Vietnam was among the first countries to sign a bilateral Joint Crediting Mechanism (JCM) with Japan, starting from July 2, 2013, with projects aiming to cut greenhouse gas emissions through technological solutions such as improved energy efficiency and the use of renewable energy. Japan has committed approximately $35 million in financial support to the task.

“Many carbon credit-generating projects under the JCM have achieved initial success in countries that have established bilateral cooperation frameworks with Japan,” said Dr. Nguyen Phuong Nam, International Reviewer of the United Nations Framework Convention on Climate Change (UNFCCC) and CEO of KLINOVA Climate Innovation & Consulting. “The experience gained from implementing the JCM is extremely valuable for developing countries like Vietnam, as it helps shape discussions and understanding of how bilateral climate cooperation under Article 6 of the Paris Agreement can work in the future.”

Worldwide impact

The JCM has now been rolled out in 30 partner countries, attracting over $3 billion in total investment across more than 250 projects. These initiatives are gradually being integrated into the Paris Agreement framework, supporting emission reduction goals while ensuring transparency and avoiding double counting.

According to KLINOVA, Indonesia has registered 31 JCM projects since 2013, with a standout example being a power generation project at the PT Semen Indonesia (Persero) Tbk cement plant utilizing waste heat. Located in Tuban province in East Java, the project cuts greenhouse gas emissions by optimizing waste heat recovery systems to generate electricity.

Developed and registered in 2013, the project was issued carbon credits for the 2018-2020 period. The Joint Committee of Japan and Indonesia approved 46,938 credits over three years, equally split between the two countries. This is currently the largest carbon credit-generating JCM project among the 13 certified in Indonesia.

In Thailand, from 2013 to 2020, developers successfully registered eleven JCM projects. Of these, five have been issued carbon credits out of 25 submitted proposals. One key project is the waste heat recovery power generation initiative in Thailand’s cement industry, implemented in Saraburi province by the Siam City Power Company in collaboration with Siam City Cement. The country’s cement sector has made notable strides forward in deploying this technology, driven by both environmental and economic motivations.

The project’s main goals are to reduce any reliance on the national grid, lower operating costs, and cut CO₂ emissions from one of Thailand’s highest-emitting industries. It is currently the largest JCM project successfully registered in Thailand, and expected to generate around 29,000 carbon credits annually between 2018 and 2030.

In Mongolia, a JCM agreement was signed with Japan in 2013, with six projects having now been registered, of which five have received carbon credits. Four of the projects focus on renewable energy and two on energy efficiency, with the most recent registration completed in 2023.

This latest project involves a 15 MW solar power system near the new international airport in the capital Ulaanbaatar and is projected to generate up to 18,000 credits a year, making it a strong candidate for the largest JCM project in Mongolia. Previously, a 12.7 MW solar plant serving Ulaanbaatar’s suburban areas, registered in 2017, held the record, with 44,299 credits issued between 2017 and 2020.

While Cambodia has only registered six JCM projects to date, fewer than other Southeast Asian countries, the REDD+ project in the Prey Lang-Stung Treng Wildlife Sanctuary stands out. It has registered 200,000-400,000 carbon credits annually and successfully issued 612,525 credits from 2018 to 2020; the highest single issuance under the JCM to date worldwide.

Beyond Southeast Asia, JCM projects have also been registered between 2013 and 2020 in South Asia, Africa, Eastern Europe, Central America, and Latin America. However, most of these remain small in scale and are still in the early stages of registration, with a relatively limited number of projects and issued credits in these regions, Dr. Nam said.

Vietnam’s progress in JCM framework

According to the Department of Climate Change at the Ministry of Agriculture and Environment (MAE), the JCM has posted several notable results in Vietnam, including the establishment of a bilateral Joint Committee, the approval of 15 methodologies, and the registration of 14 projects, most of which focus on energy-saving measures and equipment upgrades to improve energy efficiency.

To date, 35,000 carbon credits have been issued in Vietnam. Several other projects are still under development. In addition to those registered, Japan continues to provide financial support for the development and implementation of more than 30 new JCM projects planned for the 2021-2030 period.

Dr. Nam said recent JCM projects in Vietnam mainly involve biomass boiler systems, the installation of high-efficiency air conditioning equipment in factories, and rooftop solar power systems. All of these initiatives aim to enhance energy efficiency in industrial plants and major electricity-consuming facilities across the country.

Each project is designed to generate carbon credits in the most streamlined and accessible manner, contributing to the emission reduction goals of both Vietnam and Japan. The initial financial support from the Japanese Government, along with the transfer of advanced technologies, is considered a major advantage in project implementation.

Dr. Nam underlined that the JCM has key strengths, including its simplicity, transparency, and flexibility in developing methodologies. The mechanism supports successful registration and credit issuance for projects of all sizes and scales.

Moreover, the JCM allows for the adoption of a wide range of best-available technologies to support emission reductions at source. This makes it particularly well-suited to small and medium-sized enterprises (SMEs) in developing countries like Vietnam, where operational and technological capabilities are often moderate.

However, since JCM projects still operate under a bilateral cooperation model - between Japan and the host country - with up to 50 per cent of the initial investment funded by the Japanese Government, domestic project developers often remain dependent on external partners.

In addition, the issue of carbon credit ownership, as well as the rights to trade them under the JCM or other compliance or voluntary mechanisms, must be addressed through clear policies and regulations. These should be based on consensus among stakeholders, particularly concerning reinvestment or scaling up of ongoing projects.

“With Vietnam’s proactive, flexible approach to developing carbon market policies, registered JCM projects show strong potential and feasibility,” Dr. Nam emphasized. “This remains true while awaiting technical guidelines from the UNFCCC Secretariat and Vietnam’s own regulations for implementing Article 6 of the Paris Agreement and other emerging carbon trading mechanisms.”

At a recent forum entitled “Promoting Business Engagement in the Joint Crediting Mechanism (JCM) in Vietnam towards Readiness for Vietnam’s Carbon Market”, co-hosted by the MAE and Japan’s Ministry of the Environment, Mr. Nishimiya Koji, Senior Advisor at Idemitsu Vietnam, said the company is currently developing its first carbon reduction project in Vietnam.

“Though the project is not under the JCM framework, it integrates multiple approaches,” he explained. “The challenge lies in adopting a diversified strategy to mitigate risks in the event of policy shifts, whether towards stricter or more flexible rules. We can improve and expand upon advanced methodologies by combining them with the JCM or other mechanisms; that’s where the opportunity lies.”

Mr. Koji also suggested that if Vietnam considers mechanisms such as Gold Standard or Verra, it should also study the JCM carefully, including its strengths and limitations. Based on that, policies and processes should be developed to fit local circumstances, particularly for farmers, who often lack the technical knowledge to interpret complex indicators. “We need expert teams to examine how to apply these mechanisms effectively in specific, real-world conditions,” he believes.