New opportunities from the Draft amendment and supplement to Decree 06 on carbon credits

28-11-2024

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In recent times, the global carbon market has developed rapidly, along with the increasing demand for carbon credit trading. However, Vietnam still lacks a comprehensive legal framework to promptly operationalize its carbon credit and emission allowance trading market.

Therefore, it is necessary to revise and supplement Decree No. 06/2022/NĐ-CP, which regulates greenhouse gas emission reductions and ozone layer protection. These amendments aim to facilitate compliance with regulations and advance the country’s goal of achieving net-zero greenhouse gas emissions.

To gain deeper insights into this issue, we had an interview session with Ms. Dang Hong Hanh, Co-founder and CEO of the Vietnam Energy and Environmental Consultancy Joint Stock Company (VNEEC).

Interviewer: In the context of Vietnam’s goal to achieve net-zero emissions, how has the development of the carbon market and the issuance of national policies, particularly Decree No. 06/2022/NĐ-CP, been effective?

Ms. Dang Hong Hanh: In order to fulfill the commitment to achieve Net-zero emissions by 2050, as well as other specific commitments from now until 2030, such as reducing methane emissions, Vietnam has made several policy decisions to promote greenhouse gas emission reductions.

Among these, Decree No. 06/2022 is one of the most important. This decree, under the Environmental Protection Law, is the first to establish the obligation for businesses to reduce greenhouse gas emissions. Businesses are required to report their emissions inventory and meet their obligations for emission reduction.

At the same time, Decree No. 06/2022 affirms and creates new tools and policies for the domestic carbon market. Carbon pricing through the carbon market is identified as one of the crucial instruments to achieve the greenhouse gas reduction goal and fulfill Vietnam’s Nationally Determined Contributions (NDC).

To date, Decree No. 06/2022 stipulates the obligation to report greenhouse gas emissions inventories by businesses, as well as the roadmap to establish the carbon market in Vietnam. It also outlines the responsibilities of various ministries and sectors involved in the process.

This decree marks a turning point for the development of the domestic carbon market in Vietnam. It also provides a very important legal framework for businesses to fulfill their obligations while also participating in the carbon market.

Interviewer: In the process of implementing the Decree, what challenges and difficulties have you observed regarding greenhouse gas emission reductions and participation in the carbon credit market?

Ms. Dang Hong Hanh: Although the Decree was issued in 2022, many challenges remain in its implementation for both the government agencies, supporting organizations, and the business community.

This is a new area, and it is the first time such obligations have been mandated for businesses, so many are still unsure about the process, with several points causing confusion that need clarification.

From the perspective of government agencies, when we conduct capacity-building activities, local authorities face challenges regarding the verification of greenhouse gas inventories. The local government agencies tasked with this, typically provincial People’s Committees, face difficulties because many related departments at the provincial level deal with different aspects of greenhouse gas emissions.

As a result, local governments often struggle to determine which unit should take the lead in these activities. For example, when we enhance the capacity of provincial departments, there is confusion in certain departments. The Department of Natural Resources and Environment, which usually handles waste management, now has to oversee verification of energy-related data and greenhouse gas inventories related to industries like cement. This requires expertise that these departments currently lack.

For businesses, there are challenges due to the lack of detailed guidance and training programs to assist with implementation. Although many departments have worked with various organizations to offer training for businesses in various formats, the training is still limited. For instance, we have conducted training sessions for businesses in different sectors, sponsored by JICA, through the project to strengthen the implementation of Vietnam’s NDC. However, due to the limited number of training sessions, we haven’t been able to reach all businesses that are required to report their greenhouse gas emissions.

The businesses that received training are in seven sectors: cement, steel, beer and alcohol, waste, paper and pulp, textiles, and transportation, but this still doesn’t cover all businesses that need to fulfill their obligations.

Moreover, participating in training is just the first step—it’s more of an icebreaker than a deep dive. There are still no specialists who can guide businesses through the detailed process of fulfilling these obligations. As a result, during pilot implementations at some businesses, even with hands-on support, challenges persist.

Interviewer: Given the challenges mentioned, MONRE is drafting a Decree to amend and supplement several provisions of Decree No. 06/2022/NĐ-CP, dated January 7, 2022, which governs greenhouse gas emission reductions and ozone layer protection. What amendments or additions do you consider the highest priority?

Ms. Dang Hong Hanh: Decree No. 06/2022 has established a legal foundation for the carbon market and promoted activities related to greenhouse gas emissions reporting and investment in emission reductions. However, as it is being implemented, there are several aspects that need further clarification and tightening, and some provisions should be amended to better align with the realities and capabilities of Vietnamese businesses.

For instance, provisions related to the annual verification of emission reductions and regulations regarding businesses participating in emission allowance trading need to be addressed in more detail. As such, Decree No. 06 is being amended to incorporate necessary updates and adjustments to facilitate information reporting, improve the quality of reporting verification, and particularly to expedite the development and operation of the domestic carbon market.

With a functioning domestic carbon market, businesses will have more flexible strategies for reducing emissions, tailored to their specific operational needs. This will allow them to lower their costs for emission reductions and comply with state regulations, compared to a scenario where there is no carbon market and businesses must manage reductions on their own.

The carbon market’s structure will also be adjusted to align with the roadmap and capabilities of businesses, ensuring competitiveness while easing the pressure on smaller companies with limited capacity. The provisions on reporting and verification will be clearer, making it easier for businesses to meet their reporting obligations and ensure the quality of their information.

Ha An – VTVNews

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