Carbon market development key to green transition

According to the World Bank Group's Country Report on Climate and Development Vietnam in 2022, climate change cost the country about 10 billion USD in 2020, which is about 3.2% of its GDP. By 2050, climate change could cost the world's economy a total of $523 billion.

The carbon market has been identified as a key solution for Vietnam to reach its net zero goal in the near future, according to Pham Viet Bien Cuong, Director of the Centre for Environmental Protection and Response to Climate Change. 

Global trade and investment are driving the development and acceleration of green standards, incorporating new requirements related to labour, the environment, sustainable development and the reduction of carbon emissions.

In addition, there is an increasing need for bilateral and international cooperation, as well as efforts related to green fields. Vietnam has a great chance to achieve its green transformation objectives and establish its place in the world's green value chains at this pivotal juncture.

Cuong also said that the basic principle of the market's operation was that polluters should compensate for their emissions into the atmosphere by exchanging and trading carbon credits.

Factories and manufacturing companies emit a certain amount of CO2. If they exceed the allowed level, they must buy more carbon credits. On the flip side, businesses emitting less than the limit can sell their extra carbon credits to those exceeding the limit, according to Cuong.

The carbon credit market plays a vital role in helping enterprises and the country's economy shift from brown to green, lowering greenhouse gas emissions and boosting national GDP and company profits.

At a seminar last week about developing the carbon market, Nguyen Minh Vu, Deputy Foreign Minister, affirmed that green transformation was a new driving force for sustainable growth and a key strategy for Vietnam to establish its position in the global green value chain.

The Organisation for Economic Cooperation and Development (OECD) highlighted the Vietnamese Government's efforts to promote green growth and sustainable development and expressed their impression of the country's commitment to net-zero emissions made at the 26th UN Climate Change Conference (COP26). They maintained that Vietnam had enormous potential for creating a vibrant, effective, and high-quality carbon market.

To date, Vietnam is one of the four nations with the highest number of investment projects registered under the clean development mechanism, having received 40.2 million carbon credits to date for 150 projects.

However, Vietnam is facing many challenges in the carbon market construction and development process, such as a lack of legal framework, international cooperation, and limited awareness.

To deal with these problems, Vietnam has issued a number of significant strategic initiatives on sustainable development and green growth, one of which is a development plan for instruments related to carbon pricing, particularly a market for compliant carbon.

Vietnam wants to make sure that domestic and international carbon credit exchange and offsetting mechanisms are set up in a way that follows the law and international agreements. They also want to speed up the creation of rules for managing carbon credits and trading greenhouse gas emission quotas, and they plan to test a carbon credit trading floor starting in 2025.

Source: Vietnamplus