On the first day of COP29, countries took the first important step when agreeing on the carbon generation standards under the Article 6.4 of the Paris Agreement. This promised to boost demand for carbon credits and ensure transparency in the international market, under the UN’s supervision.
The global carbon credit market is growing well. Carbon credits are not only considered a kind of commodity, but also a tool to implement global emission reduction commitments.
The compliance market is where organizations, companies and nations carry out carbon credit transactions based on bilateral agreements or trading floors. Subjects buy carbon credits to meet the carbon emission reduction target, striving for net zero, i.e., the goal they voluntarily declared to reduce their carbon footprint.
The mandatory market is where greenhouse gas emission quotas and carbon credits are traded, so that enterprises can comply with laws on emission reductions.
To date, 48 countries have set up mandatory carbon markets, with carbon tax policies, an effective economic solution for organizations and individuals to take financial responsibility for greenhouse gas they emit.
Carbon credits are traded from $1-2 to $200 per credit, depending on the kind of projects generating carbon credit, the standards, associated benefits, and transaction locations.
Vietnam is among top 5 countries with greatest potential in carbon credits. Vietnam can sell tens of million tons of CO2 in agriculture if it joins the carbon credit market, contributing to the net-zero commitment by 2050.
The Ministry of Agriculture and Rural Development (MARD) is hurriedly working on standards for forest carbon credits, trying to build a legal framework, thus creating favorable conditions to attract investment and operate a domestic carbon credit market.
This will not only help reduce emissions, but also open up opportunities for sustainable development of the forestry economy.
The Ministry of Natural Resources and the Environment (MONRE) has submitted to the government a plan to join the carbon credit market, under which a national carbon credit trading floor will be put into operation.
According to MARD’s former Deputy Minister Ha Cong Tuan, there are five solutions that need to be implemented to join the market.
First, heightening awareness and reaching a consensus on the need to mitigate greenhouse gas emissions, and striving to operate a carbon credit mechanism in the business community and community of people living near forests.
Second, the state executing role of operating the market through a system of policies, including the operation of the national carbon credit trading floor, policies to encourage domestic businesses and the society to contribute to reducing greenhouse gas emissions.
Third, now is the time to think of an independent consultancy and supervision. It won’t succeed if relying on the state. All the stages, from consultancy and measurement to emission supervision must be independent and non-state. It is necessary to use technology as a criterion to obtain international confidence in Vietnam.
Fourth, there should be a national coordination organization which acts as a focal point. It could be MONRE that connects with enterprises which have emissions or absorb large volumes of carbon, and this could create a working group to develop resources, organize data, supervise and carry out public relations.
Fifth, Vietnam must attach much importance to international standards and apply these standards during implementation.
Regarding forest carbon credits, Tuan suggested that MARD, MONRE and Ministry of Finance (MOF) join forces to submit to the government a voluntary carbon credit mechanism for approval, especially for the south central region and Central Highlands.
Nguyen Dinh Tho, Director of the Institute of Strategy and Policy on Natural Resources and Environment, said that Vietnam is being held back due to major bottlenecks in policies and the lack of a clear legal framework.
To make the carbon credit market operate effectively and expand internationally, there must be a clear recognition procedure, he said.
Tam An
