Forest carbon credits - opportunities and challenges for the forestry industry

BHG - Carbon credits are the general term for tradable credits or licenses that represent 1 tonne of carbon dioxide (CO2) or the mass of another greenhouse gas equivalent to 1 tonne of CO2.

Carbon emission trading on the market has been carried out through credits. The carbon market originates from the United Nations Kyoto Protocol on climate change, adopted in 1997.

Forest carbon credits are created from the projects and activities of reducing greenhouse gas (GHG) emissions, including Reducing Emissions from Deforestation and Degradation (REDD+), enhancing sinks from afforestation, reforestation, and revegetation (ARR) and improved forest management (IFM).

Natural forests in Ha Giang Province.

Developing forest carbon credit projects is a great opportunity for forest management and protection units in Vietnam, especially in the current context of the large demand for this type of credit in the carbon market. According to 2019 data, the average price of a REDD+ credit was 3.79 USD per credit, and for new afforestation and vegetation regeneration projects was 7.89 USD per credit.

In Vietnam, the Emission Reductions Payment Agreement (ERPA) for the North Central region was signed between the Ministry of Agriculture and Rural Development and the World Bank (WB) on October 22, 2020. Under the agreement, Vietnam will transfer 10.3 million tonnes of CO2 emission reduction in the North Central region during the 2018-2024 period to the WB with a total of 51.5 million USD.

Ha Giang has 387,357 hectares of natural forest and 90,430 hectares of planted forest, with a coverage rate of 58.9%. It is the province with the third largest forest area in the northern midland and mountainous region. Currently, Ha Giang’s forest is a giant carbon sink. This is a new resource contributing to forest protection and development and improving the lives of forest workers, as well as an advantage for the province to attract green investment.

According to the results of the forest inventory by the forestry sector, which were approved by the Ha Giang Provincial People's Committee in Decision No. 456/QD-UBND, dated March 24, 2016, the province has nearly 90,000 hectares of natural forest reserves (including 845.0 hectares of rich forests, 27,754.0 hectares of medium forests, and 61,314.0 hectares of poor forests). These are forest areas that can absorb the most CO2. According to the published results of measuring the ability to absorb CO2 by scientists from the Vietnam Academy of Science and Technology in 2018, the total absorption of the existing natural forest area reached about 9.7 million tonnes of CO2 for a certain period (not including the forests without reserves and planted forests). With the voluntary market transfer price to compensate like the North Central region (5 USD per tonne), Ha Giang can earn over 1 trillion VND. Such massive environmental service revenue will contribute significantly to forest protection and development and improve people's lives.

However, to measure, calculate, appraise and bring to market, as well as find partners for purchasing the above emissions reduction amount, there are still countless difficulties and challenges, such as the current lack of legal framework and guidance on technical regulations detailing transfer, benefit sharing and determination of forest carbon credit prices. There are many different carbon standards in the world, but Vietnam has not yet had any standards.

Currently, Ha Giang is one of the provinces receiving and managing the project of “Building capacity to effectively participate in the high-quality forest carbon market” through aid from CARE International organisation in Vietnam. This is also an opportunity for Ha Giang Province to gradually access the effective forest carbon market.

Nguyen Duc Binh