Pooling all efforts for the carbon market

March 02, 2021 | 12:13
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The prime minister has assigned relevant ministries and agencies to compile a draft regulation introducing the forest environment and CO2 indexes in accordance with the regulation that localities developing industrial projects and emitting CO2 will be charged based on their forest environment index. Prof. Pham Van Dien, deputy director general of the Vietnam Administration of Forestry (VNFOREST), told VIR’s Kim Oanh about the principles these indexes need to incorporate and how they will help build out the carbon market in Vietnam.

What are the principles to build forest environment and CO2 indexes?

pooling all efforts for the carbon market
Prof. Pham Van Dien, deputy director general of the Vietnam Administration of Forestry (VNFOREST)

The forest environment index would be a measure of the capacity to decrease CO2 emissions while simultaneously increasing absorption. A key part of this is forest carbon stock, the amount of carbon that has been sequestered from the atmosphere and is stored within the forest ecosystem.

Comparing the forest environment index with actual emissions will help set payments for reducing emissions and establish a market for international emissions trading for sellers, buyers, and intermediaries alike.

Regarding the CO2 index, I believe there are two theoretical avenues that can be taken. The index can either concern the carbon emissions of each facility separately, with the upper limit being the emissions quota allotted for them, or look at the net emissions of the entire market and carbon credit created by the decreases in emissions and increased absorption capacity achieved by managing the ecosystem.

At the same time, the two indicators need to be built with a mind to ensure economic growth while promoting forest protection, benefiting buyers, sellers, and farmers alike.

How will these indices promote carbon trading?

They will be the basic building bricks to developing the domestic carbon market, making it possible to exchange carbon credit within the bounds of domestic regulations and international commitments. Reduction targets are forecast to drive carbon credit supply below demand, making the market more animated.

The forest environment and CO2 indexes will motivate provinces to better manage their forests, while manufactures with net emissions will be encouraged to upgrade technology and switch to renewable energy to stay within their allotted quotas and avoid charges.

What can Vietnam learn from the experience of other countries in managing carbon emission?

Vietnam has been a proactive proponent of emissions reduction, joining the United Nations Environment Programme, including the United Nations Framework Convention on Climate Change, the Kyoto Protocol, the UN-REDD+ programme, and the Paris Agreement. Throughout these almost 20 years, we collected a great deal of international experience and adjust to suit the country’s realities.

VNFOREST has been working to internalise these international experiences and submitted regulations on the domestic and international transferring of carbon credit and the accompanying financial management mechanisms to the prime minister. The most urgent tasks at present are implementing policies to meet the demand.

What difficulties does Vietnam face in creating the indexes as well as developing the carbon market?

There is a tough road ahead of Vietnam. The first issue to tackle will be the creation of convincing regulations relating to the exchange of carbon credit and associated compensation issues. These regulations must be clear, realistic, and be rooted in a scientific basis.

Another problem is the allocation of emissions quotas would require realistic figures about the actual emissions of each facility, which at the moment are not shared or are only available in abridged forms that have been heavily interfered with.

At the same time, completeness, timeliness, openness, and transparency in implementation are of the essence. For this, a contingent of qualified, well-trained human resources, facilities, and equipment are required.

What proposals has VNFOREST submitted to advise the creation of these indexes?

After receiving the assignment of the prime minister, we began to compile a set of considerations we believed would be crucial. However, we have to pool our proposals with those of the ministries and other agencies to arrive at a workable document.

In my opinion, before officially rolling out regulations, the government should authorise the selling of carbon credits on a case-by-case basis as it will not only benefit forests but also help Vietnam accumulate experiences even before the legal framework is completed.

What potential do you see in carbon trading as a business, and what is VNFOREST doing to promote this potential?

One example for the potential is the Emission Reductions Payment Agreement signed between the Ministry of Agriculture and Rural Development and the World Bank’s Forest Carbon Partnership Facility (FCPF). Under the agreement, Vietnam will reduce 10.3 million tonnes of CO2 emissions from six north-central provinces.

If Vietnam implements this programme successfully, it could reduce emissions by a total of 24.6 million tonnes by 2025. After reducing the 10.3 million tonnes committed under the FCPF, the country can earn an additional $71.3 million by selling the carbon credit gained from the remaining 14.3 million tonnes for $5 per tonne (the average global selling price).

However, this is only part of the potential benefits because the project is implemented only in six north-central provinces – there would be far more to gain if it was extended to the entire country.

In addition, Vietnam has failed to reach the revenue target from forest environment services outlined in its national forestry development strategy for the period of 2006-2020. VNFOREST is still working to realise the full potential of this service segment.

VNFOREST is promptly completing the national forestry development master plan for 2021-2030 with a vision to 2045 to submit it to the government for approval, along with the public investment programme on sustainable forestry development for 2021-2025.

Besides that, the country will develop forest environment services, diversifying income sources, with the expectation to acquire VND3.5 trillion ($152.17 million) a year from the field by 2030.

By Kim Oanh

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