Conference summarizing the plan for developing and implementing regulations on the management and use of forest environmental service fees.

PV: Could you please tell us about forest carbon credits and the development of carbon markets?

Mr. Tran Duc Thuan:According to the Vietnam Forestry Department, Vietnam is currently implementing only one program for transferring emission reduction results/forest carbon credits. This is the Emission Reduction Payment Agreement (ERPA) for the North Central region, signed on October 22, 2020, between the Ministry of Agriculture and Rural Development and the International Bank for Reconstruction and Development (IB), part of the World Bank Group. Under the ERPA, Vietnam transfers 10.3 million tons of CO2 to the WB (with the possibility of increasing by a maximum of 5 million tons of CO2), at a unit price of 5 USD/ton of CO2, for a total payment of 51.5 million USD; of which, 95% of the transferred amount will be included in Vietnam's Nationally Determined Contribution (NDC). To implement the ERPA, on December 28, 2022, the Government issued Decree No. 107/2022/ND-CP regulating the pilot transfer of emission reduction results and ERPA financial management.

Furthermore, the Ministry of Agriculture and Rural Development and the Forest Finance Enhancement Organization (Emergent), the administrative body of the Alliance for Emission Reduction through Forest Finance Enhancement (LEAF), are preparing to negotiate, sign, and implement an emission reduction sales agreement for the Central Highlands and South Central regions under the Letter of Intent (LoI) signed on October 31, 2021. Accordingly, Vietnam is expected to transfer 5.15 million tons of CO2 from the Central Highlands and South Central regions to LEAF/Emergent during the 2021-2025 period. The entire amount of credits transferred to LEAF/Emergent will be counted towards Vietnam's NDC commitments.

Recently, several provinces have proposed the development and implementation of pilot projects for investing in and trading forest carbon credits, including Son La province. However, to date, these provinces have not been able to implement the projects due to a lack of legal regulations and detailed guidelines.

PV: What is the potential for developing the carbon market in Son La province, sir?

Mr. Tran Duc Thuan:On March 9, 2022, the Prime Minister issued Decision No. 326/QD-TTg allocating national land use planning targets for the period 2021-2030, with a vision to 2050, and the national five-year land use plan for 2021-2025. Accordingly, the forest land area of ​​Son La province is 694,741 hectares; of which, 334,100 hectares are protection forests, 87,831 hectares are special-use forests, and 272,810 hectares are production forests. By the end of 2023, the forest cover rate of the entire province reached 47.5% and will increase to 48% by the end of 2024. Thus, along with the policy of payment for forest environmental services, Son La province has great potential to mobilize financial resources through participation in domestic and international carbon markets when it has all the necessary conditions regarding the system of legal documents, detailed guidelines, and full implementation of its NDC commitments. This financial resource will directly contribute to the protection and sustainable development of forests, improve the lives of forest workers, alleviate difficulties for forest management boards and businesses, and reduce state budget investment in the forestry sector.

PV: Could you please explain the legal basis for Son La province to implement the business of forest carbon credits?

Mr. Tran Duc Thuan:On June 17, 2022, the Government Office issued Notice No. 176/TB-VPCP containing the conclusions of Prime Minister Pham Minh Chinh, agreeing in principle to allow Son La province to develop and implement the "Pilot Project for Trading Forest Carbon Credits". This proposal allows for the implementation of one component of the carbon credit market (carbon absorption from forests), with a pilot mechanism, creating a legal basis for implementation and allowing for the evaluation of effectiveness before the State issues an official regulation for the entire carbon credit market. The development and pilot implementation of the project allows the implementation process to be under the management of local state agencies, ensuring feasibility and reliability for entities participating in the forest carbon credit market.

PV: What are the province's goals for developing its carbon market, sir?

Mr. Tran Duc Thuan:With the goal of generating over 7 million forest carbon credits throughout the period, the province will earn an average of over 100 billion VND annually. This will be a significant non-budgetary resource for the management, protection, and development of the province's forests. Simultaneously, it will effectively exploit the province's potential and advantages; encourage businesses to invest in innovative technologies that reduce carbon emissions, implement closed-loop production, and utilize waste from previous products as raw materials for subsequent products, thereby reducing negative impacts on the environment, ecosystems, and human health.

The Provincial Forest Protection and Development Fund is the unit assigned by the Provincial People's Committee to advise on the development and implementation of the "Pilot Project for Forest Carbon Credit Trading in Son La Province until 2030". The project is built on the basis of the province's orientations, strategies, plans, and socio-economic development programs. Its objectives are to establish a payment relationship between CO2 emitters and carbon absorbers/storers based on the principle that revenue from service users must be paid to service providers; to create a mechanism for mobilizing stable financial resources, contributing to forest protection and development, and increasing income for forest workers. Simultaneously, it aims to gradually form carbon credits that meet standards and liquidity in the domestic and international carbon markets. It also aims to promote investment shifts towards low-emission economic development and leverage state resources. Attracting resources from organizations, businesses, individuals, and international sources, and promoting public-private partnerships on the basis of equality, cooperation, and mutual benefit. In particular, securing additional funding for planting new protective forests and special-use forests with native tree species to increase carbon sequestration capacity.

The development and implementation of the "Pilot Project for Trading Forest Carbon Credits in Son La Province until 2030" is of significant importance, making a positive contribution to the implementation of the national strategy on climate change in the province; contributing to the realization of the Prime Minister's commitment at COP 26: "Vietnam commits to reducing the country's greenhouse gas emissions to 'zero' by 2050". The benefits of the carbon credit market will create a new source of income for emission reduction projects and activities, promote sustainable development, and encourage international cooperation in combating climate change and reducing greenhouse gas emissions.

PV: Thank you, sir.

Source: Son La Newspaper