Official Dispatch 1108/LN-KH&HTQT 2024 information on the status of implementing the services of forest carbon sequestration and storage

To: Departments of Agriculture and Rural Development of provinces and cities

In recent times, several localities have received proposals from domestic and international organizations and individuals to explore and propose the implementation of forest carbon sequestration and storage services (forest carbon services), including the measurement, reporting, verification, issuance, and trading of forest carbon credits. However, this is a new field, and the system of legal documents is still incomplete and lacks detail, requiring further research and refinement in the future. The Department of Forestry provides information for the provincial-level Departments of Agriculture and Rural Development to refer to and cooperate in the implementation of this type of service as follows:

I. STATUS OF IMPLEMENTING FOREST CARBON SERVICES

1. Objective of greenhouse gas emission reduction

To implement the Nationally Determined Contributions (NDC), the Government^[1] has assigned the ministries managing specific sectors and fields the targets for greenhouse gas emission reduction by 2030, among these, the sector of agriculture and rural development has been assigned a reduction target of 129.8 million tons of CO₂td. Based on this, the Ministry of Agriculture and Rural Development has assigned the forestry and land use sector a minimum reduction target of 39.31 million tons of CO₂td by 2025 and 79.1 million tons of CO₂td by 2030^[2].

According to the report on the results of REDD+ implementation in Vietnam for the 2014-2018 period, the emission reductions from forests amounted to approximately 56.7 million tons^[3] (with emission reductions of 20.3 million tons and increased carbon sequestration of -36.4 million tons). The results of emission reduction^[4] and increased absorption^[5] were achieved thanks to the nationwide efforts in forest restoration, protection, and development during the past period. Therefore, the forestry sector has the potential and is taking the initiative step by step to complete the necessary conditions, legal document systems, and detailed guidelines to participate in the domestic and international carbon market after fulfilling the NDC commitment obligations.

2. Regarding Programs and Projects for Transferring Emission Reduction Results/Forest Carbon Credits

As of now, Vietnam is implementing only one program for transferring emission reduction results/forest carbon credits, which is the Emission Reductions Payment Agreement (ERPA) for the North Central region, signed on October 22, 2020, between the Ministry of Agriculture and Rural Development and the International Bank for Reconstruction and Development, part of the World Bank Group. According to the ERPA, Vietnam transfers 10.3 million tons of CO₂ to the World Bank (with an additional maximum of 5 million tons of CO₂), at a unit price of 5 USD per ton of CO₂, with a total payment value of 51.5 million USD, of which 95% of the transferred amount will be counted in Vietnam's NDC. To implement this ERPA, the Government issued Decree No. 107/2022/ND-CP on December 28, 2022, prescribing the pilot transfer of emission reduction results and the financial management of the ERPA.

In addition, the Ministry of Agriculture and Rural Development and the Forest Finance Accelerator (Emergent), the administrative agency of the Lowering Emissions by Accelerating Forest finance (LEAF) Coalition, are preparing to negotiate, sign, and implement the Emissions Reduction Purchase Agreement for the Central Highlands and South Central regions based on the Letter of Intent (LoI) signed on October 31, 2021. Accordingly, it is expected that Vietnam will transfer 5.15 million tons of CO₂ from the Central Highlands and South Central regions to LEAF/Emergent for the 2021-2025 period. The entire amount of credits transferred to LEAF/Emergent will be counted in Vietnam's NDC commitments.

In recent, some provinces such as Quang Nam, Son La, Lao Cai, and Thanh Hoa have proposed to develop and implement pilot projects for investing in and trading forest carbon credits. However, these provinces have not yet carried out their projects due to the lack of law regulations and detailed guidelines.

3. Difficulties and obstacles in the implementation of forest carbon services

- Policies and law regulations^[6] have been established but lack detailed provisions and guidelines necessary for the implementation of forest carbon services, including: ownership of forest carbon, regulations on the exchange and transfer of forest carbon, and mechanisms for managing and using revenue from forest carbon services.

- The emission reduction quotas contributing to the achievement of NDC targets and the potential commercially viable forest carbon credits of each locality have not been identified or allocated.

- The information and awareness of many stakeholders regarding forest carbon services are still limited, including: understanding what forest carbon credits are, methods of creating credits, calculation methods for credits, as well as guidelines for validation, verification, and issuance of credits, etc.

- Forest carbon standards and systems for measurement, reporting, validation, and credit issuance to be applied to the domestic carbon market have not been developed.

4. Tasks for implementation in the upcoming period

In accordance with the Prime Minister’s Directive No. 13/CT-TTg of May 2, 2024 on strengthening the management of carbon credits to implement the Nationally Determined Contributions and improving the institutional framework and policies for the implementation of forest carbon services, the Ministry of Agriculture and Rural Development shall carry out the following specific tasks:

i) Assess the potential for emission reduction and carbon sequestration from forests at the national, regional, and local levels by 2030, with consideration towards 2050.

ii) Allocate emission reduction quotas from forests to ecological regions and localities annually for the 2021-2030 period to achieve NDC targets.

iii) Develop national standards for forest carbon credits and detailed regulations on the systems of measurement, reporting, and validation of emission reductions/increased carbon sequestration from forests.

iv) Develop a database and a system for the registration and management of forest carbon credits.

v) Propagate, disseminate, guide, and enhance the capacity of stakeholders regarding the methods of creating, exchanging, and trading forest carbon credits.

vi) Advise on organizing negotiations, signing, and implementing the Emission Reductions Purchase Agreement (ERPA) for the Central Highlands and South Central regions with Emergent and other partners.

vii) Continue researching and refining policies and law regulations to carry out and implement forest carbon services.

II. RECOMMENDATIONS FOR LOCALITIES

Currently, ministries and sectors are developing and completing the legal framework and institutional, technical, and capacity conditions to implement the domestic carbon market and participate in the global carbon market, which includes drafting a Decree to amend and supplement a number of articles of the Government’s Decree No. 06/2022/ND-CP prescribing greenhouse gas emission reduction and ozone layer protection, and developing a Scheme for the evolution of the domestic carbon market, etc. To prepare and be ready for the implementation of forest carbon services, the Department of Forestry provides the information and recommendations for provincial-level Departments of Agriculture and Rural Development as follows:

1. The services of forest carbon sequestration and storage are new issues, currently being piloted in 06 provinces in the North Central region as mentioned above. There are no specific regulations or guidelines for implementation yet, and further research and development are ongoing.

2. The trading, exchanging, and offsetting of forest carbon credits with domestic and international organizations and individuals must comply with law regulations and can only be carried out with the surplus emission reductions after fulfilling the NDC contribution responsibilities according to the allocated quotas.

3. Localities should proactively mobilize and integrate legitimate resources to implement emission reduction/increased absorption measures on managed forest areas to carry out the greenhouse gas emission reduction plan in the forestry sector as outlined in the Ministry of Agriculture and Rural Development’s Decision No. 1693/KH-BNN-KHCN of April 28, 2023 serving as a basis for proposing and implementing projects for transferring forest carbon credits.

4. Currently, the Department of Forestry is compiling a Q&A document on forest carbon services to share information and raise awareness among stakeholders. Provincial-level Departments of Agriculture and Rural Developments of localities that have needs or interest are requested to send questions related to forest carbon services to the Department of Forestry before August 5, 2024, for compilation and issuance.

Contact Information: Ms. Nghiem Phuong Thuy, Specialist, Department of Science, Technology, and International Cooperation, Forestry Department (Tel.: 0912 062 504).

The Department of Forestry hereby informs for reference and implementation./.