Unlocking Vietnam’s Carbon Credit Market Potential

Vietnam has significant potential to grow its carbon credit market, especially as the global shift towards green transition and emission reduction to combat climate change gains momentum. To seize the opportunities presented by the development of the carbon credit market, businesses will need to overcome several challenges, starting with meeting international standards…

Developing the carbon credit market in Vietnam

According to assessments by both local and international experts, Vietnam holds great potential for carbon credit projects spanning various sectors such as forestry, agriculture, and clean water. Not only does Vietnam possess substantial potential, but its carbon credit market also enjoys favourable conditions for development. This opportunity arises from the ongoing global trend of emission reduction and green transition, driven by governments. Amidst this green transition, many businesses have committed to and outlined plans for emission reduction, aiming for carbon neutrality. The substantial demand for carbon credits sets a highly favourable stage for developing the carbon market in Vietnam.

Governments’ commitment to Net Zero at COP26 is considered a driving force for the carbon credit market (Image illustration)

Challenges for businesses in the carbon credit market

As many countries, including Vietnam, are strongly committed to reducing emissions and Net-Zero goals by the mid-21st century, various plans and solutions are actively being implemented to achieve these goals, and the importance of carbon credits is growing.a

For organizations and businesses, carbon credits are more than just a measurement system; they are a solution to meet emission standards and contribute to environmental commitments. This is why the global carbon market is vibrant, with the participation of many major corporations setting targets for net-zero emissions and closely tracking global climate goals. In the green transition trend, the number of businesses aiming to reduce emissions in scopes 1, 2, and 3 is increasing. This group represents potential customers purchasing Vietnam’s carbon credits and renewable energy certificates (RECs). Additionally, international entities such as banks, investment funds, and global cooperation funds… are expected to participate in this market.

Emission scope of each organization, enterprise

The Taskforce on Scaling Voluntary Carbon Markets (TSVCM) estimates that the demand for carbon credits could increase by more than 15 times by 2030 and up to 100 times by 2050. By 2030, the carbon credit market could be worth over $50 billion USD, presenting a significant opportunity for the Vietnamese carbon credit market and businesses participating in it.

Currently, there are about 300 methodologies with 27 carbon standards worldwide. Notable ones include the UNFCCC (United Nations Framework Convention on Climate Change), the Verified Carbon Standard (VCS) approved by VERRA, and the Gold Standard. While this diversity is advantageous, it poses challenges, especially for new market entrants. Businesses must delve into the details of standards, suitable methodologies for project registration, and the best implementation method. For example, companies must consider four criteria when registering a project with UNFCCC: real & measurable; permanent & not reversed; additional, independently verified. Of particular importance is additionality, implying that carbon credits serve as a financial mechanism to promote emission reductions. Without this mechanism, financial barriers may hinder emission reduction activities.

Successful project certification and favorable pricing are only possible when meeting standards through appropriate methodologies. Understanding project implementation is crucial for proactive project registration, optimizing costs during the certification issuance process. Therefore, it is imperative to successfully enhance businesses’ awareness of carbon credits and the carbon credit market, registration procedures, and project implementation methodologies to issue certificates at favorable prices based on international standards.

Mr. An, Pham Dang

Deputy General Director Vu Phong Energy Group, Director of Carbon Solutions VP

(Source: Saigon Entrepreneur Newspaper/Vietnamese: báo Doanh nhân Sài Gòn)

Vu Phong Energy Group

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