Accelerate legal framework for forest carbon market: Deputy PM

On May 4, Deputy Prime Minister Ho Quoc Dung chaired a meeting on drafting a decree regulating forest carbon absorption and storage services, as well as the Emission Reduction Purchase Agreement (ERPA) with the Emergent Forest Finance Accelerator.

Forest carbon absorption and storage is one of the five forest environmental services defined in the 2017 Forestry Law. However, it has yet to be implemented due to the lack of specific legal provisions. The meeting thus aimed to discuss the Ministry of Agriculture and Environment’s report on feedback, revisions, and proposals regarding the draft decree, as well as its proposals for emission-reduction transactions.

Decentralizing procedures for issuing forest carbon credits to localities

Reporting to the Deputy Prime Minister, Tran Quang Bao, Director of the Department of Forestry and Forest Protection under the Ministry of Agriculture and Environment, said that as per Resolution No. 01/NQ-CP dated January 8, 2025, of the Government on the main tasks and solutions for implementing the socio-economic development plan and the state budget estimate for 2025, the Ministry is assigned to lead the drafting of the decree.

The Ministry has coordinated the drafting process in accordance with the Law on Promulgation of Legal Documents, including consultations, public disclosure, appraisal, and submission to the Government and the Prime Minister. The draft decree ensures constitutionality, legality, and consistency within the legal system and aligns with Party and State policies.

It is also designed to be consistent with related laws, such as the Law on Forestry and the Law on Environmental Protection, as well as regulations on greenhouse gas emissions reduction, carbon markets, and finance, and with international treaties to which Viet Nam is a party. It also promotes decentralization and simplifies administrative procedures.

The draft includes 4 chapters, 20 articles, and 6 appendices, covering eligible entities, payment methods and levels, management and use of funds for forest carbon services, forest carbon projects, emission reduction results, and carbon credits supplied.

The ministry has proposed adjusting the draft to decentralize the administrative procedure for issuing forest carbon credits to local authorities, in line with the Prime Minister’s directive on administrative reform.

According to Director Tran Quang Bao, issuing the decree would address existing bottlenecks, unlock the forestry sector’s potential, and establish a comprehensive legal framework for localities and forest owners to implement these services. It would also promote the forest carbon market, create new revenue streams, and increase incomes for forest owners and communities, while contributing to Viet Nam’s NDC targets and international commitments.

Among the five forest environmental services (ecotourism, hydropower, clean water, aquaculture), only carbon storage remains without detailed regulations - the final piece needed to complete the legal framework and mobilize financial resources for forest protection. The ministry plans to complete appraisal and issuance of carbon credits for 2021 - 2022 in Q2 2026, and submit proposals for 2023 - 2025 credits in Q3 2026.

At the meeting, Mai Thi Thu Van, Deputy Head of the Government Office, said the draft has incorporated feedback from Government members and added a key provision on decentralizing authority to provincial People’s Committees to issue carbon credits for locally managed forests.

She emphasized the policy of promoting decentralization and delegation of power as directed by the Prime Minister; however, this is a new field in Viet Nam, so it needs to be implemented with caution. The advantages and disadvantages of decentralizing to localities must be clearly analyzed.

Strong decentralization without loosening control to guarantee transparency

Concluding the meeting, Deputy Prime Minister Ho Quoc Dung highlighted that discussions provided a comprehensive overview of the drafting process and the implementation of the ERPA under the LEAF Coalition. As this is a new and unregulated area, difficulties are inevitable, making the decree essential for unified implementation.

He stressed the necessity and urgency of issuing the decree as the ultimate goal is to establish a complete and consistent legal framework for localities and forest owners. It would also define mechanisms for supplying, trading, and transferring emission reduction results, thereby developing a forest carbon market - a sector Viet Nam has yet to fully tap into.

While welcoming the Ministry’s proactive approach, Deputy Prime Minister Ho Quoc Dung said, “Decentralization must go hand in hand with management. Ministries must set standards and strengthen inspection and supervision. Strong decentralization must not mean loosening control.” Alongside decentralization, he called for robust monitoring mechanisms to ensure transparency and efficiency in the carbon market.

Regarding the ERPA, he clarified that the Ministry of Agriculture and Environment has the authority to negotiate and sign the agreement, and must ensure compliance with regulations while drawing on international experience. After the decree is issued, the Ministry is tasked with negotiating the ERPA with Emergent in June 2026.

Reducing emissions from forests, enhancing carbon stocks

Earlier, on October 31, 2022, at the 26^th Conference of the Parties to the UN Framework Convention on Climate Change (COP26), the Ministry of Agriculture and Rural Development (now the Ministry of Agriculture and Environment) signed a Letter of Intent with Emergent, the administrative body of the LEAF Coalition.

Under the Letter of Intent, Viet Nam plans to transfer 5.15 million forest carbon credits from the Central Highlands and South Central regions to Emergent at a minimum price of USD 10 per credit for the 2021 - 2025 period through an ERPA. All credits will be retained to contribute to Vietnam’s NDCs.

The ERPA is expected to mobilize international finance for forest-based emission reduction activities, reduce greenhouse gas emissions by preventing deforestation and forest degradation, enhance carbon stocks, and promote sustainable forest management.

Viet Nam has completed the technical and institutional requirements to access results-based payments under REDD+ from the Green Climate Fund, the Forest Carbon Partnership Facility (FCPF), and the LEAF Coalition.

The Ministry of Agriculture and Environment’s next step is to negotiate, sign, and implement the ERPA after receiving approval from the Prime Minister or once the forest carbon decree is issued, in coordination with relevant ministries and agencies.