Carbon credit trading is emerging as a leading sustainable development strategy globally. While Vietnam’s carbon credit market is still young, it holds promising growth potential.
In the global context moving towards the Net zero goal, many organizations and businesses are strategizing and dedicating resources to the carbon credit market.
Vietnam is implementing green economic programs, aiming for a circular economy and committing to achieving net zero emissions by 2050. Therefore, building and implementing greenhouse gas emission reduction plans across various sectors and developing carbon supply chains are essential. This is also a practical step for Vietnam to achieve sustainable digital transformation goals.
Understanding the Carbon Credit Trading Market
To define the carbon emission reduction trading market correctly, it is essential first to understand the concept of carbon credits. Carbon credits are tradable certificates representing the right to emit a certain amount of CO2 or other greenhouse gasses equivalent to CO2. One credit equals one ton of CO2 or its equivalent.
The carbon market originated from the Kyoto Protocol of the United Nations Framework Convention on Climate Change, adopted in 1997. Under this agreement, countries with surplus emissions rights can buy or sell them to countries with higher or lower emission commitments. This created a new commodity called carbon credits, representing emission reductions or greenhouse gas absorptions.
Globally, the carbon credit trading market has significantly developed in recent years. This new business model reached a record high of over $948 billion in 2023, a 2% increase from the previous year. Many countries and regions worldwide have implemented emission trading systems (ETS) to price carbon emissions and encourage companies to invest in carbon emission reduction technologies, helping to achieve climate change and sustainable development goals.
Meanwhile, research by Markets and Markets shows that the Asia-Pacific carbon market is predicted to grow the fastest during 2023-2028, led by China. For Vietnam, carbon credit commercialization has also been implemented, with positive developments observed to date.
Initial Results of Carbon Business in Vietnam
The Ministry of Agriculture and Rural Development of Vietnam has stated that carbon credit trading is gaining popularity worldwide and is being favored by many countries. A recent study has shown that to reach the climate change objectives, emissions must be decreased by 43% by 2030. Investing in clean technology is considered the most significant factor in achieving this goal.
In recent years, China has been focusing on research and development of clean technologies such as batteries, solar energy, and wind power. Many other countries worldwide are also promoting the development of green industries, seen as a future pillar, such as the United States, the world’s leading exporter of electric vehicles.
While the carbon market in Vietnam is still relatively new and undergoing refinement, the country is evaluated to have significant potential in supplying carbon credits to the international market.
In practice, Vietnam has successfully conducted carbon credit transactions in recent years, earning approximately $60 million. Pioneering sectors in this green product trading activity include agriculture and forestry.
Carbon Credit Trading in the Agricultural Sector
The agricultural sector has achieved impressive results in carbon credit transactions, such as the Vietnam Livestock Biogas Program, implemented in 53 provinces nationwide. This program has been highly regarded internationally for its greenhouse gas emission reduction efforts. As a result, Vietnam has sold over 3 million carbon credits, earning over $8 million and benefiting 1 million people in rural areas.
Mr. Le Hoang The, Director of The VOS Eco-System Co., Ltd., noted that Vietnam is one of the leading countries in carbon emission growth rate. In 2022, Vietnam ranked among the top 20 countries with the highest CO2 emissions, with a growth rate of 57,3% from 2010 to 2022. This achievable result for a new market like Vietnam demonstrates the abundant potential for carbon credit supply in our country.
The active participation in greenhouse gas emission reduction trading of forestry sector
In the forestry sector, carbon credit trading has also yielded impressive results. At the end of March, Vietnam became the first country in the Asia-Pacific region to receive a payment of $51,5 million (about 1,200 billion VND) from the World Bank for selling over 10 million forest carbon credits. This demonstrates positive progress in carbon credit commercialization in Vietnam.
Moreover, the Ministry of Agriculture and Rural Development is in the final stages of negotiating the transfer of 5,15 million forest carbon credits in 11 provinces in the South Central and Central Highlands regions for the period 2022-2026 to the LEAF/Emergent organization at a minimum price of $10 per ton of CO2. This further confirms the bright prospects of the carbon market in the forestry sector in Vietnam.
Conclusion
The global carbon market is vibrant, with many large corporations working towards achieving net zero emissions to adhere closely to global climate goals.
Vietnam’s carbon market is currently in the process of piloting mechanisms in 2025 and is expected to operate officially from 2028. Enterprises expect that the opening up of legal pathways will help energize this billion-dollar market, with many industries benefiting from carbon credit sales.
Many experts believe that Vietnam’s carbon market will undoubtedly become increasingly dynamic with strong growth potential. This market not only helps Vietnam achieve climate goals and energy security but also contributes to the sustainable development of the national economy.
Source: Compiled
