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Guide to Participating in the Carbon Market for Businesses

Guide to Participating in the Carbon Market for Businesses

Climate change is one of the biggest challenges facing humanity. To solve this problem, reducing greenhouse gas emissions is extremely important. Carbon markets play a key role in promoting effective and sustainable reductions in greenhouse gas emissions.

As a pioneer enterprise in the field of renewable energy and accompanying businesses in carbon neutral solutions, VREnergy will synthesize information and instructions for participating in the carbon market for businesses:

This article will provide you with an overview of the carbon market, including:

  • Learn about carbon markets
  • Assessing the potential to participate in the carbon market
  • Choose a method to participate in the carbon market
  • Guide to participating in the carbon market for businesses

Learn about carbon markets

To put it simply, the carbon market is a system that allows organizations to buy and sell carbon credits . Each credit represents one ton of CO2 or other greenhouse gases removed from the atmosphere. Organizations can purchase credits to offset their greenhouse gas emissions.

There are 2 types of carbon markets: Mandatory carbon markets and Voluntary carbon markets .

Compulsory carbon market is a market in which countries, organizations or businesses, by law, must inventory and reduce greenhouse gas emissions and have the right to participate in exchange, trade, and other activities. transfer of greenhouse gas emission quotas as well as carbon credits.

Emission reductions will be subject to mandatory national, regional or international regulations, such as the mechanisms in the Kyoto Protocol that aim to regulate greenhouse gas emissions for countries, systems and systems. Euro Emissions Trading System/Scheme EU-ETS and other mandatory emissions trading systems.

In contrast, the voluntary carbon market is a market that allows emitters to offset their unavoidable emissions by generating emissions reduction projects to reduce greenhouse gas emissions. glasses on a voluntary basis.

A carbon market is a system that allows organizations to buy and sell carbon credits
A carbon market is a system that allows organizations to buy and sell carbon credits
A carbon market is a system that allows organizations to buy and sell carbon credits

Carbon credit projects are developed and registered according to voluntary/independent carbon standards such as Verified Carbon Standard (VCS) or Gold Standard (Gold Standard – GS) and other standards. other voluntary carbon.

In summary, how the carbon market works:

  • Quota system: Governments set limits on greenhouse gas emissions for businesses in a certain sector or region.
  • Credit allocation: Enterprises are granted carbon credits based on allowed emission levels.
  • Carbon credit trading: Businesses can buy and sell carbon credits on the market.
  • Emissions equalization: Businesses need enough credits to offset their actual emissions.

Learn more about the 5 Benefits of applying carbon credits that businesses need to consider before entering the carbon credit market!

Assessing the potential to participate in the carbon market

Demand for carbon credits is expected to increase sharply in the coming years as countries commit to reducing GHG emissions. According to the World Bank, the international carbon market could be worth $280 billion by 2050.

Currently, more than 60 countries and regions have participated in carbon pricing systems. And the number will continue to grow strongly in the near future.

Vietnam is one of the countries with the highest GHG emissions in Southeast Asia. According to 2020 data, Vietnam emitted 448 million tons of CO2, ranking 46th out of 192 countries and regions. The main reason is because Vietnam is in a period of strong development, using a lot of fossil fuels for industrial production and daily life.

Great potential for reducing emissions: On the contrary, Vietnam also has great potential for reducing GHG emissions from areas such as:

  • Energy: Developing renewable energy and using energy effectively.
  • Industry: Applying advanced technology, minimizing emissions in production.
  • Agriculture: Convert to low-GHG emission farming models.
  • Forestry: Protect and develop forests, enhance CO2 absorption.

Support policies: The Vietnamese Government has issued many policies to support carbon market development, such as:

  • Environmental Protection Law 2020: Regulations on carbon market development.
  • National strategy on climate change to 2050: Identify goals for reducing GHG emissions and developing carbon markets.
  • Decree 06/2022/ND-CP: Detailed regulations on carbon market operations.

Overall: Vietnam’s carbon market can develop strongly and contribute to the country’s goals of reducing GHG emissions and sustainable development.

Choose a method to participate in the carbon market

There are many methods of participating in the carbon market, each with its own advantages and disadvantages. Businesses need to carefully consider factors such as goals, financial potential, and risk management ability to choose the most suitable method.

Here are some popular carbon market participation methods:

  • Direct transactions: Businesses buy and sell carbon credits directly with each other in the market.
  • Trading via carbon credit floor: Enterprises buy and sell carbon credits through a licensed trading floor.
  • Participate in emission reduction projects: Enterprises invest in emission reduction projects to receive carbon credits.
  • Using intermediary services: Businesses use the services of intermediary companies to buy and sell carbon credits or participate in emission reduction projects.
Instructions for participating in the carbon market for businesses 2 min
Instructions for participating in the carbon market for businesses 2 min

In addition, businesses can also participate in the carbon market through carbon funds. A carbon fund is an organization that mobilizes capital from investors to invest in emission reduction projects. Businesses can buy carbon credits from carbon funds or participate in investing in carbon funds.

Guide to participating in the carbon market for businesses

To participate in the carbon credit market, businesses need to comply with legal regulations on the carbon market and regularly update information on the carbon market and carbon credit prices.

Specifically, the steps to participate in the carbon market for businesses are:

Step 1: Assess potential:

  • Determine the amount of greenhouse gases (GHG) emitted by the enterprise.
  • Assess the ability of businesses to reduce GHG emissions.
  • Learn about carbon markets and carbon credit pricing.

Step 2: Choose participation method:

  • Direct transactions: Businesses buy and sell carbon credits with each other.
  • Transactions through exchanges: Businesses buy and sell carbon credits through licensed exchanges.
  • Participate in emission reduction projects: Enterprises invest in emission reduction projects to receive carbon credits.
  • Using intermediary services: Businesses use the services of intermediary companies to buy and sell carbon credits or participate in emission reduction projects.

Step 3: Prepare documents:

  • Business license.
  • Report GHG emissions.
  • Plan to reduce GHG emissions.
  • Documents proving financial capacity.

Step 4: Register to participate in the carbon market:

  • Enterprises submit applications to register to participate in the carbon market to state management agencies.
  • State management agencies will review and issue licenses to participate in the carbon market for businesses.
Enterprises submit applications to register to participate in the carbon market to state management agencies for consideration
Enterprises submit applications to register to participate in the carbon market to state management agencies for consideration
Enterprises submit applications to register to participate in the carbon market to state management agencies for consideration

Step 5: Carbon credit trading:

  • Enterprises buy and sell carbon credits on the market according to the selected method.

Conclude

Participating in the carbon market is a good opportunity for businesses to reduce greenhouse gas emissions, develop sustainably and enhance corporate image. Businesses should research carefully and develop appropriate strategies before entering the market.

Hopefully the information that VREnergy shares in this guide to participating in the carbon market for businesses will be useful for businesses!

References:

Carbon Market: Potential and Prospects of Vietnam (Centre for People and Nature, No. 33/2023).