Vietnam has successfully executed a landmark transaction, selling 10.3 million tonnes of CO2 emission credits to the World Bank for nearly VND1.25 trillion VND ($52.74 million), as confirmed by the Ministry of Agriculture and Rural Development to the prime minister on December 28.

This marks a significant stride in both the environmental and economic realms for the country.

The carbon credits, derived from the forest regions of north central Vietnam, are part of the Emission Reductions Payment Agreement (ERPA) established on October 2020 between the International Bank for Reconstruction and Development (IBRD), part of the World Bank Group, and Vietnam’s Ministry of Agriculture and Rural Development.

The first phase of the ERPA involved transferring 10.3 million tonnes of CO₂ to the World Bank, valued at $51.5 million. This translates to about $5 per tonne.

In early August, the World Bank disbursed $41.2 million, covering 80 per cent of the emission reductions stipulated in the ERPA. The remaining balance of $10.3 million will be settled following the complete transfer of CO₂.

Funds from this transaction are earmarked for distribution among forest owners, local authorities, and organisations tasked with natural forest management. A portion of the proceeds will also be allocated to initiatives aimed at reducing forest loss and degradation, thereby enhancing the income and livelihoods of those involved in forestry.

The Vietnam Forest Protection and Development Fund is designated as the central entity for receiving, managing, and utilising the funds from the ERPA.

This includes coordination with the Forest Protection and Development funds of six provinces in the north central region: Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, and Thua Thien-Hue.

Beyond the credits already sold, the World Bank confirmed a total reduction of 16.21 million tonnes of CO₂ for the entire north central region in the first period (January 1, 2018-December 31, 2019), of which 10.3 million tonnes were part of the ERPA transfer.

“The World Bank is keen on acquiring an additional one million tons out of the remaining 5.91 million tonnes of CO₂. We are currently seeking governmental approval to develop a plan for trading or transferring the residual 4.91 million tonnes, to further support forest protection and development in the region,” the ministry official said.

Forest carbon credits are generated through greenhouse gas emission reduction activities such as curbing deforestation and forest degradation, and promoting afforestation, reforestation, vegetation restoration, and enhanced forest management. These credits provide an opportunity for forest owners to monetise the CO₂ absorption capacity of their managed forests in the burgeoning carbon market.

Vietnam Investment Review