VN's carbon credit market has significant development potential

May 27, 2024 - 08:04
Nguyễn Phương Nam, climate change assessment expert of the United Nations Framework Convention on Climate Change, talks to Vietnam News Agency about how any carbon market should be managed.
Nguyễn Phương Nam, climate change assessment expert of the United Nations Framework Convention on Climate Change, image??

Nguyễn Phương Nam, the climate change assessment expert of the United Nations Framework Convention on Climate Change, talks to Vietnam News Agency reporter about how to promote the carbon market.

Prime Minister Phạm Minh Chính has issued Directive No. 13/CT-TTg, to enhance management of carbon credits in order to implement the Nationally Determined Contributions (NDC) programme.

How do you evaluate the potential development of the carbon credit market in Việt Nam?

The carbon market in Việt Nam will have significant developmental potential. Firstly, Việt Nam, as a developing country, has high production demands, resulting in increased greenhouse gas emissions due to environmentally-unfriendly technologies. Thus, there are considerable opportunities when it comes to reducing greenhouse gas emissions in the country. Additionally, the geographical location plays a crucial role, as Việt Nam, a tropical country, has more potential for diversifying renewable energy sources such as solar and wind power, compared to other nations.

Moreover, Việt Nam has ample opportunities to attract green financial resources, not only focusing on climate change adaptation and extreme weather phenomena resistance, but also in reducing greenhouse gas emissions. Therefore, the demand and opportunities for establishing a carbon credit market are closely linked to Directive 13/CT-TTg issued by the Prime Minister.

However, it is crucial for ministries, sectors, localities and relevant agencies to evaluate the current status of greenhouse gas emissions, allocate greenhouse gas emission quotas and operate the market smoothly and attractively for investors to engage in carbon credit trading.

How does the implementation of the carbon market contribute to Việt Nam's goal of achieving net-zero emissions by 2050? 

This is an ambitious goal requiring the involvement of various stakeholders, including ministries, sectors, localities, Vietnamese enterprises and support from international organisations, to channel green finance into helping domestic enterprises transition to green. Green capital, with many preferential incentives supporting enterprises, ensures profit recovery and contributes to reducing greenhouse gas emissions, moving towards Việt Nam's stated goal of achieving net-zero emissions by 2050.

The most significant challenge currently for Việt Nam is to accurately determine the greenhouse gas emissions of major emitting enterprises, because if we fail in this, it will pose a significant obstacle for State management agencies. Allocation of greenhouse gas emission quotas to enterprises needs to be carried out so that enterprises know and can reduce emissions, creating surplus quotas for carbon credit trading. Therefore, the most crucial task in Việt Nam is to determine the allocation of greenhouse gas emission quotas for domestic enterprises currently in operation and production.

How will Vietnamese export enterprises face carbon credit barriers?

For Vietnamese export enterprises, they must deal with several issues related to trade and export barriers, especially after the European Union introduced the Carbon Border Adjustment Mechanism (CBAM) in 2023. Therefore, goods in some of the sectors regulated by the European Union, such as iron, steel, cement, fertilisers, hydrogen and electricity, exported to the EU, if they are not taxed in the host country, will also be taxed at Europe's borders, equivalent to nearly US$100 for a tonne of CO2. Vietnamese enterprises within the global supply chain, with customers in Europe, are at risk of this tax.

Apart from the European Union, other countries worldwide like the United States, the United Kingdom and Australia have implemented similar mechanisms. This means Vietnamese enterprises need to equip themselves with knowledge and calculations of greenhouse gas emission intensities per product to avoid trade barriers, thereby enhancing competitiveness and brand recognition. Sustainable brands are not only good and affordable but also have social and environmental significance. Therefore, Vietnamese enterprises need to prepare now so that in the next five to ten years, any trade is smooth and they can establish a certain reputation in the global market.

The Ministry of Finance is proposing a carbon credit trading platform. In your opinion, how should the platform be operated?

The Ministry of Finance is the appropriate authority to lead the construction and management of a carbon credit trading platform. The project is being accelerated and in principle, a trading platform should be easily approved, especially given the current trends in information technology, it should make exchanges and transactions relatively easy and convenient.

However, to establish a complete ecosystem, involving stakeholders from units of depository and registration of credit trading entities to order match units or brokers, requires in-depth understanding of the specific product. Carbon credits are an intangible commodity similar to stocks and require many legal regulations to clearly define ownership units or asset values for smooth trading.— VNS