Building a transparent and efficient carbon market

With the goal of achieving net zero emissions by 2050 as committed at the COP26 Conference in 2021, the carbon credit market is a key policy tool to help promote market-based greenhouse gas emission reduction.

The large timber plantation model brings economic efficiency to people in Minh Thanh commune, Tuyen Quang province. (Photo: NGO HUNG)

However, in order to participate in the carbon market sustainably and effectively, relevant agencies need to promptly promote and implement plans, solutions, and related legal frameworks.

There are still many challenges.

The carbon credit market plays an important role in supporting Vietnam to minimize greenhouse gas emissions, contributing to the global effort to combat climate change. Participating in the carbon credit market not only helps reduce the cost of complying with environmental regulations, but also facilitates the sustainable development of the economy.

The Vietnamese Government has made important progress in developing and perfecting the legal framework for the carbon credit market, such as the Law on Environmental Protection 2020, Decree No. 06/2022/ND-CP and Circular No. 17/2022/TT-BTNMT of the Ministry of Natural Resources and Environment (formerly) regulating the techniques for measuring, reporting, verifying greenhouse gas emission reduction and greenhouse gas inventory in the waste management sector, which are typical examples.

The establishment of these legal frameworks not only facilitates businesses to participate in the carbon credit market but also contributes to ensuring the transparency and efficiency of the market.

In reality, although there is great potential for developing the carbon market and the legal framework for this activity is gradually being completed, the development of the carbon credit market in Vietnam still faces many challenges.

According to Dr. Bui Thi Hoang Lan, National Economics University, one of the reasons for the above situation is primarily because carbon credits are still a new market in Vietnam, the legal framework is not yet complete and the standards are unclear.

Therefore, the legal framework for this market has not kept up with reality; detailed regulations on transactions, carbon credit pricing and handling of violations are still not comprehensive and specific.

Second, the human resources for the carbon market are still quite thin. Currently, the quantity and quality of human resources knowledgeable about carbon project development and credit appraisal are still lacking, which is also a challenging problem for a developing country like Vietnam when participating in the global carbon credit market.

Third, the measurement, reporting and verification (MRV) system is still in its infancy and does not meet the accuracy and transparency requirements to gain international recognition, making it difficult to monitor and verify emissions. The lack of technical infrastructure, appropriate human resources and MRV operating policies is a major barrier to the effective implementation of carbon markets.

Analyzing the current status of building a legal framework for the carbon credit market in Vietnam, Dr. Thai Thi Thanh Minh, Hanoi University of Natural Resources and Environment, said that Decree No. 06/2022/ND-CP of the Government regulating the reduction of greenhouse gas emissions, protecting the ozone layer and related documents are only a framework, without detailed regulations on the transaction, payment, dispute resolution mechanisms and especially the domestic carbon credit market pricing mechanism, leading to uncertainty for investors.

In addition, ownership of the forest carbon credit market (REDD+) and carbon sequestration projects remains unclear, especially the relationship between the State, forest owners/project owners and buyers, making it difficult to sign long-term contracts.

Along with that, the quality of emission data at many enterprises is not consistent; domestic appraisal organizations have not met the quantity and quality standards according to international standards.

Synchronizing solutions for carbon market development

At a time when pollution levels are as serious as they are today, developing a carbon credit market is no longer an option, but a mandatory requirement if Vietnam wants to deeply integrate into global value chains.

This is not simply an environmental policy, but an integration strategy, linking responsibility with economic benefits…

However, in reality, the carbon credit market in our country is still in its infancy. Although it has great potential, especially in areas such as renewable energy, agriculture and waste treatment, this market has not been fully formed, activities are fragmented and lack connectivity.

These issues pose urgent requirements for research, policy consultation, and the development of synchronous solutions to develop an effective, transparent, and practical carbon credit market in Vietnam.

Dr. Dinh Thai Hung, National Coordinator - NDC Partnership (Nationally Determined Contribution) said that Article 6 of the Paris Agreement on climate change opens up great opportunities to mobilize international capital for emission reduction projects.

However, the challenge is the lack of a transparent emission quota allocation mechanism and limited credit quality.

Mr. Hung emphasized that when the EU applies the carbon border adjustment mechanism, Vietnamese export enterprises will be under higher pressure to comply.

Therefore, Mr. Hung said that we need to proactively inventory greenhouse gases from 2025 to get a reasonable quota allocation; have solutions to develop internal credit projects to offset and generate revenue.

Along with that, it is necessary to take advantage of carbon credits as a green financial lever, helping businesses access international capital and green the supply chain.

Providing solutions to promote the carbon credit market in Vietnam, towards sustainable development, Dr. Bui Thi Hoang Lan stated that the relevant authorities need to continue to improve the technical regulations and standards of the market such as the mechanism for exchanging and offsetting domestic carbon credits with the region and the world in accordance with the regulations and international treaties that Vietnam has participated in; establishing a national registration system to manage all carbon credits, and connecting with systems and standard organizations in the world.

In addition, it is necessary to train the team, management capacity, and organization to operate the carbon market. Raising awareness of businesses, organizations, and individuals to meet the readiness to participate in the market.

Climate change, which is taking place strongly globally, is one of the most serious challenges of the 21st century. Therefore, building and developing a transparent and effective domestic carbon market is an important economic tool, promoting businesses to transform their production models towards green and sustainable direction.

To do this, according to experts in the environmental field, along with implementing the above solutions, it is necessary to synchronously develop solutions on policy, technology, finance and international cooperation.

Improving the legal system, investing in a prosperity measurement system, and encouraging businesses to proactively integrate internationally and participate deeply in the global value chain will help Vietnam not only fulfill its commitment to reduce emissions, but also take advantage of economic opportunities from the carbon market, promoting green growth and sustainable development.

Source: https://baosonla.vn/kinh-te/xay-dung-thi-truong-carbon-minh-bach-hieu-qua-ImaYVEWDg.html