Introduction

The Ministry of Finance of Vietnam hosted a seminar on 19 October 2023 to kick off a project that was an essential step in the development of a carbon credit trading market in the nation. The initiative, with significant potential to benefit both the environment and the economy, stands ready to revolutionise Vietnam's stance on carbon emissions and sustainability.

Current carbon credit landscape

Vietnam's carbon credits are not currently protected by a clear legal framework, and they are not widely recognized globally. The question of ownership rights is another significant barrier, as it is not apparent if carbon credits belong to the government, the project owner, or the landowner.

References to carbon credits and the carbon credit market were introduced into the Environmental Protection Law in 2020. On 7 January 2022 Decree No. 06/2022/ND-CP, which defines rules for the reduction of greenhouse gas emissions and the protection of the ozone layer, was subsequently issued by the government. Accordingly, articles 91 (Reduction of Greenhouse Gas Emissions), 92 (Protection of the Ozone Layer) and 139 (Establishment and Development of Carbon Markets) of the 2020 Law on Environmental Protection are covered in depth by this Decree.

The Decree further states that the official opening of the business market for carbon credits is expected for 2028 after a period of trial activities. On the same day, the MONRE also published Circular No. 01/2022/TT-BTNMT outlining the application of the Law on Environmental Protection.

According to article 16 of Decree 06, subjects participating in the carbon market include:

- establishments on the list of sectors and facilities emitting greenhouse gas (GHG), which must make an inventory of GHG promulgated by the prime minister;

- organisations participating in domestic and international carbon exchange and offsetting mechanisms; and

- other organisations and individuals relevant to investment in and trading of GHG emission quotas and carbon credits on the carbon market.

There are two major phases in the carbon market's proposed development path. The first phase, which will last until the end of 2027, will be centered on a number of important activities. This involves:

- the creation of rules governing the management of carbon credits;

- the trading of GHG emission quotas;

- carbon credits; and

- the creation of operating standards for the carbon trading (CTX).

Along with guidance for both domestic and international carbon exchange and offsetting mechanisms that is in line with current laws and international agreements, this phase will also include pilot programmes to evaluate carbon exchange and offsetting systems across possible industries. Additionally, trial operations for the CTX will begin in 2025. Additionally, efforts will be made to build capacity and spread knowledge regarding the growth of the carbon market.

The CTX's official operation will then start in 2028 along with rules governing carbon credit connectivity and exchanges within national, regional and international carbon markets. This thorough road map lays out the steps needed for Vietnam to develop a thriving carbon market.

Just Energy Transformation Program

Vietnam, together with Indonesia and Brazil, stands among the five nations that have reaped the rewards of the Just Energy Transformation Program (JETP). This programme is dedicated to converting fossil fuel-based power plants into renewable energy sources, consequently producing carbon credits. The effective execution of the JETP initiative is poised to make a substantial contribution to the expansion of Vietnam's carbon credit market.

The JETP was officially unveiled in December 2022. This partnership is geared towards providing financial support, technology, capacity enhancement and aiding in the enhancement of policies and regulations in Vietnam, with the ultimate aim of boosting private investments in renewable energy. The initial fund allocated for the programme's first three to five years amounts to $15.5 billion. It is anticipated that Vietnam will release its JETP Resource Mobilization Plan (JETP – RMP) by November 2023.

Interest from various sectors

The recent seminar organised by the Ministry of Finance has garnered significant interest from various stakeholders. Investment funds, renewable energy developers and advisory firms were among the attendees. These diverse groups recognise the immense potential of the carbon credit trading market and the positive impact it can have on Vietnam's sustainability efforts.

Role of advisory firms

Advisory firms hold a crucial position in this burgeoning market. They require a well-defined legal framework to evaluate existing carbon credit holdings, ensuring their compliance with European standards, thus making them eligible for international trading. This transparency will not only be advantageous for current carbon credit holders but also foster the entry of new participants into the market.

Comment

Vietnam's launch of a carbon credit trading market represents a giant leap toward a sustainable and environmentally friendly future, not merely a step in the right direction. Vietnam is expected to emerge as a major participant in the global carbon credit market as the legal framework takes shape and conformity with international norms is attained.

Vietnam's establishment of a market for selling carbon credits is a momentous breakthrough that has enormous promise for both economic expansion and environmental sustainability. Vietnam is well-positioned to establish a successful carbon credit market that adheres to international norms and contributes to a greener, more sustainable future as it adapts and learns from the experiences of other nations.