Prime Minister Pham Minh Chinh on Friday assigned the Ministry of Finance to submit a draft carbon market development project to the government for approval in July.
Chairing a meeting of the national steering committee set up to realize Vietnam's commitment to net zero emissions by 2050, the cabinet leader requested the Ministry of Natural Resources and Environment (MONRE) to develop a decree on carbon credit management to submit to the government in the second quarter of 2024.
MONRE was asked to coordinate with the Ministry of Agriculture and Rural Development to consult other countries and give recommendations to the Prime Minister for a directive on forest carbon credit management in Vietnam; while four other ministries were assigned to issue regulations on climate change response and cutting greenhouse gas emissions.
A carbon credit is a transferrable financial instrument certified by governments or independent certification bodies that represents the right of a business to release one ton of carbon dioxide into the environment.
For example, a company that generates 12 tons of emissions while the limit is 10 tons can buy credits for two remaining tons from another firm with fewer emissions than the limit. This is confirmed by a third party. The ultimate goal of carbon credits is to reduce greenhouse gas emissions.
In Vietnam, the government has set a target to establish and pilot the operation of a carbon credit trading floor by 2025, the Prime Minister said, adding the exchange will be officially open three years later.
Many foreign businesses and organizations are facing obstacles buying credits in Vietnam due to the absence of a clear legal corridor.
Businesses need guidance from a coordinating agency under the government because the carbon market covers many fields such as forestry, energy, and animal husbandry, the PM said, noting Vietnam does not have a carbon rights registration system or a list of carbon facilities and projects.
Chinh affirmed that green development, energy transition and emission reduction are inevitable trends and Vietnam cannot stand aside. It needs to see this as an opportunity to restructure the economy towards green and sustainable development.
"Green development must be sustainable, inclusive and comprehensive, leaving no one behind," the government leader said.
He assigned the Ministry of Industry and Trade to propose the issuance of a pilot mechanism for direct electricity trading between renewable energy generators and major users.
“There should be a mechanism to encourage the development of rooftop solar power, aiming to accelerate energy transition projects and realizing Vietnam's commitment at the 26th UN Climate Change Conference (COP26),” he said.
Vietnam's forests net-absorb 40 million tons of carbon yearly, or $200 million in carbon credits at $5 per ton, Deputy Agriculture and Rural Development Minister Nguyen Quoc Tri said at a June press conference.
The nation's forests absorb 70 million tons and exhaust 30 million tons of carbon every year. This is a major income source for foresters, he added.
Vietnam's forestry sector has already signed with the World Bank its first carbon credit sale of 10.3 million tons for $51.5 million under the Emission Reductions Payment Agreements (ERPA). The agreement runs until 2025.