Transition towards a new carbon market mechanism

The workshop brings policy-makers, government officials, researchers, practitioners from CDM service providers, and media together to share key lessons learnt from implementing and managing carbon credits in Viet Nam and other countries. They also discussed how Viet Nam can harness opportunities from the market mechanisms enshrined in the Paris Agreement by transitioning from the Clean Development Mechanism (CDM) to the Sustainable Development Mechanism (SDM).

As detailed international rules are to be set under the framework of the Paris Climate Change Agreement, Viet Nam could make contribution to the formulation and adoption of the rules so that CDM projects are not lost. The outcome of the workshop can help Viet Nam in this endeavor. The discussions also offer options to link the Paris Agreement Mechanism with national climate change policy instruments such as carbon taxes which will help realize Viet Nam’s greenhouse gas emission target in its National Determined Contribution and gradually transform into low carbon development pathway, while generating more revenues.

The CDM was established in 1997 under the Kyoto Protocol. It enables projects in developing countries that reduce greenhouse gas emissions to sell emission credits to developed countries.

Viet Nam has been very successful in deploying CDM. The Prime Minister issued a Decision No. 130/2007/QD-TTg in August 2007 stipulating a number of financial mechanisms and policies for CDM projects.

Viet Nam ranked the 4th in the world in terms of numbers of projects, with over 250 CDM projects to be recognized by the Executive Board of CDM (EB), making a total amount of greenhouse gas reduction potential of about 137.4 million tons of CO2 equivalent in the credit period. The certified emission reduction granted by the EB has been calculated at over 10 million, ranked the 11th in the world.

Viet Nam has accumulated a lot of experience in combining sustainable development and emission reduction, while providing emission credits to industrialized countries at internationally competitive prices.

However, during the last five years, the CDM has suffered due to a crash of the prices of emission credits caused by uncertainty about future international climate policies and lack of political will in industrialized countries to pursue vigorous climate change mitigation policies. Thus both foreign investors as well as the local private sector reduced their activities under the CDM.

With their resuscitation under the Paris Agreement, carbon market mechanisms have again become an increasingly popular instrument for international and domestic climate change mitigation efforts. The mechanisms also reduce costs for achieving national emission targets and generate business opportunities for the private sector./.