This remark was heard at the workshop on forest carbon hosted by the Management Board for Forestry Projects (MBFP) under the Ministry of Agriculture and Rural Development in coordination with the GIZ Vietnam Office under the German International Cooperation Agency (GIZ) in Phu Yen province on June 4, 2024.

Experience from the US$51.5 million carbon credit deal

At the workshop, delegates focused on exchanging and answering many questions about carbon, and introduced an overview of forest carbon, the carbon market development project and good practices from the emission reduction program in the northern central region as well as the potential of Vietnam's forest carbon in the future.

To date, 11 provinces in the Central Highlands and the South Central Coast have submitted documents to sell carbon credits to the LEAF mechanism with 4.26 million ha of forest

Mr. Vu Tan Phuong, Director of the Vietnam Forest Certification Office (VFCO), said that emission reduction measures in forestry include protecting existing natural forests in mountainous areas, protecting coastal forests, restoring special-use forests and protection forests, improving the quality and carbon stocks of poor natural forests, improving the productivity and carbon stocks of large timber plantations, replicating agroforestry models to increase carbon stocks and conserve soils.

Regarding the 2023 forest carbon price on the international voluntary market for major projects, the highest was the improved forest management (IFM) project at US$16.21 per tCO2 equivalent (tCO2e), followed by the afforestation/reforestation/natural vegetation regeneration project at US$15.74.

The carbon credit price from REDD+ projects was the lowest (US$7.87/tCO2e) but it brought the highest value with US$222 million paid in 2023 globally (versus US$584 million in 2022), he said.

In Vietnam, REDD+ projects are currently in their third phase - Results-based payments, because they can be measured, reported and verified. That is also the foundation for the Emissions Reduction Payment/Purchase Agreement (ERPA) in the North Central region with a transfer value of US$51.5 million.

Sharing lessons learned from the successful sale of forest carbon credits for US$51.5 million in 2023, Mr. Nguyen Chien Cuong, officer of the Vietnam Forest Protection and Development Fund, said that it was the implementation result of the ERPA Agreement signed in 2020.

The total value of the ERPA carbon credit purchase contract was US$51.5 million or US$5 per tCO2e. To date, the entire contract value has been fully paid, with 10.3 million tCO2e successfully implemented. This is the only fully paid carbon credit purchase deal up to this point.

Drawing experience from this success, Mr. Vu Tan Phuong said that any forest carbon project requires social safety conditions, including participation, transparent information sharing, gender equality and diversity, especially in the international context of promoting the development of high-integrity carbon credits.

Planning, implementing many forest carbon credit trading projects

Ms. Nghiem Phuong Thuy from the Department of Forestry under the Ministry of Agriculture and Rural Development said that the Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition was established to halt deforestation by financing large scale tropical forest protection on 2.5 million ha in Vietnam.

“The LEAF Coalition is not a carbon program/project or a carbon standard organization but offers a carbon credit trading mechanism. All credits traded through LEAF are registered and issued according to the TREES (The REDD+ Environmental Excellence) Standard by ART,” she added.

To date, 11 provinces in the Central Highlands and the South-Central Coast (Lam Dong, Dak Nong, Dak Lak, Gia Lai, Kon Tum, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan and Binh Thuan) have submitted documents to sell carbon credits to the LEAF mechanism with 4.26 million ha of forest (including 3.24 million ha of natural forests and 1.02 million ha of planted forests). The total selling value of carbon credits is expected to reach US$500 million.

In addition, the Green Climate Fund (GCF) launched the Pilot Program for Payment for REDD+ Implementation Results. With great potential for forest carbon, many localities and the private sector are also researching and proposing other pilot forestry projects.

Mr. Nguyen Chien Cuong from the Vietnam Forest Protection and Development Fund said that the Vietnamese forestry sector is planning to implement many forest carbon credit trading projects.

First, the Green Climate Fund (GCF)/JICA will buy carbon credits in four central provinces and 11 northern mountainous provinces in 2024-2029, with a total estimated amount of US$65-150 million (or US$5 per tCO2e) for a maximum credit volume of 30MtCO2e

Second, the Quang Nam forest carbon project, which was submitted to the Government but not approved, is being proposed for inclusion into the LEAF project area. The credit buyer is BP Group (South Pole Shell, Terra G First, Everland and Mirova Ecosphere) with an estimated credit volume of 1.6 MtCO2e a year (unit price: US$5 per tCO2e) from 2024 to 2030.

SK Forest Group also offered to buy carbon credits in 15 northern provinces. However, this proposal is currently on hold.

LEAF/EMERGENT Agreement signed a Letter of Intent in 2022, with a commercial carbon credit volume of 11 million tCO2e or US$10 per tCO2e. Six South Central provinces and five Central Highlands provinces with 3.24 million ha of natural forests will sell carbon credits under this agreement.

Tran Hong Nhung from the Legal Department under the Ministry of Finance said that there are two types of goods on the carbon market in Vietnam.

First, greenhouse gas emission quotas allocated by the Ministry of Natural Resources and Environment to establishments subject to mandatory greenhouse gas (GHG) inventory.

Second, carbon credits certified by the Ministry of Natural Resources and Environment are traded on the carbon credit exchange, created from domestic credit creation programs and projects, and created from international credit creation programs and projects.

To create an open market for carbon credit trading, the Vietnamese Government is carrying out a roadmap to complete the legal framework and technical infrastructure by the end of 2024 while improving the management capacity of governmental agencies and the perception of businesses.

In 2025-2027, the carbon credit exchange will be piloted and pilot results will be evaluated. From 2028, the Carbon Credit Exchange will be officially operated.