Beyond the three pioneering sectors already involved in carbon trading – thermal power, steel production, and cement – the Ministry of Agriculture and Rural Development will collaborate with other ministries and sectors to identify additional fields with high potential and readiness for market entry.

Speaking at the "From CBAM (Carbon Border Adjustment Mechanism) to the Carbon Market" seminar on 23/6, Dr. Nguyen Thanh Cong, Deputy Head of the Carbon Market Department at the Ministry's Climate Change Agency, highlighted electric vehicles and F&B processing as two sectors leading Vietnam's emissions reduction efforts. He believes businesses in these areas are well-placed for future carbon market participation.

Dr. Nguyen Thanh Cong, Deputy Head of the Carbon Market Department, Climate Change Agency, Ministry of Agriculture and Rural Development, at the event. Photo: Dan Tri

Dr. Nguyen Thanh Cong, Deputy Head of the Carbon Market Department, Climate Change Agency, Ministry of Agriculture and Rural Development, at the event. Photo: Dan Tri

Market involvement offers these businesses an additional financial resource for reducing greenhouse gas emissions while also preparing them for potential carbon pricing measures from importing countries.

Globally, similar businesses have successfully monetized their emissions reduction strategies. Tesla, for example, earned nearly 3 billion USD from selling carbon credits last year, 150% more than in 2023. This revenue significantly offsets initial electric vehicle production costs.

Carbon credits are tradable permits or certificates granting the holder the right to emit one ton of CO2 or an equivalent amount of other listed greenhouse gases.

"Tesla serves as a prime example for Vietnamese electric vehicle manufacturers", Cong stated. He added that many global beverage companies, including Coca-Cola and Heineken, have set Net Zero emission targets for 2050 or earlier.

In Vietnam, transportation is one of six sectors required to report greenhouse gas inventories according to the 2024 list, given its annual emissions of 32.9 million tons of CO2 equivalent (CO2e).

Ho Chi Minh City is exploring carbon credit generation from transport emissions reductions, prioritizing the electrification of buses and delivery vehicles. Subsequent priorities include emissions reductions from the metro system by discouraging private vehicle use and installing solar panels on station roofs. The city aims to transition 80% of ride-hailing motorbike drivers to electric vehicles by 2027, contingent on financial support, registration fee waivers, and VAT exemptions.

Currently, Selex Motors is the only company with a registered carbon credit project. The project plans to sell credits over five years, representing a total emissions reduction of over 197,000 tCO2.

The carbon market presents business opportunities, such as investments and selling credits to facilities exceeding their emission quotas. Decree 119 on emissions quota allocation allows thermal power, cement, and steel companies to purchase carbon credits up to 30% of their allocated quota for offsetting. "This is a relatively high and flexible figure for businesses participating in the market to comply with greenhouse gas emission quotas", Cong explained.

Explaining the Carbon Border Adjustment Mechanism (CBAM), Cong compared it to a carbon tax on goods imported into the European market. This mechanism is currently in a transitional phase until the end of this year and will be implemented from 2026 for high-emission sectors like iron, steel, fertilizers, and cement.

Under CBAM regulations, EU businesses must submit quarterly reports on the greenhouse gas emissions of imported products. These reports include data on total imported goods, production emissions, and existing carbon pricing mechanisms in exporting countries.

Singapore, for instance, currently levies a 25 USD tax per ton of CO2. The final adjustment price paid by EU businesses will be offset by the exporting country's tax to avoid double charging. Vietnam, however, lacks a carbon pricing mechanism or tax. Exporting one ton of steel would require a Vietnamese business to purchase carbon credits equivalent to the emissions from producing that steel. Without emissions reduction measures, CBAM costs could reach 20-35% of the goods' value.

Dr. Cong believes it would be more beneficial for Vietnam to retain carbon pricing, similar to Singapore, to keep resources within the country and allocate them to green initiatives. The Ministry of Agriculture and Rural Development is working with relevant ministries to establish a domestic carbon market and pricing mechanism, thus reducing export costs for businesses trading with the EU.

Thuy Truong