Vietnam aims to raise $200 million annually by reducing emissions from deforestation, with some carbon credits to be transferred through government-backed, mechanisms that are simpler than conventional trading, state media Vietnam News Agency (VNA) reported March 4, citing the Department of Forestry.
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Register NowVietnam's progress in establishing carbon policies and trading infrastructures remains sluggish compared with its Southeast Asian counterparts. For instance, Singapore and Indonesia have implemented compliance carbon pricing mechanisms while Malaysia and Thailand have established domestic carbon exchanges.
Nothing similar has been completed in Vietnam and under the government's current plan a carbon exchange will only be established around 2028. As such, the Vietnamese government has chosen some simplified ways to address the capability constraints and raise capital in the short term.
The World Bank has paid Vietnam $51.5 million for its emission reductions under the Forest Carbon Partnership Facility (FCPF), Vietnam's Department of Forestry said Jan. 20 in a statement.
The World Bank's FCPF is designed to directly pay a country's forest owners for emissions mitigation from Reducing Emissions from Deforestation and Forest Degradation or REDD activities.
The payment agreement signed in 2020 required Vietnam to reduce 10.3 million mt of CO2 emissions by 2025 in six provinces (Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri and Thua Thien Hue), so as to receive a total of $51.5 million from the FCPF, the World Bank's official website showed.
"This is the first agreement on emission reduction to be successfully implemented in Vietnam, contributing to forest management and protection and improving people's lives," the Department of Forestry said.
"This money is transferred to localities to pay forest owners, local people and communities to manage, protect and develop forests," the government body said.
Such funds enable local communities to get paid directly based on the emission reduction outcomes and minimize middlemen's involvement and profit sharing, a World Bank official told S&P Global Commodity Insights in an earlier interview.
Another agreement has been signed between the Vietnamese government and non-profit organization Emergent, through which Vietnam transfers 5.15 million carbon credits, which represent emission mitigations in 2022-2026, to Emergent at a price of no less than $10/mtCO2e, VNA reported.
Emergent will pay for the carbon credits with private sector finance and the private sector will use these credits to meet their net-zero targets, according to the state media.
The carbon credits will be certified by The REDD+ Environmental Excellence Standard (TREES), the world's first purely jurisdictional carbon credit standard, according to Emergent's website.
Emergent said the carbon crediting through TREES ensures a more streamlined process as every project will be backed by the government and aligns with the UN's Paris Agreement, which outperforms other VCM projects that issue credits based on REDD methodologies.
Vietnam's unconventional ways to raise money from forest carbon sinks could be a blueprint for other countries that face capability constraints and would like to tighten governmental control over the carbon assets.
Platts, part of S&P Global, assessed nature-based avoidance credit price at $3.1/mtCO2e on March 5.