Vietnam launches first phase in emissions trading scheme

The government announced on Tuesday that Vietnam had officially launched the pilot phase for an emissions trading scheme to encourage three major industrial sectors, namely steel, cement and thermal power producers to reduce the amount of CO2 they produce. According to the decree, Vietnam's thermal power, steel and cement producers will have to purchase allowances that cover their carbon intensity, or the amount of CO2 produced per unit of production.

In its first phase, the scheme will cover approximately 50% of Vietnam's total emissions. This will continue until 2029. The scheme will be extended to other sectors including commercial buildings and cargo transportation.

By the end of the year, the first batch of emission permits for 2025-2026 is going to be distributed to companies. Companies that exceed their emission allowances must buy credits to cover the difference.

This scheme allows firms to offset up to 30% of their emissions through the purchase of credits from low carbon projects in their own country or abroad.

According to Mai Duong, analyst at Veyt (a provider of carbon market data), the new ETS will not have an immediate effect on major industry emissions. The majority of allowances are expected to be free in the first phase.

She said that the priority was to first help organizations adapt to the rules, regulations and system rather than to deliver immediate environmental impact.

Vietnam will use carbon trading to help it achieve its goal of "net zero" emission by 2050.

Vietnam's emission levels have been increasing in recent years. This is mainly due to a rise in coal-fired electricity generation which increased by nearly 18% in the last year. The crude steel production for 2024 is also up 15% from the previous year. (Reporting and writing by Vu Khánh; editing by John Mair).

(source: Reuters)