Hanoi (VNS/VNA) -  In light of Vietnam'sprojected generation of approximately 10.8 million voluntary carbon creditsannually, there is a growing demand for efficient exchange and purchasemechanisms, prompting active discussions about the establishment of a domesticcarbon credit exchange.

This initiative aims to boost centralisation, transparency, and overallefficiency in managing related transactions, according to Tang The Cuong, Headof the Department of Climate Change under the Ministry of Natural Resources andEnvironment.

The initiative holds significant importance as it serves as a "greenkey" for Vietnam in achieving its "Net Zero" target andultimately striving for net zero emissions by 2050.

In line with the goal of reaching Net Zero by 2050, the Ministry of NaturalResources and Environment is actively developing a Scheme for the Developmentof a Domestic Carbon Market. This scheme places emphasis on the mandatorytrading of GHG emission quotas for industries and businesses within thedomestic carbon market, while also considering international marketintegration.

The roadmap for this project outlines the commencement of piloting by 2025,with the official operation of a carbon credit exchange by 2028.

Cuong stressed the necessity for thorough preparation in terms ofinfrastructure, techniques, inventory capacity, and corporate reporting tosuccessfully implement the aforementioned plan.

According to statistics, a total of 1,912 enterprises across the country arerequired to conduct greenhouse gas emission inventories and meet specificemission quotas. As a result, the Ministry of Natural Resources and Environmentis set to advise the Prime Minister on approving Vietnam's overall emissionquota for the period 2026-2030 and annually thereafter.

This endeavour reflects the commitment of businesses towards reducinggreenhouse gas emissions, with foreign investors and countries actively seekingcollaboration with Vietnam to implement projects that can generate carboncredits and align with the Paris Agreement on climate change. Such projectsoffer a valuable source of credit for transactions, Cuong said.

According to Nguyen Hong Loan, Head of the Advisory Board for the constructionand operation of the voluntary carbon credit exchange Currently, Vietnam hasfour existing carbon credit mechanisms, including the Clean DevelopmentMechanism (CDM), Joint Credit Mechanism (JCM), Gold Standard (GS), and VerifiedCarbon Mechanism (GCS).

The total number of carbon-related credits issued in Vietnam as of December2022 is about 40 million, with approximately 50 projects seeking issuance ofcarbon credits under the Global Carbon Council (GCC) mechanism. Notably, CDMand JCM are managed by state agencies.

“With the remaining mechanisms, the credit holder bears the responsibility ofreporting to the appropriate management agency for synthesis. The establishmentof a domestic carbon market with an exchange will significantly enhance thecentralisation, transparency, and efficiency of transactions involving carboncredits,” Loan said.

Regarding the roadmap for managing all carbon credits, Nguyen Van Minh, Head ofthe Economic and Information Unit of the Department of Climate Change, saidthat the Ministry of Natural Resources and Environment will soon create anational registration system. Under this system, all businesses andorganisations generating carbon credits in Vietnam will be required to registertheir credits.

Furthermore, any transactions with foreign exchanges must be reported to themanagement agency, the Ministry of Natural Resources and Environment, as suchactivities impact the national emission reduction targets.

Setting clear short-term goals

Nguyen Thuy Hanh, Deputy General Director of Standard Chartered Bank,emphasises that the establishment of a voluntary carbon credit market is acrucial direction for Vietnam to achieve its ambitious net zero emissionstarget by 2050.

Vietnam's potential as a developing market is evident, but to attract ForeignDirect Investment (FDI) capital, Vietnamese enterprises and their supply chainsmust embrace a green and sustainable approach.

From a banking perspective, Hanh highlights that they are committed toproviding sustainable development products and services while offering freeadvice to businesses with new investments or plans to reduce emissions.

The global demand for voluntary carbon credits has been surging, and Vietnam isno exception to this trend. In Vietnam, carbon credit projects arepredominantly implemented through pre-purchase contracts, where the party inneed places an order.

Drawing from Singapore's experience in building and operating a carbon creditexchange, Mark Glossoti, Chief Operating Officer at Climate Impact X, advises Vietnamto establish clear short, medium, and long-term goals. While these targets mayneed adjustment due to market uncertainty, taking the initial steps isessential, he said.

Furthermore, Glossoti stresses the importance of anticipating the developmentof the carbon market over time and allocating necessary resources forestablishing the exchange.

Recent developments show that Prime Minister Pham Minh Chinh has requested theMinistry of Finance and the Ministry of Natural Resources and Environment todevelop a decree on carbon credit management, to be submitted to the Governmentin the second quarter of 2024.

Additionally, the Ministry of Natural Resources and Environment has beenassigned to lead and collaborate with the Ministry of Agriculture and RuralDevelopment and other relevant agencies to seek insights from other countries'experiences./.