The market for buying and selling carbon credits has been in operation for some time now, with the forestry sector being the primary source. Vietnam is expected to be able to sell 57 million carbon credits to international organizations, earning hundreds of millions of dollars. However, this term is still unfamiliar to many individuals.
A carbon credit (carbon certificate) is a business certification that indicates ownership of a specific amount of CO2 or other greenhouse gasses. They are translated into CO2 (Carbon dioxide) equivalents, where one carbon credit equals one ton of CO2 and vice versa.
Understanding the impact of carbon credits presents a strategic opportunity for organizations today. Carbon credits provide considerable benefits, including:
The carbon credit market is an economic system that reduces CO2 emissions by establishing emission limitations and allowing businesses to buy and sell credits. industries that cut their emissions below the limit can sell the extra credits to other industries, encouraging cost-effective emission reduction.
The market is expanding rapidly, both in terms of transaction volume and organizational engagement. The carbon market owes its origins to the United Nations' Kyoto Protocol on Climate Change, which was adopted in 1997.
According to the Ministry of Agriculture and Rural Development, buying and selling emission reduction credits on the carbon market is becoming a more sophisticated process. This is a market in which traded items reduce or absorb greenhouse gas emissions. They are typically transferred between domestic enterprises and international entities.
Carbon credits include polluting industries receiving credit units, which allow them to emit a specific amount of air within a set limit. This restriction is usually adjusted at regular intervals. At the same time, firms can transfer unused credit units to other enterprises in need.
Businesses that exceed the permitted limit must pay for additional credit units. Second, they can earn from lowering emissions and transferring extra credit units.
For example, suppose a corporation produces 12 tons of emissions yet the limit is just 10 tons. They can purchase two credit units from enterprises that emit less than the limit and have excess credit units. This process is confirmed by a third party, and the credit units can be traded on the carbon exchange.
Currently, there are two major versions mentioned: the compliance carbon market and the voluntary carbon market.
Compliance carbon market: Results of countries' obligations under the United Nations Framework Convention on Climate Change (UNFCCC). It compels member countries to follow regulations in order to reduce greenhouse gas emissions.
Voluntary carbon market: Where carbon credits are issued, bought, and traded voluntarily between organizations, companies, or countries. International accords provide no compulsion.
Vietnam, which covers 3/4 of its territory in forest land and resources, has numerous prospects for expanding the carbon market. However, the execution of this market presents numerous problems. Despite the hurdles, developing a CO2 credit trading system is still regarded as an important alternative for firms seeking to cut emissions.
The carbon credit exchange allows enterprises and individuals to acquire and sell greenhouse gas emission rights through activities such as auctions and exchanges. It is also used to manage borrowing and returning emission quotas in order to control and reduce emissions.
Article 17 of Decree No. 06/2022/ND-CP lays forth the plan for building the CO2 credit exchange. As a result, this exchange is expected to start operations in 2028.
Vietnam currently has more than 300 registered carbon credit programs and projects, with 150 of them issuing 40.2 million credits and trading on the international carbon market. However, developing and operating carbon credit schemes necessitates extensive expertise and the involvement of recognized organizations, providing a significant barrier to enterprises.
Understanding this requirement, FPT IS and Carbon EX, a carbon credit trading platform in Japan, have inked a memorandum of understanding to provide services and solutions to help carbon credit projects satisfy global standards. The two sides will exchange information, share knowledge, and encourage technological research and application, with the goal of expanding Vietnam's carbon market to other regions. This collaboration intends to achieve Vietnam's Net-Zero objective by 2050.
FPT IS will collaborate with organizations and businesses in Vietnam to deliver green transformation services, such as project and credit management using technology. Carbon EX, with its expertise in carbon credits, will provide help from inspection to final approval, as well as the development of new processes in accordance with international standards such as the Verra Carbon Standard, Gold Standard, and J-credit.
At the same time, Carbon EX will promote worldwide carbon credit trading, assisting Vietnamese enterprises in effectively creating, operating, and managing carbon credit projects.
Each ton of CO2 discharged into the environment yields one carbon credit. To calculate the number of carbon credits, firms must first estimate the amount of carbon emissions created by a certain activity. Businesses can determine the quantity of carbon credits consumed based on their CO2 emissions.
In November 2020, the Environmental Protection Law was significantly amended, providing new requirements for organizing and expanding the domestic carbon market (Article 139 of the Environmental Protection Law No. 72/2020/QH14). The Ministry of Natural Resources and Environment is in charge of defining the total quota for Vietnam's Emission Trading System (ETS) as well as the process for allocating quota.
On January 7, 2022, the government issued Decree No. 06/2022/ND-CP to further cut greenhouse gas emissions and safeguard the ozone layer. This decree explains Article 91, which deals with the reduction of greenhouse gas emissions, and Article 139, which deals with the formation and development of the carbon market, as outlined in the Environmental Protection Law 2020.
On January 18, 2022, the government released Decision No. 01/2022/QD-TTg, which lists the sectors and facilities that must undertake greenhouse gas inventories. A total of 1,912 facilities are planned to participate in the domestic carbon market. On November 15, 2022, Circular No. 17/2022/TT-BTNMT was issued to specify technical steps for reducing GHG emissions.
To obtain carbon credits, an organization or product must complete the following critical steps:
Step 1 (Greenhouse gas inventory): Determine and properly quantify the greenhouse gases released by the company during industrial activities. Businesses can inventory greenhouse gasses using FPT IS's VertZéro technology solution.
Step 2 (Analysis and evaluation): Examine several components of the manufacturing and transportation processes to appropriately quantify greenhouse gas emissions.
Step 3 (lower greenhouse gas emissions): Develop and implement greenhouse gas reduction strategies to lower the organization's or product's environmental effect.
Carbon credits' values currently fluctuate based on the location and atmosphere during transactions. In 2019, the average price of a carbon credit was $4.33. Meanwhile, in 2020, this amount unexpectedly rose to 5.60 USD per carbon credit before declining to an average of 4.73 USD per carbon credit in 2021.
Currently, there are numerous ways to get carbon credits, ranging from engaging in forest protection projects to implementing circular production processes or utilizing renewable energy. Furthermore, units can purchase carbon credits from reliable exchanges. Businesses must register and certify carbon credits in accordance with the market program regulations.
These forms not only lower emissions, but also provide chances to participate in the carbon market. This opens up new economic prospects while also helping to safeguard the environment.
Selling carbon credits is a complicated procedure. To succeed, firms must have a thorough awareness of the carbon credit market, legal regulations, and customer expectations. Here are some detailed guidelines for selling carbon credits:
VertZéro is a connection between organizations and the Vietnamese business sector, helping firms reach Net Zero targets by 2050. We offer services and solutions to help with the implementation of green transformation projects, such as using technology to manage projects and generate carbon credits.
Additionally, VertZéro is constantly developing new technologies to fulfill global requirements and participate in carbon credit trading operations. We invest in research and collaborate with top experts and consultants on green transformation solutions for organizations.
Understanding the demands of enterprises, we implement two major strategic solutions: a greenhouse gas inventory solution, and ESG reporting. The solution seeks to digitalize the entire process of gathering environmental data, calculating, organizing, and producing greenhouse gas inventory reports. It also evaluates implementation progress and commitments to guarantee conformity with international standards.
