TOKYO/JAKARTA -- Japanese companies have begun stepping away from coal-fired power plant projects as the practice of exporting carbon-spewing technologies comes under fire, a striking about-face for a country that has long promoted coal in developing economies.
Mitsubishi Corp. decided Thursday to withdraw from the $2 billion Vinh Tan 3 facility in southern Vietnam, marking its first exit from a coal project. The 2-gigawatt plant is slated to come online in 2024.
Japanese Environment Minister Shinjiro Koizumi welcomed the news. "I want strong public-private cooperation so that we can demonstrate Japan's unwavering resolve to decarbonize to the international community," he said Friday after a cabinet meeting.
Meanwhile, both Mitsubishi and the Japanese government remain committed to the Vung Ang 2 coal plant project, despite investor backlash and international criticism from activists including Greta Thunberg.
But world leaders are set to discuss ending public funding for fossil fuels when they meet for a U.S. climate summit in April or the Group of Seven summit in June. If countries officially decide to adopt this policy, it will be tough for Tokyo to move forward with facilities like Vung Ang 2.
Amid investor pressure to divest from coal, Mitsui & Co. has reportedly informed the Indonesian government that it is planning a sale of its 45.5% stake in Paiton Energy, a major independent power producer that operates coal-fired plants. The buyer and the size of the sale have yet to be decided.
In truth, the effect of Mitsubishi's decision to withdraw from Vinh Tan 3 is expected to be relatively minor, as the Vietnamese government is focusing on expanding renewables and liquefied natural gas, with coal filling the gaps as needed. Indonesia is moving in a similar direction, planning to stop approving construction of coal-fired plants in 2028 and transition to renewable energy.
The shift away from carbon has spurred international companies to suspend or bow out of major coal projects. General Electric said in September that it will exit the market for new coal plants entirely, and Siemens Energy recently decided to stop bidding for new coal-fired plant projects.
Mounting pressure from investors who view coal power as "stranded" assets has increasingly led financial institutions to withdraw financing from such projects. Standard Chartered and HSBC have stopped providing funding for Vinh Tan 3.
More than 130 significant banks and insurers worldwide have placed restrictions on coal-related investments, according to the U.S.-based Institute for Energy Economics and Financial Analysis. Belgium's KBC Group, for example, in January stopped investing in coal mining companies and any utilities that generate more than 25% of their energy from coal.
Japan's public and private sector have encouraged construction of new coal plants abroad in the name of supporting emerging economies. But as Tokyo has come in for criticism over this at international venues related to climate change, the country has adjusted its stance to make it more in line with the international consensus.
Mizuho Financial Group halted all new financing for coal plants last year and aims to reduce outstanding credit for such projects to zero by fiscal 2040.
Though trading houses Marubeni, Sumitomo Corp. and Itochu all still have coal-fired power plants under construction or in operation, all three have said within the past few years that they will in principle no longer participate in new projects. They will instead focusing on supporting developing countries with renewable energy and LNG, which is less carbon-intensive than coal.