Vietnam can apply three methods of allocating carbon emission quotas when operating a carbon market, including allocating through the Government, an auction, or a combination of the two. Each method has advantages and disadvantages, based on the actual situation. Government support can be used when the market is starting to operate and auctions when the market is fully operational.
Click the link below for orgiginal details
SUMMARY :
......
2. THE LINK BETWEEN THE CARBON MARKET IN VIETNAM AND EMISSION REDUCTION TARGETS
2.1. THE ROLE OF THE CREDIT MECHANISM IN THE OPERATION OF THE CARBON MARKET IN VIETNAM
2.1.1. ANALYSIS OF THE ROLE OF NORMS AND TRADE MECHANISMS IN THE FUNCTIONING OF THE CARBON MARKET IN VIETNAM
Vietnam can apply three methods of allocating carbon emission quotas when operating a carbon market, including allocating through the Government, an auction, or a combination of the two. Each method has advantages and disadvantages, based on the actual situation. Government support can be used when the market is starting to operate and auctions when the market is fully operational.
- Allocating free emission quotas by the Government to businesses: There are two common methods used to make this allocation - based on the past or the limit. Limit allocation grandfathering is based on the actual emissions of a business in a certain year or period in the past. These allocations are enforceable because they avoid high initial emission reduction costs for sectors participating in the ETS. However, the disadvantage of these allocations is that it is beneficial for enterprises with high emissions and will have to add regulations when new businesses enter the market for the first time. The allocation by quota (benchmarking) is determined based on the enterprise's mitigation performance indicators. This method is beneficial for businesses that effectively reduce emissions and is easier to apply for first time new market entrants.
- Allocating emission limits through auction: Auction activities happen in two ways, including static auction through the primary market with a closed auction mechanism. Businesses participate in the auction once and then pay the same price. In a dynamic auction, a continuous bidding process continues over many rounds until the final price is fixed. The advantage of this approach is that auction design and market entry regulations help prevent market manipulation through groups of small businesses colluding, affecting single large enterprises. For enterprises to do emissions trading and auction activities, the governments of countries/regions generally set up an exchange with the same operating method as a stock exchange, and units of carbon emissions are priced like stocks. In fact, countries that currently have carbon emission markets are using the financial transactions system to conduct carbon emissions transactions.
Because Vietnam has established and operates a stock market, it may be feasible to allocate emission quotas through an auction. However, in the early days of forming a carbon market, it was possible to simply use the free emission quota allocation mechanism and then gradually combine it with the allocation of quotas through auction when the carbon market has entered the fully operational stage.
2.1.2. THE ROLE OF THE CARBON OFFSET MECHANISM IN OPERATING A CARBON MARKET IN VIETNAM ANALYSIS
For the carbon offsetting mechanism, like other markets globally, operating a carbon market in Vietnam can exist in the primary and secondary markets.
Primary Market (Issuer Market): The primary market is where credits, created and issued by a market authority (usually the state), enter the system. Allocation decisions are made by the governing body that shapes the primary market. If allowances are provided free of charge or at a fixed price, there is no opportunity for price or market manipulation. However, this allocation method does not offer the opportunity to adjust carbon market prices. On the other hand, if allowances are to be auctioned, not only providing the market with an early price discovery mechanism, but also reducing the risk that profits from market leverage, auction design, and market monitoring will close—an important role in ensuring fair price discovery and should be robust to protect against collusion and market manipulation. Therefore, the primary role and responsibility of the primary market participant will depend on the government or state regulator. This aspect will be studied in detail in the following section.
Secondary Market: This will include many parties involved in trading many different types of financial instruments. Participants include businesspeople directly in the market that are subject to limits set by governments and other intermediaries who may enter the market to provide expertise to those involved other market participants and provide liquidity. Some examples are included below.
- Over the Counter (OTC) Transactions: transactions between buyers and sellers of carbon credits or carbon credits can occur directly when two parties conduct bilateral transactions or through a third party. OTC contracts are often less standardized and can be customized to meet the individual needs of the buyer or seller and are therefore not qualified to find enough markets to warrant an exchange. OTC contracts can be tailored to fit those companies' exact time frame needs, something they cannot find in the more standard contract trading markets. With OTC transactions, since one party may not know and be familiar with the other party, direct transactions will involve certain risks that when the other party enters the transaction, there is nothing to request or intend to make a bargain. This risk can be minimized by making a transaction through a third party. Executing a transaction through a clearinghouse means that the clearinghouse essentially becomes the counterparty to each transaction. If it is a central clearinghouse, there will continue to be an aggregate picture of the market and individual market positions through the clearinghouse. This clearinghouse service comes with a fee for its services and a required margin that serves as a guarantee, usually in cash, that at least the determination of positions taken in the trade can be insured. If one counterparty is unable to perform part of the contract, the other party's cost margin, together with the mutual guarantees of other market participants, will help ensure that the other party of the contract will not default on the transaction. While this deposit sent to the clearinghouse is being held as security, it cannot be used for other potential investments, making sense for fewer companies.
