Overview of the Carbon Credit Market in Vietnam

Overview of the Carbon Credit Market in Vietnam

Whether businesses operating in the energy sector are large or small, the carbon credit market is increasingly becoming an important factor for each business. Participation in this market not only helps determine the impact of business activities on the environment but also creates a positive image of commitment to environmental protection.

Carbon credits are not only a means of measuring the level of carbon emissions, but also a strategic management tool that helps businesses better understand their impact on climate change. Participating in this market can create a competitive advantage, especially in the context of increasing environmental management measures and resource protection requirements.

Let’s join VREnergy to learn more about the trading mechanism, transaction process, and development potential of the Carbon credit market in Vietnam!

Regulations on Carbon Credits in Vietnam

Overview of carbon information market in Vietnam 1 min

The carbon credit market in Vietnam is regulated in Decree No. 06/2022/ND-CP dated January 7, 2022 of the Government regulating greenhouse gas emissions mitigation and ozone layer protection. This Decree specifically regulates:

  • Principles, objectives, scope, subjects of application, mechanisms, policies, processes, procedures, and methods of implementing greenhouse gas emission mitigation and ozone layer protection;
  • Manage, monitor, check, inspect, and handle violations of laws on greenhouse gas emission reduction and ozone layer protection.

The carbon credit market is expected to be an important tool to promote reduction of greenhouse gas emissions, contributing to environmental protection and response to climate change.

Carbon Credit transaction mechanism and process

At present, we are still in the phase of building the foundation for the operating market as well as establishing and organizing the pilot operation of the Carbon credit exchange. Official instructions for operating a carbon credit exchange by 2028.

So what mechanisms and processes will we have to access the upcoming carbon credit market:

Carbon Credit trading mechanism

The carbon credit market is a decentralized market in which participants freely buy, sell, and exchange carbon credits with each other. Carbon credit market participants include:

  • Businesses that emit greenhouse gases: Businesses that emit greenhouse gases can purchase carbon credits to offset their greenhouse gas emissions.
  • Businesses that reduce greenhouse gas emissions: Businesses that reduce greenhouse gas emissions can sell carbon credits to profit from reducing their greenhouse gas emissions.
  • Financial institutions: Financial institutions can participate in the carbon credit market to invest in projects that reduce greenhouse gas emissions.

Carbon credit trading is done through the carbon credit exchange . In Vietnam, the Center for Environmental Technology Development and Application (CEMT) is the unit assigned by the Ministry of Natural Resources and Environment to organize and operate the carbon credit trading floor.

Price of carbon credits

The price of carbon credits is determined on the basis of market supply and demand. The price of carbon credits can change over time and depends on many factors, including:

  • The amount of greenhouse gas emissions of the enterprise;
  • The Government’s policy on reducing greenhouse gas emissions;
  • The need to buy carbon credits from other businesses.

Carbon credit trading process in Vietnam

Overview of the carbon information market in Vietnam 2 min

In Vietnam, the carbon credit trading process is regulated in Article 58 of Decree No. 06/2022/ND-CP dated January 7, 2022 of the Government regulating greenhouse gas emissions mitigation and ozone layer protection. .

The carbon credit trading process in Vietnam includes the following steps:

  1. The project development organization sends an application for carbon credits to the Ministry of Natural Resources and Environment.
  2. The Ministry of Natural Resources and Environment organizes the appraisal of applications for carbon credits.
  3. The Ministry of Natural Resources and Environment makes the decision to grant or not grant carbon credits.
  4. The project development organization registers carbon credits at the Center for Environmental Technology Development and Application (CEMT).
  5. CEMT checks carbon credit application documents.
  6. CEMT issues carbon credit codes.
  7. Project development organization selling carbon credits on the carbon credit exchange.
  8. The carbon credit buyer pays money to the carbon credit seller.
  9. CEMT confirms carbon credit trading.

The carbon credit trading process in Vietnam is being piloted from 2023. CEMT’s carbon credit trading floor is expected to be officially operated in 2024.

Current Carbon Credit market in Vietnam

The carbon credit market in Vietnam is still in the early stages of development. However, in recent years, the market has made positive developments.

Number and value of Carbon Credits traded

In Vietnam, the carbon credit market is still in the early stages of development. However, in recent years, the market has made positive developments.

According to statistics from the Ministry of Natural Resources and Environment, in the period 2022-2023, the total number of carbon credits granted in Vietnam is 1.2 million credits, of which 1.1 million credits are reduction credits. emissions and 100,000 credits are emissions offset credits.

The value of carbon credits in Vietnam in the period 2022-2023 ranges from 100,000 VND to 200,000 VND/credit. The value of carbon credits can change over time and depends on many factors, including:

  • The amount of greenhouse gas emissions of the enterprise;
  • The Government’s policy on reducing greenhouse gas emissions;
  • The need to buy carbon credits from other businesses.

Featured Industry in the Carbon Credits Market

In Vietnam, the prominent industry in the carbon credit market is the energy industry. Greenhouse gas emission reduction projects in the energy sector account for the highest proportion of the total carbon credits granted in Vietnam.

In addition to the energy industry, other industries also have the potential to develop carbon credit markets, including:

  • Agriculture
  • forestry
  • Build
  • Transportation

Development potential of the Carbon Credit Market in Vietnam

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The carbon credit market in Vietnam has great development potential. According to forecasts of the Ministry of Natural Resources and Environment, the demand for carbon credits in Vietnam will increase significantly in the coming years.

The reason is:

  • Vietnam is one of the largest greenhouse gas emitters in the world.
  • The Vietnamese government is promoting measures to reduce greenhouse gas emissions.
  • Vietnamese businesses are becoming more and more aware of social and environmental responsibility.

To develop the carbon credit market, the Vietnamese Government needs to continue to improve the legal framework, creating favorable conditions for businesses to participate in the market. At the same time, it is necessary to promote propaganda and raise awareness of the carbon credit market for businesses and people.

The Future of the Carbon Credit Market in Vietnam

The carbon credit market in Vietnam is expected to have strong developments in the future. It is expected that the demand for carbon credits in Vietnam will increase significantly in the coming years, due to the following factors:

  • Vietnam is one of the largest greenhouse gas emitters in the world. According to a World Bank report, Vietnam is the 20th largest greenhouse gas emitter in the world, with a total greenhouse gas emissions in 2022 of 283 million tons of CO2e.
  • The Vietnamese government is promoting measures to reduce greenhouse gas emissions. In October 2022, the Government of Vietnam approved the National Strategy on Climate Change for the period 2021-2030, with a vision to 2050, which sets the goal of reducing greenhouse gas emissions to zero by 2022. 2050.
  • Vietnamese businesses are becoming more and more aware of social and environmental responsibility. Businesses are looking for solutions to reduce greenhouse gas emissions, and the carbon credit market is one possible solution.

The carbon credit market in Vietnam has great development potential. For the market to develop effectively, there needs to be close coordination between the Government, businesses and related organizations.

Above is some general information about the carbon credit market in Vietnam. From now until the end of 2027, the Ministry of Finance will focus on building regulatory systems and policies to create a foundation for the market.