Operating the carbon market from 2028: What implementation plan does Vietnam need?

According to the plan, by June 2025, Vietnam will allocate greenhouse gas emission quotas and then officially operate the carbon market from 2028.

Developing forests and ecosystems to increase greenhouse gas absorption. (Photo: Hung Vo/Vietnam+)

According to the latest information from the Ministry of Natural Resources and Environment, from June 2025, Vietnam will begin piloting the greenhouse gas emission trading system (ETS), then officially operate the carbon market from 2028 and connect the domestic market with the international market after 2030. However, to successfully implement the above goal, Vietnam needs to have a specific roadmap for converting energy from "brown" to "green" and at the same time have a design and management plan for the emission trading system to suit the practical conditions of the country.

ETS quota allocation from June 2025

Sharing with reporters, Mr. Nguyen Tuan Quang - Deputy Director of the Department of Climate Change (Ministry of Natural Resources and Environment) said that as a country heavily affected by climate change, Vietnam has actively participated in international efforts on climate change and proactively made major commitments to reduce greenhouse gas emissions. In particular, at the COP 26 Conference, Vietnam announced to achieve net emissions of "0" by 2050. To achieve the above commitments and Vietnam's emission reduction target, according to Mr. Quang, one of the important solutions is to convert energy from "brown" (traditional energy sources such as fossil fuels that pollute the environment) to "green" (clean energy sources, renewable energy); Promote the use of energy economically and efficiently, save resources through the use of advanced, low-emission technology, implement circular economic models... Along with that, Vietnam needs to transform agricultural production in a greener direction. For example, the project of 1 million hectares of high-quality low-emission rice. According to calculations, applying this solution, the agricultural sector will reduce emissions by 3-5 tons of CO2/ha of rice. Next is the development of forests and ecosystems to increase greenhouse gas absorption, because coastal mangrove ecosystems absorb 4 times more than natural forests. Finally, carbon pricing measures. According to statistics from the Ministry of Natural Resources and Environment, there are currently 70 countries and territories in the world applying such tools as carbon tax and carbon market, this measure currently controls about 11 billion tons of carbon, equivalent to 20% of global emissions. "This is an inevitable trend and Vietnam is also preparing to establish a domestic carbon market," Mr. Quang emphasized. Mr. Quang also said that the content of establishing a carbon market as well as the roadmap for developing a carbon market in Vietnam has been stipulated in the Law on Environmental Protection 2020, Decree No. 06/2022/ND-CP of the Government regulating the reduction of greenhouse gas emissions and protection of the ozone layer. "According to the plan, by June 2025, Vietnam will allocate quotas; then the market will begin trading and exchanging quotas. Thus, there is not much time left to prepare for implementation," Mr. Quang noted. The leader of the Department of Climate Change also said that the legal corridor and practical roadmap are currently available, but what needs to be done is to specifically assess and calculate the level of macro impacts and impacts on businesses, and at the same time have a design and management plan for the ETS system to suit the practical conditions of Vietnam. "The assessment of the impact of the greenhouse gas emission quota and carbon credit trading system in Vietnam will be chaired by the United Nations Project Services Office, lasting from now until June 2025, to serve the implementation of the pilot phase. It is expected that in the upcoming pilot phase, about 150 large emission-emitting enterprises and facilities in the fields of iron and steel production; cement; and thermal power will be included in the carbon market," Mr. Quang informed.

In the upcoming pilot phase, about 150 large emission-emitting enterprises and facilities in the iron, steel, and cement production sectors will be included in the carbon market. (Photo: PV/Vietnam+)

According to the plan, the Ministry of Natural Resources and Environment will organize and manage the activities of exchanging, withdrawing, paying back, and borrowing quotas. After that, Vietnam will officially operate the carbon market from 2028 and is expected to connect the domestic market with international and regional markets after 2030.

How does the international carbon price?

To achieve the above green commitments and emission reduction targets, experts believe that one of the important measures is carbon pricing. At the workshop "Initializing the Impact Assessment of the Greenhouse Gas Emissions Trading System and Carbon Credits in Vietnam" recently organized by the Department of Climate Change, Dr. Robert Ritz (University of Cambridge) said that carbon pricing has the potential to reduce emissions quickly and cost-effectively. "For example, in the UK, the application of a carbon tax in the electricity sector has helped reduce 26% of CO₂ related to electricity production in just three years. And from October 1, 2024, the UK has stopped producing coal-based electronics," Dr. Robert Ritz cited an example and emphasized that the emission quota regulation is the driving factor for carbon pricing. However, Dr. Robert Ritz also noted that managers need to consider policy support to limit the transfer of carbon costs (or increase product prices to consumers) to offset the increased costs due to carbon prices. Mr. Frederic Ggnon - Lebrun, a consultant from South Pole, also said that along with transparency in the management mechanism, the government needs to simplify rules and requirements to facilitate management and help carbon market participants easily establish financial models. Ms. Nguyen Hong Loan - Director of Green Climate Creation Company Limited (GreenCIC), Head of the climate policy expert group, emphasized that in order to operate the carbon market effectively in Vietnam in the coming time, assessing the impact of the greenhouse gas emission quota and carbon credit trading system is very important. Therefore, as a technical support consulting group for Vietnam, the group will analyze Vietnam's legal framework and review international experience to determine design options; management for the development of the ETS, focusing on feasible options for piloting the carbon market in the 2025-2027 period. According to the plan, the consulting team will assess and model the impacts of ETS management options in Vietnam, including analyzing the specific socio-economic and environmental impacts of these options, especially the impacts on energy-intensive industries; assessing and modeling the socio-economic and environmental impacts of carbon credit trading and the results of Vietnam's greenhouse gas emission reductions internationally. "On that basis, the consulting team will provide recommendations to identify optimal management options for carbon credits and greenhouse gas emission quotas to support the process of building a national legal system, towards effective operation of the carbon market in Vietnam," said Ms. Loan.

Vietnamplus.vn

Source: https://www.vietnamplus.vn/van-hanh-thi-truong-carbon-tu-2028-viet-nam-can-phuong-an-thuc-hien-ra-sao-post988514.vnp