- Carbon Credit Exchanges: Exchanges provide a central meeting place for buyers and sellers to meet and buy and sell. They are useful because the identities of market participants are confirmed as members and trade on the exchange, their trades are cleared, and they regularly report yield and price information market transparency. Being a member of an exchange or paying a broker to buy or sell on an exchange on one's behalf can have several benefits, including increased market liquidity versus contracts more customizable but may also result in additional transaction costs.
EMISSION REDUCTION TARGETS COMMITTED IN THE NDC
According to Vietnam's net zero commitment by 2050 at COP26, Vietnam will issue detailed strategies, plans, and provide specific implementation roadmaps in sectors and fields such as energy, agriculture, forestry, land use, waste etc. At COP26, in addition to declaring that Vietnam will achieve net zero emissions by 2050, Vietnam has joined the Leaders' Glasgow Declaration on Forests and Land Use and the Commitment to Reduce Measles Emissions- Global meltdown, Global Joint Declaration on the transition from coal to clean energy. All sectors have strategies to mitigate greenhouse gas emissions. Accordingly, according to Vietnam's emission scenario under normal development (BAU), by 2050 Vietnam's total GHG emissions are forecasted to reach 1495.4 million tons of CO2eq, of which, energy is 1210 million tons of CO2eq, accounting for 81 percent LULUCF accounted for 4 percent, agriculture accounted for 10 percent. These greenhouse gas mitigation activities help facilities, factories, and enterprises earn their carbon credits. Thereby, helping organizations/individuals to participate in the implementation of the domestic and international carbon credits exchange and clearing mechanism in accordance with the provisions of law and international commitments of Vietnam. Besides, after Vietnam's net zero commitment by 2050 at COP26, Vietnam has issued decrees, circulars and policies related to greenhouse gas emission reduction and domestic carbon market development to promote the implementation of the net zero goal by 2050. In addition, the development of a carbon market is indispensable for Vietnam to successfully achieve its net zero emissions target by 2050. Therefore, it is an important factor in formatting and developing Vietnam's carbon market.
National GHG emission mitigation measures for 2021–2030 are identified for the energy, agriculture, LULUCF, waste, and industrial processing sectors. Contribution to GHG emission reduction is determined for two cases - by the country itself and international support through bilateral and multilateral cooperation and the implementation of new mechanisms under the Paris agreement.
With domestic resources, by 2030, Vietnam will reduce its total greenhouse gas emissions by nine percent compared to the national BAU, equivalent to 83.9 million tons of CO2 equivalent. The estimated mitigation of greenhouse gas emissions in the energy sector is 51.5 million tons of CO2eq, accounting for 5.5 percent of the national BAU; the agricultural sector is 6.8 million tons of CO2 Bn, up 0.7 percent compared to BAU countries; LULUCF sector is 9.3 million tons of CO2 Bn, accounting for 1.0 percent compared to BAU countries; waste sector is 9.1 million tons of CO2 Bn, accounting for 1.0 percent compared to BAU countries; IP field is 7.2 million tons of CO2 Bn, accounting for 0.8 percent compared to BAU countries. GHG emission reductions are estimated in each sector. However, during the implementation of the updated NDC, it will be adjusted to suit actual conditions to ensure the national contribution target.
The contribution rate above nine percent could be increased to 27 percent compared to the national BAU (equivalent to 250.8 million tons of CO2) receiving international assistance through bilateral, multilateral, and implement the mechanisms of the Paris Agreement on climate change. In particular, the estimated reduction of greenhouse gas emissions in the energy sector was 155.8 million tons of CO2 Bn, accounting for 16.7 percent compared to BAU countries; the agricultural sector is 32.6 million tonnes of CO2 Bn, accounting for 3.5 percent compared to BAU countries; LULUCF sector 21.2 million tons of CO2 Bn, accounting for 2.3 percent compared to BAU countries; the waste sector is 33.2 million tonnes of CO2 Bn, accounting for 3.6 percent compared to BAU countries; IP field is 8.0 million tons of CO2 Bn, accounting for 0.9 percent compared to BAU countries.
Compared to the current NDC, the contribution to GHG emission reduction in the updated NDC in the case of country self-actualization has increased in both emissions reductions and emission reduction rates compared to the BAU up to 2030. Then, the amount of greenhouse gas emissions increased by 21.2 million ton s CO2 equivalent (from 62.7 million tons in the current NDC to 83.9 million tons in the NDC updates), and the corresponding rate of deflation emissions increased by one percent (from eight percent in the current NDC to nine percent in the updated NDC). The contribution rate for mitigating greenhouse gas emissions when international assistance increased from 25 percent to 27 percent, greenhouse gas emissions fell by 52.6 million tons of additional CO2 equivalent (from 198.2 million ton s in NDC is now up to 250.8 million tons in updated NDC).
