As reported by the Natural Resources and Environment Newspaper, on the morning of November 27, 2023 in Ho Chi Minh City, after the Announcement Ceremony of the First Annual Green Development Journalism Award and the Discussion Sessions: "Circular Economy - from Reality to Policy" and the Discussion "Carbon Financial Market: Opportunities and Challenges".
The event series is organized by the Green Development Journalism Club towards NetZero Carbon (GREEN MEDIA HUB), in collaboration with the Natural Resources and Environment Newspaper, the Center for Journalism Culture - Vietnam Journalists Association.
At the seminar "Carbon Financial Market: Opportunities and Challenges", Dr. Bui Duc Hieu shared about the carbon credit market in the world and his perspective on this issue in Vietnam in the present and future.
Each country and region has a different way of operating.
Dr. Bui Duc Hieu affirmed that currently the carbon credit market in the world is very active, in all continents, however each country and each region has different operating methods and history.
Specifically: firstly, in terms of implementation time, the European Union's carbon market was the earliest in the world in 2005, and has gone through 5 stages so far. Next is the Korean market, which was tested in 2012, officially in 2015 and went through 3 stages. The Chinese market was tested in 2012 in some provinces and officially nationwide in 2022, the UK from 2021, Japan has just finished testing and will officially operate from April 2023.
Next, about the way it operates: the world's carbon market currently operates in 3 forms, including: (i) mandatory, (ii) voluntary, (iii) compliance with Article 6 of the Paris Agreement. In addition, there is another form that is not listed in the 3 types above, and is relatively simple, which is simply put on the trading floor, currently only Singapore is implementing...
There are three forms that can be summarized as follows: The first form - mandatory : The Government requires businesses on the list of mandatory emission reductions to reduce emissions annually, and each country requires emission reductions according to different sectors and fields, not all sectors and fields that are emitting in that country. Based on the emission limit imposed by the Government for each sector and field, businesses that emit more than the ceiling will have to buy credits from the Government or buy from businesses that already have credits because their emissions do not exceed the limit.
The second form - voluntary : businesses that are not on the Government's list of emission reduction requirements, but register to voluntarily reduce emissions, or businesses in the renewable energy sector. These businesses will register with the Government, through a number of international credit assessment organizations such as Gold Standard, Carbon Certification Standards - VCS, Global Carbon Council; after being granted credits, businesses will put them on the trading floor, exchange, and can sell to international organizations and businesses.
Third form - Comply with Article 6 of the Paris Agreement : implemented in the way that two countries sign a memorandum of understanding on cooperation, the content of credit exchange can focus on one or more fields, one or more enterprises. For example, a developed country provides technology, engineering, and finance to some fields of a developing country, then when enterprises in the developing country create carbon credits. Part of these credits will be retained in the enterprise and the developing country, and part will be returned to the developed country. The percentage for each side will be based on the initial agreement between the two countries.
Regarding the price of carbon credits, Mr. Bui Duc Hieu said that in the third form ( in compliance with Article 6 of the Paris Agreement ), there will be no credit price, only the first form , and the second form as mentioned above, credits are priced through auctions or trading on the floor. The price of credits depends on supply and demand, specifically depending on the production and business situation of enterprises, industries, and emission-emitting fields. For example, Korea currently only trades about 5-6 USD/credit, Australia 25 USD, China 10 USD, EU up to 77 Euro...
Opportunity for businesses to change their production model
Answering the question, the Government is aiming to pilot the carbon credit trading floor in 2025, and officially operate it in 2028. International organizations also want to support Vietnam, and the ITMO bilateral emission reduction results exchange mechanism has also been established... So what are the opportunities for Vietnamese enterprises in international cooperation to share "benefits" from this financial flow? Is it too late by 2028... Dr. Bui Duc Hieu said: One is that among the countries around us, only Korea is early, and compared to other countries such as Japan, China, Southeast Asian countries, South America, many countries are preparing to operate like us, or 1-2 years earlier. Even Singapore only buys and sells credits, without establishing a mandatory and voluntary market.
For our country, as a developing country, the economy and production are highly open. If we apply the market early, it means forcing businesses to reduce emissions, which will have a huge impact on the economy, and businesses will have to spend a lot of money to convert technology.
“Technologies to reduce emissions are very expensive. In addition to the cost of purchasing and converting technology, we also have to consider the human resources to operate and master those technologies and machines. However, we have to do it, we have to convert, otherwise we will fall behind the world,” said Dr. Bui Duc Hieu.
Regarding business benefits, Mr. Bui Duc Hieu said that businesses will have many advantages and also many challenges to face in the game towards net zero and the carbon market.
On a macro level, businesses that reduce emissions and participate in the carbon market are working with the Government to fulfill international commitments in reducing emissions. Directly contributing to the work of protecting humanity from the impacts of climate change.
Regarding the direct benefits that businesses get: Participating in the carbon market, green finance will certainly increase the brand of the business, thereby helping businesses gain many plus points in negotiating and exporting products;
In addition, businesses that reduce emissions also have an opportunity to change their production models and technologies (because we cannot live with the old forever, we must always innovate to survive and develop). Thereby creating credits to sell to the market, earning profits. For example, Tesla in 2022 sold carbon credits for $1.78 billion, accounting for 10% of Tesla's total profits that year.
As for intermediary businesses buying and selling credits and trading floors, Mr. Bui Duc Hieu believes that this is also an opportunity to have another product to trade and exchange. “And like other countries in the world, I believe our Carbon Credit trading market will be very exciting...” - Dr. Bui Duc Hieu said.
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