Amid Vietnam’s urgent need for financial and technological resources to advance its green transition, international cooperation mechanisms such as the Joint Crediting Mechanism (JCM) are emerging as viable pathways to support the country’s sustainable transformation while maintaining economic growth and developing a domestic carbon market.

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 Ministry of Agriculture and Environment and Japan’s Ministry of the Environment, business representatives discussed how Vietnamese enterprises could leverage the JCM - a promising international cooperation mechanism under Article 6 of the Paris Agreement on climate change - to scale up greenhouse gas emission reduction projects and benefit from the carbon credits generated through such initiatives.

Driving low-carbon growth

According to Mr. Iino Satoru, Director of the Global Environmental Bureau at Japan’s Ministry of the Environment, Vietnam is currently one of the most active participants in the JCM, ranking second only to Indonesia in the number of approved methodologies, with 23 out of more than 100 to date. These methodologies serve as the foundation for determining emission reductions, calculating carbon credits, and ensuring full transparency throughout the process. “We have developed clear, user-friendly methodologies tailored to each country’s practical conditions,” Mr. Satoru emphasized.

Vietnam has already developed JCM methodologies in key sectors such as wind and solar power, waste treatment, and energy-saving equipment, making it easier for domestic businesses to adopt low-carbon solutions. Reference emissions levels are also established in line with the Glasgow Guidelines, ensuring no overlap with the country’s nationally-determined mitigation activities.

In addition to building the regulatory framework to accommodate the JCM, some Vietnamese enterprises have successfully partnered with Japanese firms to access advanced technologies and financial support through the mechanism. One notable case is the T&J Green Energy waste-to-power plant in northern Bac Ninh province - a joint venture between Vietnam’s Thuan Thanh Environment JSC and Japan’s JFE Engineering Corporation. Upon completion, the plant is expected to process 500 tonnes of waste daily, with a generation capacity of 11.6 MW, utilizing advanced Japanese waste incineration technology.

Mr. Ohara Takanobu, Deputy Manager of the JFE Engineering Corporation, noted that the project would have been difficult to realize without support from the JCM. As early as 2019, through JCM-related events, the corporation was able to identify a reliable local partner to co-develop the project. Moreover, when seeking financing, the endorsement of a reputable international mechanism like the JCM helped the T&J plant secure a $30 million loan from the International Finance Corporation (IFC), through the Finland-IFC Blended Finance for Climate Program.

Crucially, participation in the JCM enabled the project to be incorporated into Vietnam’s National Power Development Plan for 2021-2030 with a Vision to 2050 (PDP8), as well as Bac Ninh province’s waste management planning. These factors facilitated strong support from local authorities and ensured stable waste input to maintain power generation operations.

Another example is the Hai Anh Wind Power Plant in central Quang Tri province, jointly developed by Vietnamese EPC contractors IPC E&C and ACIT and Japan’s Shizen Energy Group (SEG). This is Vietnam’s first wind power project to receive support under the JCM framework.

Mr. Pham Van Tin, Country Manager in Vietnam at SEG, said the project carries total investment of $58 million, of which 70 per cent was financed by VietinBank. “The JCM played a pivotal role in building our credibility with the bank and gaining the backing of provincial authorities,” he explained. SEG hopes the JCM-backed wind power model will pave the way for many more renewable energy projects around Vietnam. The project’s success goes beyond funding; it stems from confidence in the JCM’s transparent framework and technical support, including methodology development and monitoring / reporting systems.

For carbon market readiness

Looking ahead, experts recommend that Vietnam continue revising Decree No. 06/2022/ND-CP on greenhouse gas emissions reduction and ozone layer protection, in order to fully leverage international cooperation mechanisms like the JCM. This legal revision would enable the establishment of a national registry system, paving the way for the authorization and international transfer of carbon credits under Article 6 of the Paris Agreement.

Mr. Koakutsu Kazuhisa, Director of the Paris Agreement Article 6 Implementation Partnership Center, stressed that strengthening Vietnam’s institutional framework is now crucial to initiate the process of credit authorization. This would allow Vietnam to commercialize JCM credits and participate in international carbon markets. “Japan is closely following Vietnam’s institutional progress,” he said. “Countries like Mongolia and Indonesia have already submitted initial reports to the UNFCCC [United Nations Framework Convention on Climate Change] Secretariat to formally register their JCM schemes under Article 6, and Vietnam is now in the final stages of preparation.”

JCM credits may also be integrated into Vietnam’s future domestic carbon market. Once a carbon credit exchange is operational, validated JCM credits could be traded domestically or internationally, creating a stable financial flow for emission reduction projects.

As a bilateral mechanism, the JCM is more than just financial aid; it facilitates technology transfer and technical training. “Japan will continue supporting Vietnam through the Article 6 Implementation Partnership (A6IP), including assistance in developing new methodologies tailored to Vietnam’s context, funding feasibility studies, supporting MRV (Measurement, Reporting, and Verification) systems, and providing both technical and institutional training,” Mr. Satoru said.

The credit-sharing model between Vietnam and Japan is another step forward in enhancing emission reduction cooperation under the JCM. According to Japanese Government representatives, this model ensures part of the credits are allocated to Japan, while the remainder stay with Vietnam to contribute to its Nationally Determined Contributions (NDCs). This approach safeguards Vietnam’s carbon sovereignty while encouraging ongoing Japanese investment.

“Vietnam can also incorporate the JCM’s established standards and frameworks when developing its legal system for carbon market governance,” Mr. Kazuhisa added. He emphasized that the JCM is well-suited for implementing Article 6.2 in Vietnam due to its transparent, ready-to-use MRV system and simple, reliable methodologies.

Moreover, aligning Vietnam’s future carbon market standards with those of the JCM will ease the transition for both domestic and foreign businesses entering this emerging space. In this way, the JCM could serve as a foundational platform for Vietnam to begin carbon credit commercialization.

“The JCM is one of the most practical tools for developing countries to access carbon finance while achieving their emission reduction goals transparently and reliably,” Mr. Satoru said. Japan remains committed to supporting Vietnam not only in methodology development but also through technical and financial cooperation, ensuring that the JCM continues to evolve into an even more effective model for climate collaboration.

From the Vietnamese side, Dr. Nguyen Tuan Quang, Deputy Director General of the Department of Climate Change at the Ministry of Agriculture and Environment, confirmed that both Vietnam and Japan are working to finalize a new cooperation agreement and implementation guidelines for the JCM’s next phase.