AND INTERNATIONAL CARBON EXCHANGE MECHANISMS
As of June 2020, Vietnam has 257 CDM projects by the CDM Executive Board (EB), ranking fourth in the world in the number of projects, with the total amount of GHG reduction potential of about 140 million tons of CO2 . Out of 257 projects, projects on energy accounted for 87.6 percent. Waste treatment accounted for 10.2 percent, afforestation and reforestation accounted for 0.4 percent and 1.8 percent. However, most projects on energy, waste treatment, afforestation and forest regeneration are registered quite late after the price on the CER market plummeted. This is also reflected in the announcements that Vietnam has only had over 18 million CERs issued by EB so far, ranking sixth in the world.
Vietnam also has ten CDM programs of activities (PoA), 14 registered VCS projects, and four Gold Standard registered projects. Regarding the fields covered by the PMR, Vietnam has six registered projects in the waste sector. However, no CDM/VCS projects have been registered in the construction and steel sectors.
As for the voluntary carbon market, which is not under the framework of the Kyoto Private Decree, Vietnam also has the potential to participate through mechanisms such as the Bilateral Clearing Credit Mechanism (BOCM) (later is called JCM) and the Program on Reducing Emissions Through Reducing Deforestation and Degradation (REDD).
Vietnam joined the JCM mechanism in July 2013 through a memorandum of understanding on “Low-carbon growth and building JCM joint credit mechanism.” The purposes of the JCM Mechanism include 1) disseminating Japanese low-carbon technologies, products, systems, services, and infrastructure, contributing to sustainable development in developing countries, 2) quantitative greenhouse gas emission reduction contribution through mitigation action in developing countries and achievement of emission reduction targets of developed countries (Japan), and 3) contributing to the UNFCCC's goal of reducing global emissions.
According to this mechanism, when Japanese enterprises consult and transfer energy-saving and emission-reducing technologies to Vietnamese enterprises, they will enjoy preferential credits from Japan. The maximum credit limit is 50 percent of the total project cost. At the same time, the amount of CO2 reductions will be calculated for the Japanese side.
Total potential emissions reductions of 28 projects JCM is undergoing a feasibility study (by the Ministry of Environment and Ministry of Economy, Trade and Industry of Japan proposed) estimated at ten million tonnes CO2 TD/year. There are 18 projects in the energy sector, four transportation projects, three waste management projects, and three forestry projects.
Regarding the REDD mechanism, Vietnam is one of nine countries participating in the United Nations Collaborative Program on REDD (UN-REDD) to prepare for REDD. Preparing for REDD, several issues need to be considered, namely “components to prepare for readiness”. The Government of Vietnam (GoV) has identified the design of a transparent, clear, and fair benefitsharing system for REDD (BDS) as a priority for UN-REDD to support. This is a very new initiative as only a few countries are interested in sharing the benefits of REDD. This is also a very bold and challenging job because it is not the same as the carbon monitoring process and other technical issues.
If implemented in Vietnam, REDD+ could generate about US$80–100 million per year, three to four times more than the existing ODA support for the forestry sector (UN-REDD, 2009). The opportunities and prospects for REDD+ in Vietnam are huge, but whether the potential turns into reality or not depends a lot on the national implementation capacity, seizing opportunities, and overcoming difficulties and challenges.
Since 2012, Vietnam has participated in the Program “Ready to enter the carbon market” (PMR). Since 2015, with the support of the World Bank, Vietnam has implemented the project "Getting ready for a carbon market in Vietnam" (VNPMR). After five years of preparing and implementing, the project has achieved some results, laying the foundation for Vietnam to form and develop a domestic carbon market towards joining the carbon market world. From 2021–2030, Vietnam will continue to participate in the initiative "Partners for the Implementation of Carbon Markets" (PMI) initiated by the World Bank to form and develop a carbon market in the future. This is the next phase of PMR to deploy market tools in the participating countries. The focus is on the specific implementation of carbon pricing activities, contributing to the development of policies, tools for managing carbon credits, and carbon pricing in Vietnam in the next decade.
3.1. COMMON SOLUTIONS FOR DEVELOPING A CARBON MARKET IN VIETNAM
3.1.1 PROPOSED SOLUTIONS RELATED TO ESTABLISHING THE CARBON MARKET
Vietnam has been issuing legal documents related to forming a domestic carbon market.
- The Law on Environmental Protection 2020 has a provision on organizing and developing a carbon market (Article 139), according to which the domestic carbon market includes activities of exchanging greenhouse gas emission quotas and carbon credits obtained from the domestic and international carbon credits exchange and offsetting mechanism following the provisions of laws and international treaties the Socialist Republic of Vietnam is a member. Greenhouse gas-emitting establishments must inventory greenhouse gasses on the list of regulations allocated GHG emission quotas and have the right to exchange, trade, and sell on the domestic carbon market.
- The draft decree regulating GHG emission reduction and ozone layer protection that MONRE is developing stipulates the roadmap for the development of the domestic carbon market and the implementation of credit exchange projects domestically and internationally.
