Vietnam pursues policy to allow domestic trading of forest carbon credits
Vietnam is set to establish a legal framework for forest carbon sequestration and storage services with the introduction of a new draft decree. The decree, once finalized, aims to unlock fresh financial resources for forest conservation and support the country's environmental and climate goals.
The draft decree defines a forest carbon credit as the volume of CO₂ absorbed via sustainable forestry practices, which must be measured, verified, and certified by authorized domestic or international bodies. Eligible participants include forest owners, local authorities, and qualified foreign organizations, with domestic entities also allowed to voluntarily offset greenhouse gas emissions.
Service providers must register and implement carbon projects in line with legal requirements, which encompass emissions reduction activities and full measurement, reporting, and verification processes to obtain carbon credits. Projects must align with Vietnam's nationally determined contributions (NDCs) for emissions reduction and operate transparently and responsibly.
Forest carbon services will be delivered through contractual agreements or transactions on a domestic carbon exchange. Service users are legally recognized organizations that must fulfill contractual and financial obligations in accordance with Vietnamese law. Once traded, carbon credits cannot be resold or transferred, and revenues belong to forest owners, who are required to reinvest them in forest protection and development.
The decree also emphasizes a balance between State, forest owners, and stakeholders while upholding Vietnam’s international climate commitments. It separates carbon service provision from carbon credit trading to ensure legal clarity and transparency.
By allowing foreign entities meeting regulatory conditions to participate as service providers and enabling domestic businesses to voluntarily develop and use carbon credits, the decree facilitates involvement from both domestic and international private investors. This opens fresh financial resources for forest protection and development while promoting green economic growth and energy transition.
The draft decree introduces Vietnam's first domestic forest carbon standard. Market-based transactions will allow businesses to buy, sell, or offset credits freely, with prices set by market forces or auctions. The decree simplifies procedures for forest owners, enhancing their autonomy to trade or transfer credits.
The Ministry of Agriculture and Environment will lead the development of standards and oversee monitoring, while the Ministry of Finance will help set pricing methods. Provincial authorities will manage implementation and reporting. Attracting private investment, both domestic and international, is crucial for scaling up afforestation and restoration efforts.
Dr Trần Quang Baố, Director of the Department of Forestry, emphasized the potential benefits of the decree, stating that it has the potential to engage private investors and businesses with the financial and technical capacity to boost forest carbon stocks. The draft aims to address potential conflicts in pricing and benefit-sharing by harmonising the Forestry Law and the Environmental Protection Law.
In summary, the draft decree aims to unlock new funding sources for forest conservation through a transparent, accountable market for forest carbon credits, engaging a broad range of stakeholders including private domestic and international investors, thereby supporting Vietnam's environmental and climate goals.
- The draft decree in Vietnam establishes a legal structure for forest carbon sequestration services, aiming to generate fresh financial resources for forest conservation.
- The decree defines a forest carbon credit as the CO₂ absorbed through sustainable forestry practices, verified by authorized bodies.
- Eligible participants for carbon projects include forest owners, local authorities, and qualifying foreign organizations, with domestic entities also permitted to voluntarily offset emissions.
- Service providers must adhere to legal requirements, including emissions reduction activities and full measurement, reporting, and verification processes to secure carbon credits.
- Projects must adhere to Vietnam's NDCs for emissions reduction and promote transparency and responsibility.
- Forest carbon services will be delivered through agreements or transactions on a domestic carbon exchange, with service users bound by contractual and financial obligations.
- Revenues from carbon credits sold belong to the forest owners, who are required to reinvest them in forest protection and development.
- The decree encourages involvement from both domestic and international private investors by facilitating foreign participation as service providers and enabling voluntary carbon credit use by domestic businesses.
