign guarantees for new plant construction. Furthermore, anti–fossil fuel norms in supply countries do not uniformly extend to natural gas, providing additional venues for finance if Vietnam engages in fuel switching. Vietnam has also become more integrated as a manufacturer in global solar panel supply chains so may be better placed than it once was to produce and install domestically, particularly compared to Indonesia. Indonesia, however, has cancelled more plants after project finance was found, so perhaps Vietnam cancelled more coal projects simply because it could not find financing for them. We intend to explore this more fully in subsequent research when the COVID-19 crisis recedes and fieldwork recommences.

Even as Vietnam is turning against coal, this is not yet decisive. With Japanese and Korean lenders also souring on coal finance, Vietnam may be well placed for more development of renewables. However, going forward, one policy-relevant issue that has emerged is whether projects that lose investors will simply find other lenders. For example, in the south central Vietnamese province of Binh Thuan, the Vinh Tan-3 power station lost the financial backing of two banks, CLP and HSBC. However, the Japanese bank Mitsubishi UFJ Financial Group (MUFG) initially stated that since Vinh Tan-3 was already under development, its own recent ban on funding coal plants would not apply. Other partners, including Mitsubishi Corporation and Japan’s Chugoku Electric Power Co. and Korea Electric Power Corporation (KEPCO), were considering acquiring CLP’s 40 percent share (Global Energy Monitor 2020). In February 2021, Mitsubishi formally withdrew (Nikkei 2021), but other lenders, notably ICBC and China Southern Grid, were considering stepping in for Mitsubishi (Shepherd 2021).

While many financial institutions have stopped financing coal plants, the impact may not be decisive without a joint effort from all financial institutions. However, as we noted, China has been more resistant than Japan and Korea to these pressures to cease lending for coal. As we argue elsewhere, the most obvious explanation for this difference is that Japanese and Korean banks are more globally integrated with international stakeholders who care about climate change (Interview 11). In contrast, Chinese companies/lenders are essentially state-owned enterprises that are insulated from these reputational pressures. Understanding the changing politics among lenders is another important extension of this project (Davidson et al., n.d.).

Putting these pieces together on the recipient and finance side means that in terms of Table 1, Vietnam is moving northwest toward gray supply or even green shoots, with coal increasingly out of favor in Vietnam and by some of its financiers. However, both Indonesia (5.2 GW) and Vietnam (6.9 GW) still had as of early 2020 a sizable pipeline of projects with Chinese funding support.7 Thus, even though changes in policies in Japan and South Korea are pushing Vietnam toward green shoots, the reality is that Vietnam probably is closer to gray supply, where foreign financiers of coal plants may be able to build new plants if they can find local supporters, which may be possible in some regions. In Indonesia’s case, changing policies by Korean and Japanese lenders have moved Indonesia west from gray status quo toward gray demand, but the evidence suggests that Indonesia is still in the gray status quo space (see Table 4).

Table 4

Intersection of Support for Coal in Indonesia and Vietnam

Recipient CountriesFinancing Countries
Coal out of FavorCoal in Favor
Coal Plant Construction out of Favor Cell 1—Green shoots Cell 2—Gray supply
Coal Plant Construction in Favor Cell 3—Gray demand Cell 4—Gray status quo

Recipient CountriesFinancing Countries
Coal out of FavorCoal in Favor
Coal Plant Construction out of Favor Cell 1—Green shoots Cell 2—Gray supply
Coal Plant Construction in Favor Cell 3—Gray demand Cell 4—Gray status quo

A final point: while central governments play a strong role in approving, licensing, supporting, and financing coal projects, many projects still receive bottom-up support for development and finance from private and local government actors. These observations about Vietnam and Indonesia are likely applicable to other countries as they grapple with the challenges of coal phaseout and the clean energy transition. Incumbent coal interests will likely have the upper hand in many countries, and though declining costs make renewables more attractive, the politics will remain fraught, particularly while questions remain about how much of a country’s energy needs can be provided by variable fuel sources. Our findings suggest that the process of coal phaseout may accelerate, but a more comprehensive turn away from coal will require more deliberate choices by recipient and lending governments to dislodge incumbent interests that favor coal.

1.

Think tanks like Carbon Tracker frequently argue that coal plants are uneconomic, though they invoke this as a persuasive tool rather than an explanatory one. See https://carbontracker.org/reports/?category=coal, last accessed September 19, 2021.

2.

Excluding the units that are still in limbo (i.e., announced, pre-permit, and permitted), another study finds that over 66 percent of capacity in Vietnam and 52 percent in Indonesia has been cancelled or shelved (Shearer et al. 2020). In Appendix D, we show that Vietnam is near the regional and global average for cancellations, while Indonesia is below the average.

3.

The China Development Bank leads Indonesia’s 40.4 GW of financing, providing 9.8 GW, or 24 percent, closely followed by the Japan Bank for International Cooperation (9.1 GW, or 23%), then the Export-Import Bank of China (5.7 GW, or 14%) and the Bank of China (3.2 GW, or 8%); the specific funders are unknown or undetermined for 17.7 GW (19%), mainly for capacity that was ultimately cancelled, suggesting that specific funder(s) never materialized. Vietnam’s 30.6 GW of financing is led by the Japan Bank for International Cooperation (9.5 GW, or 27%), followed by the China Development Bank (8.0 GW, or 22%) and the China Export-Import Bank (6.9 GW, or 19%).

4.

For power plants that are financed by two or more countries, the capacity for each financing country is the ratio between total capacity of this plant and the number of financing countries.

5.

By financial close, we mean financing documents have been signed and conditions necessary to release the funds have been met.

6.

The only cancelled project (Ninh Binh power station Unit 5) with an identified funder (Japan Bank for International Cooperation) in Vietnam was due to administration or permitting reasons.

7.

From Tables 2 and 3, this includes projects that had been announced, that have pre-permit development, or that already have permits that are being financed by China.

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## Author notes

*

We thank the reviewers, the editors of the journal, and the editors of the special issue (Bentley Allan, Joanna Lewis, and Thomas Oatley) for their helpful comments across iterations of this article. Thanks to Global Energy Monitor for sharing the data, and the interviewees for their time and information.