- According to Vietnam's NDC in 2020, Vietnam commits that with domestic resources, by 2030, it will reduce its total greenhouse gas emissions by nine percent compared to the BAU. This level of commitment can be increased to 27 percent if it receives international support through bilateral, multilateral cooperation and market mechanisms under the Paris Agreement.
- At the COP26 Conference in November 2021 in Glasgow, UK, the Prime Minister made a strong statement on reaching net zero emissions by 2050, demonstrating national determination and commitment in accelerating the economic transformation to help tackle the climate crisis. Vietnam's commitment is highly appreciated by COP26 presidents and countries worldwide for its strong but very practical determination.
- Vietnam's carbon market needs to be built and formed based on the set criteria. In particular, the scope, scale, objects, and market tools need to be strictly guaranteed according to the criteria developed for Vietnam.
- Government level: The State management structure for the construction and operation of the carbon market impacts the whole system to bring greenhouse gas emissions to a certain limit. State management of the construction and operation of the carbon market, in a broad sense, is carried out by all state agencies. In a narrow sense, state management of credit exchange activities from GHG emission reduction is enforcement and operating activity characterized by organizational factors; is implemented on an emission-limiting basis and to enforce (future) emission reduction legislation and is guaranteed to be implemented primarily by a system of public administrations (or several social organizations in case they are assigned state management tasks). State management of the construction and operation of the carbon market is also a product of the division of labor among ministries, branches, and localities to link and coordinate the subjects being managed.
- Ministries and sectoral level: An agency with a specialized function in carbon market management needs to be established to deploy, manage, and operate a carbon market. This agency has the role of managing, regulating, and supervising the credit granting, buying, and selling activities of market participants. It is also the agency that manages the credit registration and appraisal system and the market participation status of organizations and individuals. This agency was established with the coordination between relevant ministries, such as the Ministry of Natural Resources and Environment, the Ministry of Industry and Trade, the Ministry of Construction, the Ministry of Transport, and the Ministry of Finance. In addition, several agency representatives of businesses such as the VCCI and business associations are also proposed as one of the members of the carbon market regulator. The carbon market regulator will be the body that proposes regulations and regulations on market operation. At the same time, the carbon market regulator will be the body that proposes and decides on the allocation of quotas to market participants, sets out the procedures for registration and appraisal of the credits formed, trading and trading in the carbon market in Vietnam.
- Grassroots level: direct participation in the carbon market is the business establishments, individuals directly participating in the exchange of buying and selling credits. The participation of businesses and individuals in the carbon market must satisfy the criteria of the carbon market participants. The seller is the enterprises that have, are, and will be producing in the territory of Vietnam and corresponding to such activities are causing GHG emissions; Indirect Buyers and Sellers are finance-investment public-private companies, carbon credit speculators in Vietnam. In addition, there is another target group of the market, which is between the Seller who is an enterprise (domestic private or foreign direct investment) producing in the territory of Vietnam with the potential to reduce GHG emissions, and the Buyer who is the Vietnamese government or the governments of other countries (e.g., Japan). Organizations and enterprises, when participating in the operation of the carbon market, operate under the regulated mechanisms of the carbon market. Enterprises can participate in reflecting, commenting on the regulations and operating mechanisms of the carbon market, and making reports according to the regulations on the market's MRV.
3.1.2 PROPOSED SOLUTIONS FOR DEVELOPING AND OPERATING THE CARBON MARKET
Policy Integration
Successful GHG mitigation requires a combination of policies appropriate to the national circumstances, the nature of the sectors, and the mitigation opportunities being targeted. The integration and boundaries between these policies must be clearly defined to avoid incentives for confusion or separation and undue administrative burden.
To enhance harmonizing market-based measures, the following options should be considered:
- Strengthen cooperation between ministries and central and local governments to ensure all relevant agencies have a common view on the role and function of emissions trade and avoid conflicts between future policies.
- Take an integrated approach to ETS and related policies. Assess the economic and environmental impact of implementing various viable programs such as ETS, energy efficiency certificates, renewable energy certificates, and carbon taxes. Clearly define the boundaries of policies and their respective mitigation roles.
- Research the possibility of linking related programs. Mechanisms that allow the use of credits between systems, such as clearing, can help establish a broader market for mitigation and create a consistent level of mitigation incentive.
Strengthen Monitoring, Reporting, and Verifying Capacity
Implementing new ETS requires establishing new rules and procedures related to MRV of emissions. These processes can build on existing measures in the country or learn from other systems. Capacity-building on MRV technical issues in government and regulatory bodies and implementation plays an important role in ETS implementation.
At the same time, sharing information and experiences on the development of MRV mechanisms in different countries can facilitate harmonization and help build the foundation for linking emerging systems in the future.
Clear guidance on MRV helps to improve stakeholder understanding of system requirements. For example, guidance on monitoring will include requirements for monitoring equipment, monitoring, data collection, and emission calculation methods. Reporting guidelines will include data and report format, submission deadlines, responsible agencies, and penalties for false submissions. The verification guidelines will include accreditation standards and procedures, verification requirements, and rules.
