Nguyễn Đình Thọ, Director of the Institute of Strategy and Policy on Natural Resources and Environment. Photo baochinhpohu,vn

Associate Professor Nguyễn Đình Thọ, Director of the Institute of Strategy and Policy on Natural Resources and Environment, talks to Năng lượng mới (New Energy) magazine about Việt Nam’s mechanisms and policies to develop the carbon market, which will operate on a pilot basis in 2025.

The carbon market is an important economic tool to promote the reduction of greenhouse gas emissions and combat climate change. What specific policies does Việt Nam need to develop and operate the carbon market?

Globally, the carbon market has developed in two forms. The first is the compliance market (buying and selling carbon credits based on mechanisms formed under the framework of the United Nations Framework Convention on Climate Change), similar to the regulations that Việt Nam will pilot from 2025. If enterprises emit more than the allocated quota, they must purchase carbon credits to offset. For this market, enterprises are required to participate to comply with carbon emission reduction regulations.

For the voluntary market (based on the voluntary buying and selling of carbon credits), globally, it mainly adheres to the regulations related to corporate sustainability reporting to enhance the credibility and appeal of the goods and services provided by enterprises. Consumers worldwide and global stock markets now require enterprises to report on sustainable development, with carbon accounting being a crucial component.

Since Việt Nam enacted the Environmental Protection Law in 2020, it has laid the foundation for developing the carbon market. With this law, we now have a comprehensive policy system to enable the compliance carbon credit market to operate in the near future. However, Việt Nam’s opportunities in the voluntary market are much greater than in the compliance market, given our vast forest and marine areas capable of increasing carbon absorption. Therefore, future mechanisms and policies must create conditions for ethnic minorities, farmers, and local communities in these areas to benefit from carbon credits.

To meet the listing requirements on global markets, the EU's requirements (from January 2024) related to sustainability reporting and the requirements of countries such as the UK, the US and others (starting from July 2024), enterprises must participate in the compliance market to meet their carbon emission requirements. The voluntary market's development will also increasingly demand higher standards from enterprises.

In addition to the compliance market, we need to support small and medium-sized enterprises in implementing carbon accounting, inventory, and reporting to facilitate their participation in global trade and investment.

How should the carbon credit exchange operate to attract enterprises?

Our carbon market will be organised following the financial market model, and its organisation will be simpler because the financial market is currently quite complete and meets all related requirements. We can leverage the existing financial system, such as stock trading systems, to conduct carbon credit transactions. The transaction process will also be carried out like any other commodity. The organisation of trading, custody, control and supervision of carbon credit transactions will be entirely conducted as in the financial market.

The organisation of Việt Nam’s carbon market in the near future will not face significant difficulties, except for establishing the commodity (carbon credits) and ensuring the transparent pricing of carbon credits, meeting global and Vietnamese market standards.

Việt Nam has received US$51.5 million from selling forest carbon credits. How do you assess current potential, especially regarding the Cần Giờ mangrove forest in Hồ Chí Minh City?

Recently, Việt Nam received the first US$51.5 million from the World Bank (WB) for a project that has been ongoing since 2015, involving carbon credit accounting and verification from 2018 to 2020. To date, Việt Nam has delivered 10.3 million carbon credits to the WB. Then 95 per cent of the carbon emissions received by the WB will be transferred back to Việt Nam to fulfil our commitments. The value of the carbon credits generated from this project is significant, even though the transaction price was only $5 per credit. Moving forward, the WB will continue to implement new projects in the Central Highlands, and it is expected that we will be able to transact at $10 per carbon credit.

In the future, many developed countries will support us in exploiting carbon credits related to the sea, wetlands, and carbon sequestration. Therefore, biologically diverse areas capable of absorbing carbon, such as Cần Giờ, will present opportunities for selling carbon credits. However, whether we can sell carbon credits is a process involving the development of pre-feasibility studies, initial accounting, and inventory, followed by project implementation to reduce emissions, increase absorption and conduct final accounting and inventory to determine the number of carbon credits generated. This is an intricate investment process requiring expert involvement to succeed.

According to global emission reduction commitments, carbon credit projects must genuinely reduce emissions or increase global carbon absorption. Therefore, we need to enhance forest management and preservation requirements, allowing forests to mature and store more carbon, and ensure high-quality carbon credits. Additionally, emission reduction and absorption projects must meet social requirements, ensuring labour conditions for workers involved in the projects.

These projects will thus achieve dual objectives: providing livelihoods for local communities, improving living standards, and helping Việt Nam achieve emission reduction targets. VNS