The role of carbon pricing, market-based instruments, and nationally determined contribution implementation and application in Vietnam
Host: Ministry of Natural Resources and Environment
Time: 8am, June 25, 2020
Location: Flamingo Hotel, Dai Lai, Phuc Yen, Vinh Phuc
Content: Policies related to the system of exchanging quotas on greenhouse gas emissions and carbon credits, carbon pricing tools through the research results of the VNPMR project to serve the state management of the carbon market in Vietnam
- Objectives, progress and initial results of the Vietnam Partnership for Market Readiness (VNPMR)
- World Bank activities to promote carbon pricing and market based instruments (MBI)
- Role of carbon pricing and MBI in Vietnam’s policies on reducing greenhouse gas (GHG) emissions
- Role of private sector in application of carbon pricing tools in Vietnam
- Financial mechanism in activities reducing GHG towards application of carbon pricing tools in Vietnam
- Potential of GHG in producing steel and applicability of carbon pricing tools in Vietnam
- Potential of reducing GHG in solid waste sector.
VNPMR managed by World Bank
- Enhance capacity of building carbon pricing methods through MBI; and
- Pilot selected market-based instruments to create background for piloting and implementing MBI in the selected fields of steel and solid waste.
As a country heavily suffering from climate change and discharging over 120 million tonnes of solid waste per year, along with its infamous traffic jams, Vietnam has been regulating varying policies along with striving to build a carbon crediting market, in an attempt to cut emissions along with global wishes.
So far, Vietnam has developed a portfolio for a strong clean development mechanism (CDM) and established a functioning governance framework from a very early stage.
Under the Kyoto Protocol’s definitions, the CDM allows a country with a greenhouse gas (GHG) emission-reduction or emission-limitation commitment to implement an related project in developing countries like Vietnam. Such projects can earn saleable Certified Emissions Reduction (CER) credits, each equivalent to one tonne of CO2 which can be counted towards meeting the Kyoto targets.
While CDM projects play an important role in sustainable socio-economic development as well as in environmental protection, they are still relatively new to Vietnam.
CDMs exist to help developed countries achieve their climate commitments while assisting developing countries in achieving sustainable development. However, nations have thus far struggled to update rules for a new international carbon trading system under the Paris Agreement on climate change.
According to the Ministry of Natural Resources and Environment (MoNRE), Vietnam boasts great potential for developing CDM projects in at least 15 sectors. These include improving energy efficiency, exploitation and application of renewable energy sources, forestation and reforestation, change from the use of fossil fuels to reduce greenhouse gas emissions, recovery of methane from garbage landfills and coal mining pits for disposal or for power generation or daily-life use, recovery and use of associated gas from oil fields, and more besides.
Investors from any economic sector which brings about GHG emissions reductions are permitted to invest in a CDM project. So far the country has hosted over 255 CDM projects and 10 CDM programmes of activities registered by the CDM Executive Board.
Dr. Oliver Massmann, general director at Duane Morris Vietnam LLC, said that the country has more chances to join the global CDM market but the highest challenge it faces is to make actual CDM ideas economically feasible.
“Over the last few years, Vietnam has made the transition from a predominantly agricultural to a mixed economy with considerable advancement of commercial and mechanical exercises. Fast development of people’s lives, in conjunction with the government’s exertion regarding accessing electricity nationwide, have increased the demand for power,” he said.
“This presently postures a major challenge for Vietnam to preserve supported development of the control segment and to realise vitality security.”
According to Massmann, while Vietnam’s power demand is increasing exponentially, application of CDM in the renewable energy sector will help handle challenges of climate change. Thus far, solid waste and the steel sector are the two piloted fields for Vietnam joining the carbon market.
Vu Ngoc Anh, director of the Science Technology and Environment Department under the Ministry of Construction, said currently there are about 660 solid waste dumping sites with an area of at least one hectare, only 130 of which are hygienic.
Most household solid waste is used to make compost, or is buried or burned – a method of handling waste that creates the largest amount of GHG emissions.
“The target through the Partnership for Market Readiness (PMR) trust fund is reducing GHG in a way that is suitable with carbon crediting in solid waste management,” Anh said. “Along with that, market instruments in solid waste management will begin to be applied after 2020.”
Meanwhile, data from the Vietnam Steel Association shows that the sector is a power-intensive one. Currently, the whole sector consumes over 6,500 tonnes of oil equivalent per year, which can be reduced drastically thanks to renovating technologies that help to effectively save energy. The association has suggested that enterprises enhance management solutions to reduce power energy, particularly in regards to electricity.
According to the Paris Agreement, Vietnam commits to reducing at least 8 per cent of GHG emissions by 2030, and up to 25 per cent if it receives effective support from the international community.
Tang The Cuong, director of the Climate Change Department under the MoNRE, asserted that being aware of carbon pricing as an effective tool, Vietnam had participated in the PMR at the beginning of the programme. The results of co-operation with trust fund are currently being further developed and improved.
“As a country receiving technical assistance from the PMR, Vietnam not only receives direct benefits through capacity building, but also has the opportunity to participate in a forum to share knowledge and experiences from many countries,” he said.
Related projects focus on studying policies, mechanism promoting activities, and building Nationally Appropriate Mitigation Action policies for both the steel industry and solid waste, in which carbon pricing is an instrument that captures the external costs that the public pays for.
The World Bank admitted that the future of the carbon market is very complicated. For developing countries like Vietnam, joining the market is not only lining up with the world’s target of reducing GHG but also creating income and receiving modern technologies with fewer carbon emissions.
Besides this, the bank says, if developing countries including Vietnam cannot harmonise state policy with international policy, they will not be able to overcome barriers of finance and technologies in the process of participating in a low carbon market.
Most important CDM-registered project types in Vietnam
- Hydropower: The most common CDM projects in Vietnam. Validation risks are named as medium and verification risks are low. However, these projects often face a long construction period and numerous delays.
- Wastewater used to generate energy: Risk of validation is low to medium and construction time is low, often less than one year.
- Other renewable energy types: wind has high potential. So far, two CDM projects have been registered. Bio-energy projects also have high potential. Risks of validation and verification are low to medium, but there can be a long construction period.
- Municipal solid waste treatment: There are only a few projects so far, but there is high potential for composting. Risks of validation are low to medium, while there are medium risks of verification and can be medium-term period of construction.