A key element of Vietnam's carbon credit market

The global carbon credit market is shifting from its early stages to an era defined by transparency and stricter standards. Understanding how mature markets operate and tracking trends from international exchanges can serve as a guiding principle for Vietnamese businesses seeking to maximize project value and attract high-quality capital. 

At the recent “Enhancing policy frameworks and strengthening enterprise capacity for participation in the carbon market” forum, held on April 17 in Hanoi by the Vietnam Chamber of Commerce and Industry (VCCI), speakers agreed that building a high-integrity carbon credit project requires close attention to the entire development process, from selecting methodologies to issuing credits, with a strong focus on quality and integrity.

Lessons from Australia

Australia is among the leading countries in establishing a well-structured carbon market. Mr. Ryan Cook, Program Impact Manager at Australia’s Climateworks Centre, said the country operates a mandatory compliance carbon market and its defining feature is a baseline-and-credit system under the Safeguard Mechanism.

The mechanism applies to more than 200 facilities emitting over 100,000 tons of CO2 annually, he added, or around 30 per cent of national emissions. The operating rules are clear: entities emitting below their baseline receive Safeguard Mechanism Credits that can be sold, while those exceeding the threshold must purchase additional credits to offset emissions.

One key lesson for Vietnamese businesses is how the Australian Government manages prices to prevent market shocks. Mr. Cook said the market saw sharp volatility in 2022 due to supply-demand imbalances and credit hoarding.

To address this, Australia imposed a price cap of $75 per ton for Australian Carbon Credit Units (ACCUs) in 2023-2024, with the ceiling expected to rise to around A$82.68 ($53) in 2025-2026 based on the CPI and a 2 per cent margin. Stable pricing has helped corporate buyers plan long-term finances with greater confidence.

Australia’s market also focuses heavily on nature-based avoided-emission methodologies, particularly savanna fire management. Many projects are operated by indigenous communities, creating co-benefits.

Mr. Cook said these are values that projects in Vietnam could also consider to improve credit quality. Combining effective land management based on traditional knowledge with income generation for local communities can strengthen project credentials and enhance the commercial value of credits in international markets.

Major corporations such as Rio Tinto are investing heavily in these projects to secure stable supply and reduce exposure to spot-market price volatility. Australia’s Clean Energy Finance Corporation, together with a Canadian pension fund, has invested A$25 million ($16 million) in agricultural platforms to generate high-quality credits.

Integrity & quality

Despite the strong potential, commercialization remains challenging. Mr. Saurabh Joshi, Head of Origination & Strategic Partnerships at Climate Impact X (CIX), said that as many as 90 per cent of buyer discussions in the market do not result in completed deals. The main reason is that buyers are becoming more sophisticated and demanding. They are no longer purchasing credits indiscriminately, but rather applying strict standards on integrity and quality.

Today’s buyers rely on three key pillars when making purchasing decisions: whether credits qualify under compliance programs such as the aviation sector’s CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) scheme or Singapore’s carbon tax; whether methodologies are internationally-accepted and documentation is transparent; and whether projects have third-party validation or high ratings to protect corporate reputations.

Beyond the traditional spot market, capital is increasingly flowing into forward markets. Mr. Joshi forecast that, by 2025, the value of forward contracts could surge to more than $12 billion.

Global technology leaders such as Microsoft and Google are driving demand for carbon removal credits, including biochar and direct air capture technologies. Rather than simply offsetting emissions, they aim to permanently remove carbon from the atmosphere. This is a premium segment that Vietnamese project developers could explore to keep pace with global trends.

In Southeast Asia, Singapore is becoming a hotspot, with carbon taxes currently at $45 per ton and expected to rise to $50-$80 per ton by 2030. That is creating a powerful boost to regional demand and pricing for voluntary credits.

Slow but steady

To participate effectively in this market, international experts offered practical recommendations for Vietnamese businesses. Mr. Win Sim Tan, Regional Representative for Verra in Asia and the Pacific, said that based on data from the Verified Carbon Standard (VCS) program, Vietnam consistently has the largest number of VCS projects in Southeast Asia, followed by Thailand and Indonesia.

This indicates that Vietnam is already well advanced within the region. Compared with Malaysia, which has more than 20 projects, or Laos, with around ten, Vietnam currently has about 50 projects. Technically, the country already has local talent that understands how to develop carbon projects. The question now is how to scale up.

Drawing lessons from agriculture, Mr. Tan said businesses in the sector often work with smallholder farmers. Many farmers cultivate separate plots within the same area, but lack the technical knowledge to independently develop and register carbon projects.

To succeed, companies can partner with specialists to help farmers develop and register projects. Businesses may also work with technical partners to register projects while continuing to operate them directly and receive the resulting carbon credits. “This is very important, because it reduces dependence on foreign consultants, which raises costs,” he explained. “Leveraging domestic resources is an approach worth considering.”

The first and most important step, he continued, is conducting a feasibility study. Many projects fail or lose capital simply because this stage is skipped. For example, installing solar panels on a single building may not be viable due to high registration costs, but bundling multiple buildings together to create economies of scale can make the project financially feasible.

Projects also need a clear understanding of the market and potential buyers. Developers must know which markets their credits can serve and engage prospective buyers early. Without understanding buyer expectations on quality and integrity, credits may remain unsold due to weak demand.

Mr. Joshi echoed that view, advising Vietnamese developers to design projects around high integrity from the outset. Accurate and transparent Measurement, Reporting, and Verification (MRV) systems are essential for attracting investment. Projects that deliver added benefits for communities can also command higher prices through additional certifications such as CCB (Climate, Community & Biodiversity Standards) or SD VISta (Sustainable Development Verified Impact Standard).