Propose an implementation roadmap for operating the carbon market in Vietnam
The roadmap for forming and developing a carbon market in Vietnam is divided into three phases :
1. Preparation Phase
- Review, supplement, and complete the system of legal documents on strengthening the management of carbon credit business activities generated from the mechanism of exchange and clearing of carbon credits domestically and internationally.
- Complete the national system of greenhouse gas inventories, including sectoral, local, and grassroots greenhouse gas inventories.
- Raise awareness of the scope and role of the domestic carbon market and the benefits of trading in GHG emissions quotas and carbon credits.
- Improve state management knowledge for policymakers and officials on the management of business activities of greenhouse gas emission quotas and carbon credits in the domestic carbon market and the international carbon market.
- Train and foster knowledge for agencies, organizations, businesses, communities, and individuals in accessing and implementing activities to reduce greenhouse gas emissions according to exchange mechanisms, offset domestic and international carbon credits and GHG emission quota business activities and carbon credits in the domestic and international carbon markets.
- Strengthen multimedia communications about the benefits and opportunities from participating in the domestic carbon market, contributing to increasing the country's competitiveness towards developing a low-carbon economy and green growth associated with sustainable development.
2. Pilot Carbon Market Operation Phase
- Continue to perfect policies and legal frameworks and create favorable conditions for developing the domestic carbon market.
- Continue to strengthen the capacity of carbon market participants.
- Identify sectors and sub-sectors with activities causing greenhouse gas emissions to participate in the pilot carbon market.
- Determine the current and past greenhouse gas emissions of selected enterprises to participate in the pilot carbon market.
- Allocate greenhouse gas emission quotas to establishments (enterprises) selected to participate in the pilot carbon market.
3. Complete Carbon Market Operation Phase
- Continue to improve policies and legal frameworks to form and create favorable conditions for the development of the domestic carbon market based on the results of the pilot phase assessment, including regulations on:
- Regulations on adjustment of allocation and recovery of greenhouse gas emission quotas for enterprises participating in the carbon market.
- Trade greenhouse gas emission quotas and derivative carbon credits on the carbon market.
- Stabilize the carbon market.
- Identify enterprises causing large greenhouse gas emissions participating in the carbon market.
- Determine the current and past greenhouse gas emissions of selected enterprises to participate in the carbon market.
- Fully operate the system of registration and transaction of greenhouse gas emission quotas.
3.1.3. PROPOSING SOLUTIONS ON CARBON MARKET MANAGEMENT IN VIETNAM
Carbon Market Regulation Mechanism
Like normal commodities markets, the carbon market is regulated through the laws of the market economy and the regulatory policy of the state. A carbon market is formed based on the need to buy, sell, or exchange carbon credits or emission quotas between economic actors or between countries based on the agreement during a specified period. The market is regulated through the laws of the market economy, including the law of value, the law of supply and demand, the law of surplus-value, and the law of competition.
The objectives of the carbon market regulation mechanism include :
- Form and develop a stable domestic carbon market under the regulation of the State. An effective market regulation mechanism will stimulate trading activities in the market, ensuring cost savings, transparency, and convenience.
- An effective market regulation mechanism also attracts the active participation of both the state and private sectors and other economic sectors in the market and greenhouses mitigation activities, towards a green economy and responding to climate change.
- Promote the transfer of green technology between countries and parties towards clean products, strengthen carbon pricing mechanisms to create valuable products.
- Contributing to implementing international commitments on climate change and national goals as part of international cooperation on greenhouse gas reduction and response to climate change.
Proposed Tools for Regulating the Carbon Market
Under the Paris Agreement Implementation Plan, GHG emission reduction implementation activities have set the task of building a domestic carbon market and piloting it in potential areas. However, currently, the general financial policies on buying, selling and using different types of carbon credits are not adequate, especially for carbon credits on the voluntary market and market instruments on carbon credits. GHG emission reduction, green growth in potential fields also has a gap, accordingly, it is necessary to consider and select appropriate actions to implement. Although in the past, Vietnam has developed many CDM projects and established a financial policy framework in Decision No. 130/2007/QD-TTg to conduct the exchange of carbon credits, 04 projects have been registered. signed under the Joint Crediting Mechanism (JCM), several greenhouse gas mitigation projects in Vietnam are registered under the Verified Carbon Standard (VCS) and the Gold Standard (GS) ... but the main policies There is no financial policy to directly support the formation of a single market for the exchange of carbon credits in Vietnam. In addition, according to the Paris Agreement, the carbon credits from the CDM project will be transferred to the sustainable development mechanism (SDM) by the end of 2020. At the same time, the establishment of the emission trading mechanism is quite complicated. complexity requires substantial preparation for the establishment and operation of carbon pricing infrastructure and capacity.
