Vietnam plans to auction 5 million tons of carbon credits

The Vietnamese Government intends to auction approximately five million tons of excess carbon credits through international trading platforms due to the surplus available. 

This information was outlined in a report sent by the Ministry of Agriculture and Rural Development (MARD) to the Prime Minister regarding the implementation status of the Emission Reductions Payment Agreement (ERPA) in the North Central region and the proposal to transfer the surplus greenhouse gas emission reductions for the period of 2018-2019.

Vietnam is pushing to fulfill its nationally determined contributions under the Paris Agreement on climate change. Source: VNA

Specifically, last October, the World Bank (WB) sent a letter confirming Vietnam's emission reduction of 16.21 million tons of carbon dioxide (CO2). Of this amount, Vietnam received a payment of VND1.25 trillion (US$28 million) from the WB for reducing 10.3 million tons of carbon emissions between February 1, 2018, and December 31, 2019.

Of the excess 5.9 million tons of carbon credits, the Ministry of Agriculture and Rural Development (MARD) plans to sell 1 million to the World Bank, while the rest will be auctioned through international trading platforms.

For the remaining amount of carbon credits, the ministry would seek the World Bank's mediation to find potential buyers under the established ERPA or assist Vietnam in contacting pilot auctions through international trading platforms.

At present, Vietnam lacks experience in finding buyers as the field is still relatively new, the ministry said.

If the pilot auction proposal is approved, the Prime Minister will assign the Ministry of Finance to lead and coordinate with relevant agencies to develop a plan.

Currently, the voluntary carbon market price worldwide fluctuates between $2-4 per ton of CO2, with the carbon price for forestry and land use reaching $3.07 per ton in 2021. According to carboncredits.com, the natural ecosystem carbon price reached $1.57 per ton of CO2 on March 5.

Regarding carbon credit sales, Vietnam has received $51.5 million for verified emission reduction results from the WB, due to forest loss limitations, forest degradation, and increased carbon storage through afforestation and reforestation.

Carbon credit sales are part of the greenhouse gas emissions payment agreement for the North Central region signed on October 22, 2020, between the International Bank for Reconstruction and Development (IBRD) under the World Bank and the MARD.

According to the WB, Vietnam is the first country in the East Asia Pacific region to receive payments based on emission reduction results from the WB's Forest Carbon Partnership Fund.

The MARD recognizes that the success of the Reducing Emissions from Deforestation and Forest Degradation (REDD+) program brings Vietnam closer to fulfilling its nationally determined contributions under the Paris Agreement on climate change while also protecting important areas for biodiversity conservation.

Forest carbon credits are generated from emission reduction project activities such as reducing forest loss and degradation, enhancing afforestation, reforestation, vegetation restoration, and improved forest management activities.

Forest owners can convert the area of forests they manage and protect into CO2 absorption amounts, generate carbon credits, and sell these credits in the carbon market through greenhouse gas emission reduction mechanisms.