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Vietnam: Opportunities in the market for carbon credits

In the coming years, the successful applications of carbon credit programmes in Vietnam will open doors to unlimited opportunities for the locals and a more sustainable future.

Vietnam's advantages in carbon credits

In Vietnam, with 14.7 million hectares of forest, of which more than 10 million are natural forests, the rest are planted forests, and the forest cover is quite high compared to the world, about 42%, while the world average is about 31%. Therefore, it is estimated that 57 million carbon credits can be sold to international organisations from the Vietnam's forestry industry, with the transfer price of 5 USD/ton of carbon, Vietnam can earn 200 million USD/year. Because of that potential, the Government has issued Decree 156 detailing carbon sequestration services to promote the market for transactions, exchange and purchase of carbon credits.

For example, Gia Lai province has a large area of planted forests, many of which have been certified by the World Forest Management Council (FSC), so there are great opportunities to expand the forest resources to meet the carbon market in the future. Currently, with 723 thousand hectares of forest, Gia Lai's forest carbon reserves are very high, reaching over 150 tons/ha, estimated at 50 million tons in total. If the deal is at the equivalent price of about 5 - 10 USD/ton, the revenue will be 25 - 50 million USD or higher. This financial source will directly contribute to the protection and sustainable development of forests, improve the lives of forest people, remove difficulties for forest management boards, reduce investment from the state budget in forestry.

Or in Quang Nam, with an area of nearly 500,000 hectares of forest, and a coverage of more than 60%, on average, the local forests will generate 1 million carbon credits per year. If the programme is successful, Quang Nam can earn over 100 billion VND, which is much larger than the existing revenue from forest environmental services. If forest carbon credits are commercialised, within the next 10 years, Quang Nam's natural forest area will increase by 20%, contributing to the country's overall emission reduction target.

A number of ongoing projects

In order to solve the environmental problems arising from the sugar factory and to be partially self-sufficient in production power, to reduce pressure on the national power system, Lam Son Sugar Joint Stock Company (Lasuco) has invested in a project to generate heat - electricity from bagasse. The project has a capacity of 33.5 MW, 50% of the generated electricity is used for Lasuco's sugar factory, the remaining 50% is sold to Vietnam Electricity. With the construction of this co-generation plant, Lasuco is estimated to save about 69,570 MWh annually, reducing emissions by about 31,706 tons of CO2. With this project, Lasuco has been granted a carbon credit transaction certificate since 2012 at a price of 7.8 euros (US$9) per ton of CO2 under the clean development mechanism (CDM), thus, within 20 years, from 2012-2032, each year Lasuco will have about 10 billion VND more from carbon credit transactions.

Similarly, Nghe A Sugarcane Company Limited (NASU) has also installed a boiler system to generate electricity from burning bagasse for production. At NASU, the boiler capacity is 175 tons of steam/hour, and the power generation efficiency is 10 MW, of which, 50% of the generated electricity is used for NASU's sugar factory, and the remaining 50% is sold to Vietnam Electricity. Since using bagasse to produce electricity, NASU's average power production is 30.7 KWh/ton of sugarcane. In the sugarcane pressing season in 2020-2021, NASU produced more than 15 million KWh of electricity, sold more than 5 million KWh to EVN, hence increasing the revenue from 10 to 12 billion VND/crop. In addition, the business does not have to pay the cost of hiring contractors to handle excess bagasse as before.

Besides, Vietnam has other similar projects being implemented. The wind power plant in Bac Lieu province with a total capacity of 99.2 MW is estimated to have emission reductions of about 143,761 tons of CO2 per year. Nam Pia hydropower project (Son La province) with a total capacity of 15 MW, is estimated to reduce emissions by 30,780 tons of CO2 per year. Vietstar urban waste treatment project is estimated to reduce emissions by 181,492 tons of CO2 per year.

Legal framework for forest carbon credit market in Vietnam

According to the latest information from the Department of Forestry, the Ministry of Agriculture and Rural Development has completed the construction of a carbon transfer mechanism and submitted to the Government in the draft Decree amending and supplementing Decree 156. This decision will be the legal basis for Vietnam to sell forest carbon credits. In the draft Decree amending and supplementing a number of articles of Decree No. 156 submitted to the Government, a separate article 72a is added detailing the pilot payment for forest carbon sequestration and storage services, which is the full legal basis for the transaction of forest carbon credits in Vietnam.

In the draft Decree, it is clear that the forest carbon right is the right to buy, sell, transfer, supply, and cooperate with organisations and individuals at home and abroad and benefit from emission reduction results. These new regulations are built in the direction of carbon exchange in the voluntary market, in accordance with the common international approach.

As the forest carbon credit market is still in the early stages of development in Vietnam with complications, it is important for sectors to conserve and restore the lost forest area in order to increase the forest carbon stock in the area, at the same time, expanding the forest area, attracting investment resources for the management, protection and development of forests in the locality, contributing to improving the lives and livelihoods of people who depend on the local forests.

Source: the Internet



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