Over the years, carbon pricing has become the most promising market-based policy instrument. Pricing can take place as an emissions trading system (ETS) or as a carbon tax. Therefore, the study and identification of regulatory financial mechanisms for the carbon market based on the study of carbon pricing contributes to the formation of the domestic carbon credit trading market. It is essential to focus on mobilizing investment from the private sector to actively participate in GHG emission reduction activities and develop the domestic carbon market.
- Establish a carbon tax: The carbon tax is a market regulating mechanism being studied and applied in many countries worldwide under different methods and names. A carbon tax is an environmental tax levied on the CO2 emissions of fuel and is a form of carbon pricing. The carbon tax study is considered from two angles: develop a carbon tax as a new policy directly levied on emissions into the environment and correct the existing tax based on an environmental protection tax levied directly on the source of greenhouse gas emissions. A carbon tax is considered an important market-based solution to reduce emissions and respond to climate change and a mechanism for storing and trading emissions. The carbon tax aims to change energy-related choices. This includes individual choices about the use of electrical and energy equipment and the choices businesses make in designing new products, capital investment, and government choices in policymaking and resource planning.
- ETS: ETS offers the benefits of cost-effectiveness, environmental effectiveness, flexibility, transparency, and innovation incentives. Market mechanisms such as emissions trading markets are seen as a superior tool to replace traditional climate change policies. The emission trading market is a cross between the effectiveness of environmental protection policy and economic efficiency and is increasingly becoming a priority choice for many countries worldwide. An emission quota trading system is a regulated system where entities within a given industry are only allowed to emit certain levels of greenhouse gasses .
ETS requires excess users to offset excess emissions by purchasing offsets through a formal carbon market. Emissions units with emissions below the limit may be allowed to sell the remaining emissions within their cap to units that emit above the cap. This system establishes a market price for carbon offsets through a supply and demand mechanism, which results in prices that are often volatile. The impact of emissions prices on the market on the outcome of greenhouse gas reductions; reduce the ability to encourage manufacturers to switch to low-carbon technology because it can internationalize the cost of greenhouse gas emissions. For domestic enterprises, carbon pricing can affect their competitiveness in the international market. In addition, the construction and development of the ETS system requires a long and complicated study. In the immediate future, it is necessary to study the implementation in the first phase of piloting in a number of large emission industries that are easy to measure and monitor emissions such as the thermal power industry or the steel industry.
- Carbon credit generation mechanism: Currently in Vietnam, in addition to clean development projects (e.g., CDMs) implemented following the provisions of Decision No. 130/2007/QD-TTg, many types of carbon credits are also established in Vietnam, including JCM, VERs, REDD+. The JCM mechanism agreement with Japan does not carry out trading in the market, and the remaining credits still generate trading activities in the market. However, there has not been any mechanism or financial policy for this activity, leading to problems with the implementation process.
In the current situation in Vietnam, the issuance of a tax, a carbon fee, or an emission quota trading system requires implementation in the long term, in front of the carbon credits and other mechanisms. Carbon offsetting, when continuing to implement in the short term, will have more advantages and efficiency. Through mechanisms to generate carbon credits, the government will continue to regulate trading activities in the market through tax support policies and incentives in accordance with the current legal system, most recently the Decree No. Decree No. 06/2022/ND-CP dated January 7, 2022, on mitigation of greenhouse gas emissions and protection of the ozone layer in order to complete a financial legal framework governing the above credits. as well as their trading on voluntary carbon markets. This Decree stipulates that the scope of regulation includes projects that generate carbon credits and projects implemented under the carbon offsetting mechanism.
However, in the current situation in Vietnam, the introduction of taxes, carbon fees, or emission quota trading systems requires long-term implementation, in the face of carbon credit and carbon offsetting mechanisms, when continued to be implemented in the short term, will have more advantages and efficiency.
3.1.4. PROPOSING TECHNICAL SOLUTIONS OF THE CARBON MARKET IN VIETNAM
The market is complex, with many parties participating and many components. Therefore, it is necessary to design and develop an architectural framework for the carbon market in Vietnam. This framework will include the following:
The transaction system processes:
- Credit sales process
- Credit purchase process
- Member account registration process
- Process of identifying and managing carbon credits
The system structure:
- User Floor
- Communication channel layer
- Process layer, business is computerized
- Platform layer for sharing and integrating the system
- Data layer, database
- Technical Infrastructure
- Document layer of the system
The user account:
- Management accounts - including main management functions, including updating news, allocating quotas to accounts, updating emissions of enterprises, checking credits of enterprises, verifying, receiving, and tracking market transactions, and verifying business accounts.
- Trading accounts - participants can check account information and conduct transactions on the market.
3.2. PROPOSING SOLUTIONS FOR INDUSTRIES/FIELDS WITH THE POTENTIAL TO PARTICIPATE IN THE VIETNAM CARBON MARKET
3.2.1. PROPOSING SOLUTIONS FOR THE ENERGY INDUSTRY TO PARTICIPATE IN THE VIETNAM CARBON MARKET
According to the development plan, the electricity industry will increase by 304 percent in the period 2014–2030, and the power generation structure in 2030 will be mainly dominated by coalfired power plants (68.3 percent) natural gas (16.8 percent) and hydropower (13.6 percent), total power plant capacity also grew significantly, with coal power plant configuration in 2030 (49.8 percent) and natural gas (31.2 percent) increasing faster hydroelectricity (18 percent).
