Vietnam leaps on carbon credit craze

Vietnam leaps on carbon credit craze

The south-central province of Quang Nam has been waiting for the government to approve a pilot project on reducing emissions from deforestation and forest degradation and on selling carbon credits to the international market.

“Quang Nam has 628,000 hectares of natural forest, which has the capacity to absorb one million tonnes of CO2 per year. The province is expected to sell CO2 credits for $30 million by 2025,” said Le Minh Hung, director of Quang Nam Department of Agriculture and Rural Development.

Hung is also director of the Management Board of the Truong Son Xanh forest-planting project.

“Although five groups from the United Kingdom, Italy, and the United States wish to purchase carbon credits from the Truong Son Xanh project, we have to wait for government approval. I think the prime minister’s instruction to build a policy is convenient. However, it will still take a long time from building the policy to implementing the project. So, we still expect to receive the government’s special mechanism,” Hung said.

This year is the first that Vietnam will receive payment under the Emission Reductions Payment Agreement (ERPA) signed by the Ministry of Agriculture and Rural Development (MARD) and the World Bank’s Forest Carbon Partnership Facility (FCPF) in late October last year.

According to the agreement, Vietnam is expected to reduce 10.3 million tonnes of carbon dioxide emissions from the six central provinces of Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, and Thua Thien-Hue to receive $51.5 million from the FCPF.

The fund to serve for emission reduction payment worldwide is estimated at $1.3 billion. Vietnam is the first country in Asia-Pacific and fifth globally to reach such a milestone agreement with the FCPF.

Nguyen Dinh Dai, chief of the Medical Committee Netherlands-Vietnam in Central Vietnam, told VIR that it has facilitated smallholder forest owners of log-wood acacia plantations and community natural forest owners in preparing the dossier to access ERPA payments. This is being carried out through the PROSPER sustainable forest management initiative in Quang Tri, funded by the Medical Committee Netherlands-Vietnam and the European Union.

“If the payment mechanism is successful, I hope it will be extended nationwide, leading to encouraging sustainable forest management and development,” Dai said. “The programme marks the beginning of a new chapter for the country to continue to apply new and significant policies for forest protection and improved management.”

Exploring carbon credit trade

According to the calculations of the Vietnam Administration of Forestry (VAF) under the MARD, the country could reduce total carbon dioxide emissions by 24.6 million tonnes by 2025. After reducing 10.3 million tonnes committed with the FCPF, Vietnam can acquire additional tens of millions in US dollars from selling carbon credits of the remainder to partners for the global average of $5 per tonne of CO2.

The purchase should become easier after Prime Minister Nguyen Xuan Phuc in December assigned the MARD, in collaboration with the Ministry of Natural Resources and Environment (MoNRE) and relevant agencies, to build a policy to apply the forest environment and CO2 indexes in accordance with regulations.

A survey by the Department of Energy Efficiency and Sustainable Development under the Ministry of Industry and Trade showed that in order to manufacture 10 million tonnes of steel, factories will emit 21 million tonnes of CO2.

The CO2 emissions in the industry are forecast to reach 122.5 million tonnes by 2025 and increase to 133 million tonnes by 2030, accounting for 17 per cent of the whole country’s total. The major reason is the use of fossil fuels for production.

A report from the MoNRE also showed that total solid waste discharged to the environment is on average 12 million tonnes per year, 90 per cent of which is treated. Meanwhile, total greenhouse gas (GHG) emissions generated from the landfill of solid waste increased from 6.5 million tonnes of CO2 in 2014 to 8.1 million tonnes in 2017. It was estimated to hit around 10 million tonnes in 2020.

According to Pham Van Dien, deputy director general of the VAF, the potential in carbon credits is within reach, but it is necessary to have an official specific guide from the government to determine emissions reduction quotas.

In addition, policy is also required so that localities with low emissions can receive financial support from localities with large volumes.

Potential land

Under the Kyoto Protocol’s definitions, the clean development mechanism (CDM) allows a country with a GHG-reduction or emission-limitation commitment to implement an emission-reduction project in developing countries like Vietnam. Such projects can earn saleable certified emission reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto targets.

According to the MARD, Vietnam’s forests can help lessen GHG emissions and cope with climate change via their big CO2-absorbing capacity.

A number of local and foreign enterprises have already sniffed out CER opportunities in Vietnam, through forest plantation in particular. Many other CDM projects can be seen in Vietnam in various sectors such as renewable energy, waste management, chemicals, construction, transport, and agriculture.

For instance, Hanoi has a project to recover and use discharged gas at the Nam Son waste treatment complex, which was Vietnam’s CDM-related environment project, was constructed in 2009 by PIJ-LFGC Vietnam, a Malaysian-Canadian joint venture company. This $7.5 million project, producing electricity from discharged gas, particularly methane, was implemented within 2009-2016, with a collected volume of about 2.3 million tonnes of CO2. Hanoi received 10 per cent of total revenues gained from the project’s CERs and electricity sales.

As Vietnam has yet to be obliged to reduce GHG emissions under the Kyoto Protocol, the CDM opens new opportunities for local companies and agencies to sell credits earned from actively cutting down emissions to potential buyers coming from developed economies.

According to the MoNRE’s Agency for Meteorology Hydrology and Climate Change (AMHCC), Vietnam’s CDM project types include dumping ground gas recovery (7 per cent), methane recovery (27 per cent), afforestation and reforestation (4 per cent), wind power (4 per cent), hydroelectricity (54 per cent), and others (4 per cent).

Vietnam ranks 11th and eighth in the world in terms of registered CDM projects and CERs, respectively. However, foreign investors also face with some difficulties when seeking local partners with sturdy capital contributions.

“Most local companies are small- and medium-sized ones, with limited understanding about CDM projects. Meanwhile, foreign companies want to cooperate with major local ones so that they can reap big profits and many credits,” said an AMHCC expert.