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|Vu Trung Kien, director of Tan Nguyen JSC – the builder of the SETS - Smart Emission Trading System|
It is considered a trend to attract green finance inflow to invest in sustainable development, simultaneously contributing to helping Vietnam implement commitments to reduce greenhouse gas (GHG) emissions under the Paris Climate Agreement.
The Ministry of Natural Resources and Environment (MoNRE) is completing a draft decree on GHG reduction and ozone layer protection.
According to the MoNRE, the draft contains a specific roadmap for the research and establishment of a domestic carbon credit market in accordance with Vietnam’s socioeconomic development and international obligations.
As such, large emitters and enterprises are required to invest in deflationary solutions, and the cost is not small. Buying carbon credit is a replacement solution while they complete the upgrade in the manufacturing method, thus the potential for carbon trade exchange is understandable. The draft decree also establishes the timeline that Vietnam will start to take the carbon trade exchange into official operation at the start of 2028. At present, in Vietnam, there are carbon indication tradings but this activity is scattered and lack connections. There is also no fixed framework for the selling price and there are fake credit establishments. Thus, the pilot exchange is expected to create a foundation for establishing an official market and create synchronisation for existing transactions.
According to the plan, at the end of 2021 the exchange will start transactions. During this time, we are advising businesses about the benefits of participating in carbon credit trading. We also update information about the parties that are creating credit indication sources to list on the exchange, and the transactions that they have. During the advising progress, numerous enterprises pay their attention to this exchange and they want to study the benefits more carefully.
It is the trading place between the emission party and the emission reducer via special goods such as credit carbon only, green certificates, and green bonds. If factories or businesses are unable to reduce their emissions or do not comply with the carbon offset and reduction mechanism, they will have to purchase these carbon credits to offset their emissions. The floor will have a measurement and tally system via blockchain for measurement, reporting, and verification applications in the GHG reduction process. Besides that, the floor also makes a spreadsheet system of an individual/household carbon footprint. We will apply two mechanisms that meet global standards. One is the compliance market, which is strictly enforced by the UN’s established standards so far, and the emissions will be verified by senior professionals. The second is the voluntary mechanism, which is simpler and encourages the participation of individuals and households.
The exchange is only the place for transactions, not to register for certification. Our exchange will prioritise credits recognised by state-owned authorities or licensed international organisations. I also do not dare to expect that the project will gather all transactions in Vietnam, but it will contribute to creating a market that makes it easier for buyers and sellers to contact each other.
I think that the government and the MoNRE see the potential of carbon trading exchange. However, in order to realise this model, it needs time to build a completed operation mechanism.
The amended Law on Environmental Protection has regulations on the construction and development of the carbon market, however, it still needs a specific guide via decrees and circulars. The international tools are already available and Vietnam can base on rely on them to build a tool suitable for the domestic market.
Currently, the recognition and issuance of carbon credits are still dependent on third parties such as international organisations. The image of the seller in Vietnam is still quite blurry. Vietnam lacks professionals to help enterprises understand the benefit of creating carbon credit to trade on the exchange. At present, only foreign-invested and domestic large-scale enterprises pay attention to this sector.
In my opinion, it would be better to establish a pilot credit trading exchange as soon as possible because this year Vietnam is starting to implement a commitment to reduce GHG emissions.
Delay in operating a carbon credit trading exchange will make enterprises miss opportunities to enjoy the benefits.