Figure 4. Structure of Vietnam's energy supply development scenario to 2030.
Therefore, to reduce greenhouse gas emissions in the electricity generation sector, the solutions outlined in Table 3 below should be implemented.
|
TABLE 3. POTENTIAL SOLUTIONS TO REDUCE GREENHOUSE GAS EMISSIONS
BY 2030 IN THE POWER SECTOR |
||
|
SOLUTION |
DESCRIPTION
|
2030 GOALS |
|
|
Total concentrated renewable energy output
(GWh) |
118.992 |
|
TABLE 3. POTENTIAL SOLUTIONS TO REDUCE GREENHOUSE GAS EMISSIONS
BY 2030 IN THE POWER SECTOR |
||
|
SOLUTION |
DESCRIPTION
|
2030 GOALS |
|
Promoting renewable energy
sources |
Proportion in the total centralized power supply |
21.9 percent |
|
Promote wind power |
Wind power output (GWh) Proportion of total supply |
23.180 |
|
4,3% |
||
|
Promote concentrated solar
power |
Concentrated solar power output (GWh) Proportion of total supply |
15.577 |
|
2.9% |
||
|
Biomass power plants [including bagasse] |
Electricity production from wood and bagasse (GWh) Proportion of total supply |
9.506 |
|
1.7% |
||
|
Landfill gas power plant |
Power output from landfill gas (GWh) Proportion of total supply |
218 |
|
0.62% |
||
|
MSW Power Plant |
MSW Power Output (GWh) Proportion of total supply |
3.361 |
|
0.6% |
||
|
Biogas biogas power plant |
Biogas electricity production (GWh) Proportion of total supply |
0 |
|
0.0% |
||
|
Small hydroelectric plant |
Power Output SHP (GWh) Proportion of total supply |
14.912 |
|
2.7% |
||
|
Co-fired coal-biomass
plant |
Power generation from coal and biomass (GWh) Proportion of total supply |
0 |
|
0.0% |
||
|
Supercritical coal power
plant |
Supercritical coal power output (GWh) Proportion of total supply |
135.121 |
|
24.8% |
||
3.2.2. PROPOSED SOLUTIONS FOR THE AGRICULTURAL SECTOR TO PARTICIPATE IN THE CARBON MARKET IN VIETNAM
GHG mitigation solutions for agriculture to participate in the Vietnamese carbon market include:
- Converting long-day rice varieties with short-day varieties.
- Applying water withdrawal between crops and alternating wet and dry irrigation. Until recently, 45,000 hectares (Ha) of rice areas have been applied with full alternating wet and dry irrigation, reducing CO2 emissions by160 tons.
- Applying integrated crop management (ICM), the 3-decrease-3-increase (3G3T) program, and the 1-must-5-decrease (1P5G).
- Converting inefficient rice areas to rice-shrimp and rice-rice models to upland crops (maize, beans, fruit trees, and perennial industrial crops). It is estimated that more than 100,000 hectares have been planted. Implementing rational use of natural resources and reducing GHG emissions could reduce CO2 emissions by an estimated 400 tons.
- Improving diets with imported, industrially produced, or self-added feed. Tens of thousands of dairy cows have been applied to reduce GHG emissions and increase milk yield.
- Collecting and treating livestock organic matter as organic fertilizer, reducing environmental pollution, increasing efficiency of use and reducing GHG emissions (millions of tons implemented).
- Applying water-saving irrigation technology, drip irrigation integrated with fertilizer, with hundreds of hectares of coffee being implemented.
- Eliminating straw burning after harvest.
3.2.3. PROPOSED SOLUTIONS FOR THE WASTE INDUSTRY TO PARTICIPATE IN THE CARBON MARKET IN VIETNAM
It is necessary to continue researching domestic waste management models in urban and rural areas to reduce environmental pollution and reduce greenhouse gas emissions. For solid waste and hazardous waste management, several new mechanisms and policies on power generation from waste, construction waste management, control of waste from plastic bags, and recovery of discarded products have been issued. In addition, the National Strategy on Integrated Solid Waste Management to 2025 with a Vision to 2050 has been adjusted and promulgated.
There have been strides in solid waste management. Collection rates have increased from 78 percent in 2008 to 85.5 percent in 2017. The urban daily-life solid waste collection rate has increased from 78 percent in 2008 to 85.5 percent in 2017. Collection service has been extended to grade V cities and rural residential areas, including the socialization of collection, transportation, and investment in constructing solid waste treatment facilities.
