5 Benefits of Implementing Carbon Credits for Businesses

5 Benefits of Implementing Carbon Credits for Businesses

The application of carbon credits is not only a new trend in the business world but also a necessary measure for businesses to contribute to environmental protection, towards sustainable value in business activities.

Because it is not widely available, only a few businesses access and apply carbon credits during business operations.

To help businesses properly understand carbon credits and come up with appropriate development strategies, VREnergy will provide detailed answers about carbon credits through the following information:

  • What are carbon credits?
  • Historical development of carbon credits
  • Businesses that have applied carbon credits
  • The difference between businesses that have and have not applied carbon credits
  • 5 Benefits of applying carbon credits for businesses
  • Instructions for applying carbon credits for businesses

Let’s get started!

What are carbon credits?

Earth is heating up. Increased greenhouse gas (GHG) emissions, especially CO2, are the main cause of climate change. To solve this urgent problem, the international community has adopted many measures, including the carbon credit market .

Carbon credits are a policy tool used to control GHG emissions
Carbon credits are a policy tool used to control GHG emissions

Carbon credits are a policy tool used to control the amount of GHGs released into the atmosphere. Each credit represents the right to emit one ton of CO2 or an equivalent amount of other greenhouse gases. Businesses can buy or sell carbon credits to offset their emissions.

Historical development of carbon credits

The official carbon market has been known since the late 1990s through the Kyoto Protocol on the goal of reducing greenhouse gas emissions for developed countries, towards sustainable economic development. The development history of carbon credits will go through the following stages:

Beginning (1992 – 1997)

  • 1992: The Earth Summit in Rio de Janeiro (UNCED) calls on countries to develop and implement economic tools to reduce greenhouse gas (GHG) emissions.
  • 1997: The Kyoto Protocol is adopted, officially creating the international carbon credit market. This protocol stipulates binding GHG emissions reduction targets for developed countries for the period 2008-2012.

Initial development stage (1998 – 2005)

  • 1998: The Clean Development Mechanism (CDM) was established, allowing developed countries to invest in emissions reduction projects in developing countries to receive carbon credits.
  • 2005: The European Emissions Trading System (EU ETS) begins operations, making it the world’s largest carbon credits market. The EU ETS applies an emissions quota system to power plants and large industrial plants, forcing them to buy carbon credits if they emit more than their quotas.
Formal carbon markets have been known since the late 1990s
Formal carbon markets have been known since the late 1990s

Expansion period (2006 – 2015)

  • 2006: The Linked Carbon Credit Market is established, allowing countries and organizations to link their carbon markets together.
  • 2011: The World Bank launches the Carbon Fund initiative, supporting projects to reduce GHG emissions in developing countries.
  • 2015: The Paris Agreement is signed, promoting the use of carbon credits to reduce global GHG emissions. The Paris Agreement encourages countries to use market tools, including carbon credits, to achieve national emissions reduction targets.

Current period (2016 – present)

  • 2016: China’s carbon credit market begins operations, making it the world’s second largest carbon market.
  • 2021: Vietnam’s national carbon market is officially approved, expected to begin operations in 2028.
  • 2023: The global carbon market continues to grow with more countries and regions participating.

The carbon credit market is expected to continue to grow strongly in the coming years due to increasing demand for reducing greenhouse gas emissions and the development of new technologies that help reduce credit transaction costs. carbon .

Businesses that have applied carbon credits

  • Vietnam Electricity Group (EVN): EVN has purchased carbon credits from afforestation projects to offset CO2 emissions from coal power plants.
  • Vietnam Dairy Products Joint Stock Company (Vinamilk): Vinamilk has invested in renewable energy projects to reduce GHG emissions and can sell carbon credits to other businesses.
  • Vietnam Petroleum Group (Petrolimex): Petrolimex is researching and applying solutions to reduce GHG emissions, including the use of carbon credits.

Businesses that have applied carbon credits

To reduce greenhouse gas emissions and aim for sustainable value, some businesses in Vietnam have researched and effectively applied carbon credits to benefit themselves and the community. Detail:

  • Vietnam Electricity Group (EVN): EVN has purchased carbon credits from afforestation projects to offset CO2 emissions from coal power plants.
  • Vietnam Dairy Products Joint Stock Company (Vinamilk): Vinamilk has invested in renewable energy projects to reduce GHG emissions and can sell carbon credits to other businesses.
  • Vietnam Petroleum Group (Petrolimex): Petrolimex is researching and applying solutions to reduce GHG emissions, including the use of carbon credits.
Vinamilk has invested in renewable energy projects to reduce GHG emissions
Vinamilk has invested in renewable energy projects to reduce GHG emissions

What is the difference between businesses that HAVE applied and have NOT adopted?

Applying carbon credits brings many benefits to businesses, including economic, environmental and brand benefits. Businesses should research and apply carbon credits effectively to benefit themselves and the community. The specific differences are:

Enterprises that have applied carbon credits:

  • Commitment to environmental protection: Demonstrate proactiveness in reducing greenhouse gas emissions, contributing to environmental protection and responding to climate change.
  • Economic benefits: Cost savings compared to investing in separate emission reduction technologies. Strengthen brand image, enhance reputation with customers, investors and the community.
  • Management capacity: Have an effective management and monitoring system for the use of carbon credits. Grasp the opportunities and challenges in the carbon market.
  • Risk: Depends on carbon credit supply. Fluctuating carbon credit prices can affect costs. Incomplete management and monitoring systems can lead to fraud.

