Tuesday , February 7 2023

Purchasing carbon credits from Vietnam difficult without clear legal frameworks


Several foreign businesses find it difficult to purchase carbon credits from Vietnam due to a lack of clear legal frameworks.

On the sidelines of a conference on Tuesday, Pham Thu Thuy, director of the Climate Change, Energy and Low-Carbon Development team at the Center for International Forestry Research and World Agroforestry, said there are several energy companies, finance and banking institutions and other foreign entities that would like to purchase carbon credits in Vietnam, but are hesitant to do so due to a lack of a clear legal framework.

Carbon credits are permits that allow the owner of such credits to emit a certain amount of carbon dioxide or other greenhouse gases. One credit represents the right to emit one ton of carbon dioxide or other greenhouse gases.

A business would need a coordinating entity from the Vietnamese government to provide instructions if it wants to enter Vietnam as a carbon credit market, Thuy said. However, Vietnam does not have a system for registering for carbon rights, nor a list of carbon-related projects for businesses to examine.

“In Peru and Brazil, they already have exchange floors that announce whether one field is lacking or having a surplus of carbon credits; their prices and customers. These are convenient information for businesses to save time and costs when looking for carbon credits,” Thuy said.

Between 1997-2019, 17% of the global carbon credit sale came from the forestry sector. But in 2015-2019, that percentage has increased to 42%. Currently, a carbon credit costs around $2-50, depending on the type of forest and the roles they play, Thuy added.

Vu Tan Phuong, director of the Vietnam Forest Certification Office, said Vietnam has already had policy frameworks regarding carbon credits, but has not had concrete instructions regarding those frameworks, for example, exactly which activities count as emitting or absorbing carbon. Vietnam still does not have a carbon tax.

“Without the tools and policies, it would be very difficult for Vietnam to achieve its net-zero target by 2050,” he said.

Nguyen Van Minh, from the climate change department under the Ministry of Natural Resources and the Environment, said the government has already issued a roadmap for the development of a carbon market in the country. Until 2027, the environment ministry will cooperate with the Ministry of Finance to implement several activities, including the creation of policies regarding the establishment of an exchange floor for carbon credits and carbon emission quotas. That exchange floor is expected to operate on a trial basis in 2025.

“The trial would last three years, and in 2027 the floor’s operation will be evaluated,” Minh said, “before it officially operates in 2028.”

The exchange floor would involve the trading of two things: carbon emission quotas and carbon credits. Certain businesses in certain categories would need to determine their carbon emissions, and the environment ministry would cooperate with relevant parties to hand out carbon emission quotas for each business, with the goal of eventually reducing emissions.

“Each business would have a certain carbon emission quota, and once that limit is exceeded, it would need to purchase more quotas,” said Minh. “Businesses can buy quotas from the government, from other businesses, or by buying carbon credits through exchange mechanisms.” He added that businesses can only expand their quotas by 10% at most in order to prevent affluent businesses from using their wealth to release as much emissions as they want.

Vietnam and Japan are deploying mutual carbon credits, with projects in Vietnam receiving money from two sources: Japan’s Ministry of the Environment and Ministry of Economy, Trade and Industry. Carbon credits collected from these projects will be redistributed back to the Japanese government, depending on how much money these projects have received, as well as other agreement terms.

So far, 14 projects under such a scheme have been registered, and eight of them have been supplied with over 4,000 carbon credits, allowing Vietnam to gain around $40 million.

Tran Quang Bao, deputy head of the Vietnam Administration of Forestry under the Ministry of Agriculture and Rural Development, said negotiations are underway with international partners and organizations regarding the creation of projects involving the carbon market.

For example, localities in the northern parts of central Vietnam, with support from the World Bank, have signed agreements to hand over 10.3 million tons of carbon at $5 per ton.

“We are also creating legal frameworks so that local authorities and forest owners can build projects and negotiate for carbon credit exchanges themselves,” Bao said.

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