Nationwide, 114 hazardous waste treatment facilities licensed by the Ministry of Natural Resources and Environment. The total amount of hazardous waste collected and treated in 2016 was about 752,181 tons, reaching the collection and treatment rate of 90 percent. Most medical facilities and hospitals have done the waste classification for appropriate treatment. Hazardous medical waste is collected and treated by incinerators at large hospitals or centralized treatment facilities in the area.
Promulgating a mechanism to support developing power generation projects using solid waste in Vietnam. Solid waste management programs and projects are also being actively implemented by many localities to reduce the landfill rate and increase the recycling rate (MONRE 2018). Hanoi city just put into trial operation a construction waste crushing line for recycling at the construction site, this is one of the first steps in the recycling and treatment of construction waste. Ho Chi Minh City has also piloted a program to separate solid waste at source in wholesale markets, supermarket systems, enterprises in Tan Thuan Export Processing Zone, Hi-Tech Park, and residential clusters in some areas. In addition, several solid waste incineration projects for power generation have been prepared to be implemented in several provinces such as Hanoi, Binh Duong, Hau Giang, Long An, Nam Dinh, Quang Tri, Thai Binh and Thanh Ho Chi Minh City, and Thua Thien Hue.
In addition, the application and replication of technology to treat domestic waste into organic fertilizer has been applied by some localities, such as Ha Tinh, Ninh Binh, Ninh Thuan, and Yen Bai.
3.2.4. PROPOSING SOLUTIONS FOR THE LULUCF INDUSTRY TO PARTICIPATE IN VIETNAM’S CARBON MARKET
Vietnam has issued several policies related to socio-economic development, land use planning, green growth and low carbon agriculture, and sector development plans for agriculture. Therefore, it is necessary to implement the following related policies :
- National land use planning for the period 2021–2030, vision to 2050, and the national five-year land-use plan 2021–2025:24 The targets for using agricultural, forestry, and other land by 2030 include 1) rice land, 3.57 million ha, 2) forestry land, 15.8 million ha, 3) non-agricultural land, 4.9 million ha, 4) unused land, 1.2 million ha, 5) economic land, 1.65 million ha, and 6) urban land, 2.95 million ha.
- The Target Program on Sustainable Forestry Development: sets out the main tasks for forest protection and management up to 2020, including 1) forest protection and conservation, to ensure the recovery of 15 percent of degraded forest areas, especially special-use forests. Increase the area of special-use forests by 100,000 hectares by 2020, 2) develop and improve forest productivity and quality, including planting and postharvest rehabilitation with an area of 1,025,000 ha, of which 75,000 are special-use and protection forests; intensive afforestation of 200,000 ha for large timber production; zoning for natural regeneration 360,000 ha/year; planting scattered trees: 250 million trees; converting small timber production plantations into large timber: 90,000 ha; the percentage of planted forests planted with quality control varieties is from 75–80 percent, and 3) sustainable forest management and forest certification: 100,000 ha/year and supports the national forest certification program.
- The National REDD+ Action Program to 2030: focuses on reducing emissions from deforestation and forest degradation, conserving, and enhancing forest carbon stocks, and sustainable management of forest resources. The main objectives include 1) increasing forest cover to 42 percent by 2020 and reaching a total forest area of 14.4 million ha, 2) increasing forest cover to 45 percent by 2030, and 3) implementing measures to reduce emissions, increase forest carbon stocks, and sustainably manage forests.
- Target Program for Sustainable Forestry Development. The goals by 2020 include 1) increasing the value of forestry production from 5.5 percent to 6.0 percent/year, 2) achieving national forest cover of 42 percent, and the forest area is 14.4 million ha, 3) an average yield of planted forests of 20m 3 /ha/year, 4) provide 25 million jobs, increase income, contribute to hunger eradication and poverty alleviation, improve living standards for people living in forests, build new rural areas, and ensure national security.
- Project on sustainable forest management and forest certification. The scheme aims for sustainable forest resource management, biodiversity conservation, environmental services, and promoting forest certification: meet 80 percent of raw materials to produce wooden furniture for export and increase the value of planted forest wood, reduce hunger, and reduce poverty.
3.2.5. OTHER SOLUTIONS
- Continue further studies and pilot projects on specific sectors/sectors of carbon markets to have a realistic view of creating a basis for forming and developing Vietnam's carbon market;
- Review, supplement, and complete the system of legal documents on strengthening managing carbon credit business activities generated from the exchange mechanism and clearing carbon credits.
- Complete the national system of greenhouse gas inventories, including sectoral, local, and grassroots greenhouse gas inventories.
- Regulations on the measurement, reporting, and appraisal (MRV) system for GHG emission reduction activities according to domestic and international carbon credit exchange and offset mechanisms.
- Raise awareness of the scope and role of the domestic carbon market and the benefits of trading in GHG emissions quotas and carbon credits.
- Training and fostering knowledge for agencies, organizations, businesses, communities, and individuals in accessing and implementing activities to reduce greenhouse gas emissions according to exchange mechanisms, offset domestic and international carbon credits and GHG emission quota business activities and carbon credits in the domestic and international carbon markets.
No comments:
Post a Comment