Enterprises that have not applied carbon credits:

  • Regulatory risks: May face increasingly stringent regulations and laws regarding greenhouse gas emissions.
  • Lost opportunity: Missed the opportunity to save costs and enhance brand image.
  • Capacity shortage: There is no system to manage and monitor the use of carbon credits. The opportunities and challenges in the carbon market have not yet been grasped.

Let’s analyze more deeply the benefits that businesses that have applied carbon credits receive

5 Benefits of applying carbon credits for businesses

What is the purpose of applying carbon credits? Why are many leading businesses in Vietnam now starting to apply carbon credits into their business models?

Reduce Costs and Increase Energy Efficiency

When a business decides to apply carbon credits, the first thing it does is analyze and evaluate the energy sources it uses during production and operations.

In this way, we can find ways to save energy and optimize operational efficiency, from improving production processes to using advanced technology to reduce energy consumption.

Reducing energy consumption not only helps reduce operating costs but also increases business profits. By using energy more efficiently and optimizing production processes, we can reduce energy-related costs, from energy purchases to equipment maintenance and repair costs. This not only brings immediate benefits but also creates a solid basis for the sustainable development of the business.

Building a sustainable brand image

Not only is it a measure to minimize environmental impact, but it is also an opportunity to build a sustainable and positive brand image in the community and with customers. Here is a detailed analysis of this content:

  • Financial benefits and brand image
  • Create a supportive community
  • Create a competitive advantage
  • Effective communication and positive relationships for the brand
Vinamilk promotes the roadmap to reduce CO2 emissions
Vinamilk promotes the roadmap to reduce CO2 emissions

Finally, building a sustainable brand image can also create a good basis for effective communication and good relationships with stakeholders, from customers to partners and the community. Having a commitment to the environment and sustainability helps businesses build trust and create a positive and sustainable business environment.

Comply with laws and international standards

With the strengthening of environmental and climate change regulations, the application of carbon credits helps businesses comply with relevant legal regulations and international standards. This not only minimizes legal risks but also facilitates business expansion into international markets.

In a market increasingly sensitive to environmental issues and climate change, compliance with legal regulations and environmental standards is extremely important for businesses. Applying carbon credits helps businesses ensure that they comply with environmental regulations and minimize related legal risks.

In addition to minimizing legal risks, compliance with international standards on the environment and climate change also creates favorable conditions for businesses to expand their business activities into international markets. In an increasingly globalized market, having a commitment to sustainability and the environment can help businesses attract the attention and trust of stakeholders in other countries.

Promote creativity and innovation

The application of carbon credits is also an opportunity to promote creativity and innovation in the production and operations areas of the business.

Setting carbon emission reduction targets puts a pressure on businesses, forcing them to seek innovative solutions and cutting-edge technology to optimize their work processes. This encourages creativity and innovation, from developing energy-saving technologies to creating new manufacturing processes.

Businesses that foster creativity and innovation through the application of carbon credits can enhance their competitiveness and performance. By finding and applying innovative solutions, they can optimize production and operational processes, minimize environmental impact and improve business performance.

Join the sustainable business community

Ultimately, applying carbon credits to businesses is not just about minimizing their impact on the environment but also about participating in the sustainable community. 

Participating in sustainable communities is an important part of building a better future for generations to come. By minimizing their environmental impact and engaging in sustainable activities and initiatives, businesses can contribute to building a better living environment for everyone.

From there, creating favorable conditions for sustainable development of businesses. By creating social programs and initiatives, they can create opportunities for community collaboration and development, from supporting education and healthcare to infrastructure and economic development. .

Vinamilk is the first dairy company in Vietnam to have a factory and farm that are certified Carbon neutral
Vinamilk is the first dairy company in Vietnam to have a factory and farm that are certified Carbon neutral

Instructions for applying carbon credits for businesses

Step 1: Determine the amount of greenhouse gases emitted

  • Businesses need to conduct a greenhouse gas inventory to determine the amount of CO2 emissions and other greenhouse gases emitted from their activities.
  • Different tools and methods can be used to conduct greenhouse gas inventories.

Step 2: Determine the need to use carbon credits

  • Enterprises need to compare actual CO2 emissions with the issued emission quota (if any).
  • If actual CO2 emissions exceed emissions quotas, businesses need to purchase carbon credits to offset the excess emissions.

Step 3: Choose a method to buy carbon credits

  • Businesses can buy carbon credits directly from other organizations or businesses that are implementing GHG emission reduction projects.
  • Businesses can also buy carbon credits through carbon credit exchanges.

Step 4: Register to participate in the carbon market

  • Businesses need to register to participate in the carbon market according to the law.
  • Enterprises need to provide necessary information, including: information about the enterprise, the amount of CO2 emissions emitted, and the need to purchase carbon credits.

Step 5: Monitor and evaluate effectiveness

  • Businesses need to monitor and evaluate the effectiveness of carbon credit use.
  • Businesses need to update information on the carbon market and related regulations.

Conclude

The application of carbon credits is a wise strategy, bringing practical benefits to businesses in the context of climate change. Not only does it contribute to protecting the environment, enhancing image and brand, but it also opens up new business opportunities, increases operational efficiency and minimizes legal risks.

Businesses should seize this opportunity to develop sustainably and create a green future for themselves and the community.

Hopefully through this article, everyone has updated useful information in business activities, creating outstanding value, moving towards more sustainable value.

*References:

  • https://monre.gov.vn/Pages/xay-dung-de-an-thanh-lap-thi-truong-carbon.aspx?
  • https://www.whitehouse.gov/wp-content/uploads/2021/04/Innovation-Investment-and-Inclusion-CEA-April-23-2021-1.pdf