Developing a carbon market is key for Vietnam to fulfill its commitment to net zero emissions, but caution is needed when selling carbon credits, according to Director of the Climate Change Department Tang The Cuong.
Vietnam is in the process of building a carbon market with the goal of testing it in 2025 to soon put the trading floor into operation. VnExpress interviewed Mr. Tang The Cuong, Director of the Department of Climate Change, Ministry of Natural Resources and Environment, to clarify the progress, opportunities and challenges of this market.
- How do you evaluate Vietnam's carbon credit (CO2) potential?
- In our country, the exchange of carbon credits to the world has been carried out by enterprises since the year 2000 when implementing programs and projects under the Clean Development Mechanism (CDM). Up to now, there have been more than 300 registered programs, of which about 150 programs and projects have been granted 40.2 million credits and exchanged on the world carbon market, making us one of the 4 countries with the most registered CDM projects, after China, Brazil, and India.
Regarding credits earned from programs and projects under the CDM mechanism, Vietnam currently ranks 9th out of 80 countries with CDM projects granted credits. The projects that have been granted credits focus on the fields of renewable energy production and energy saving.
Mr. Tang The Cuong answered VnExpress about the carbon market. Photo: Gia Chinh
Our carbon credit potential is quite large, for example from forests with more than 14.7 million hectares of forest, 42% coverage, of which natural forests are more than 10 million hectares, planted forests are more than 4.5 million hectares. Forestry experts quantify that with this area, forests absorb nearly 60 million tons of CO2 per year. However, it should be noted that only the amount of CO2 absorption increased compared to the reference absorption level (or base level) can be converted into credits, not the entire 60 million tons of CO2 per year converted.
- How does the implementation of the carbon market contribute to Vietnam's goal of net zero emissions by 2050?
- First of all, it must be affirmed that the net zero emissions that Vietnam committed to at COP26 in 2021 is a very ambitious and challenging target. However, we are making efforts to synchronously deploy many measures to realize this commitment, of which building a carbon market is the key.
The carbon market will contribute to the goal of reducing greenhouse gas emissions at low costs for businesses and society, promoting the development of low-emission technologies. To achieve the national emission reduction target, the Prime Minister has assigned specific targets for reducing greenhouse gas emissions to the energy, transportation, agriculture, waste management and industrial processes sectors; and assigned targets for greenhouse gas absorption to the forestry sector.
Along with the country's self-implementation efforts, Vietnam needs international support through bilateral and multilateral cooperation to implement greenhouse gas emission reduction activities. When receiving international support, we may need to share ownership of the carbon credits obtained. The Ministry of Natural Resources and Environment is researching and proposing credit management policies, including the ratio of credit sharing achieved from program and project implementation, ensuring the harmony of interests among participating parties.
- How is the implementation of the emission trading platform and carbon credits being implemented as 2025 approaches?
- We are working closely with the Ministry of Finance and relevant agencies to implement this work. Some regulations that are being urgently developed include: State management of carbon credits; auction, transfer, borrowing, payment and withdrawal of greenhouse gas emission quotas; use of credits to offset greenhouse gas emissions; financial management mechanism for carbon market operations; procedures and technical regulations on measurement, reporting and appraisal of greenhouse gas emission reduction for sectors in the list of sectors subject to inventory.
At the same time, specialized agencies are synthesizing information and data on greenhouse gas emissions to organize the allocation of emission quotas as well as organize propaganda activities to raise awareness of the carbon market for cadres, civil servants, and public employees at all levels, businesses and local communities across the country.
One of the immediate key tasks is to establish a national registration system to manage all carbon credits generated in Vietnam. Accordingly, organizations and individuals are required to register accounts, provide relevant information on the type of carbon credits, the amount of credits they own, and other necessary information.
- Some experts say that if Vietnam sells all carbon credits at the current price of 2-50 USD, it may have to buy them back at a higher price in the future. What do you think about this?
- Recently, some international organizations have wanted to buy carbon credits or recognized greenhouse gas emission reduction results, especially the amount of carbon absorption from natural forests in Vietnam. Selling forest carbon credits will contribute to increasing income for forest owners, people and businesses through revenue from emission reduction results, increasing forest productivity, improving sustainable livelihoods; contributing to protecting existing forest areas and increasing forest cover.
Vietnam's forests have carbon credit potential. Photo: Ngoc Thanh
However, the role of the forestry sector is very important in achieving the emission reduction target under the Nationally Determined Contribution (NDC) by 2030 as well as the net zero emission target by 2050. Therefore, localities with forests need to coordinate with the Ministry of Agriculture and Rural Development to determine the contribution rate of greenhouse gas absorption from forests in the area to ensure the national greenhouse gas emission reduction target before selling.
Besides, carbon credits are commodities with a limited shelf life, the price of credits depends on the type of project that creates those credits, so deciding whether to sell or keep them requires careful consideration, considering many factors to ensure the most effective results.
- What is the biggest challenge in implementing a carbon market?
- Vietnam is identified as having the potential to implement emission reduction and greenhouse gas absorption measures, thereby creating carbon credits. However, to implement these measures, Vietnam also needs international support through financial and technological investment; at the same time, it is necessary to improve the quality of greenhouse gas inventories and emission reduction appraisal. Currently, in the process of practical implementation, there are many challenges, focusing on the fact that guidelines have not been issued in a timely and complete manner; human resources in both the public and private sectors for these activities are lacking and inexperienced.
In fact, developed countries all set targets to reduce greenhouse gas emissions and they also determine that to achieve this, they will need to compensate with carbon credits from other countries. Therefore, we must determine that in order to receive finance and technology to implement measures to reduce emissions and absorb greenhouse gases, we will have to share ownership of the carbon credits obtained to ensure harmony of interests between the parties.
In addition, to be able to generate carbon credits and compete in the market, projects must meet the standards of the mechanisms, must apply the correct methodology, apply data monitoring and measurement measures according to regulations and especially must prove that the project has reduced emissions or absorbed greenhouse gases, has additionality, and is assessed by an independent licensed unit. Enterprises must pay high costs to hire an assessment unit.
In the short term, we can limit risks by implementing pilot projects to gain more experience in building credit management policies - a new type of commodity with constantly changing international regulations. Investors also gain more experience and confidence when implementing greenhouse gas emission reduction projects in Vietnam.
A CO2 credit (carbon credit) is a tradable certificate that represents the right to emit one ton of CO2, or another equivalent to one ton of greenhouse gas. The trading method is understood as a company that generates 12 tons of emissions while the limit is 10 tons, can buy back 2 tons of credits from a company that emits less than the limit. This is verified by a third party. The ultimate goal of carbon credits is to reduce greenhouse gas emissions into the atmosphere.
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