High price for forest carbon credits depends on environmental integrity

This information was presented at the seminar, "The Carbon Market - From Policy to Practice," held on November 26. The event was part of the international dialogue, "Global and Vietnam Carbon Market Orientation: Assessments after COP30 and Next Steps," co-organized by the University of Economics (Vietnam National University, Hanoi), Flinders University, CARE International in Vietnam, the Center for International Forestry Research (CIFOR), and the University of British Columbia.

According to the World Bank’s Carbon Pricing Trends and Reality Report 2025, forestry and land use projects led the number of new registered projects in 2024 alone. Nature-based carbon removal credits command a significantly higher price and greater price resilience compared to other types of carbon credits, including emission reduction credits. This group of credits is expected to play a core role in compliance with many countries' Nationally Determined Contributions (NDCs) starting in 2026.

Dr. Luu Tien Dat, Deputy Head of the Science, Technology, and International Cooperation Division under the Department of Forestry and Forest Protection (Ministry of Agriculture and Environment), stated that this trend is consistent with a new global standard: forest carbon credits are only accepted when they guarantee absolute environmental integrity, additionality, permanence, and transparency. This is no longer merely a technical requirement but is becoming a standard of competition for nations and enterprises in the international market. Consequently, forests are now being positioned as an ecosystem service asset with stricter integrity requirements than ever before.

In Vietnam, the service of forest carbon absorption and storage was addressed in the 2017 Forestry Law and is one of the five types of forest environmental services.

The payment mechanism for forest environmental services has been implemented for over a decade, with total revenue reaching more than 30 trillion Vietnamese Dong by the end of 2024. Revenue from forest carbon services through the pilot North Central emission reduction program accounted for 4% of this total, despite only being implemented since 2023. This clearly demonstrates the potential of carbon as an additional financial resource for the state budget for the forestry sector.

To institutionalize the mobilization of financial resources from forest carbon services, the Department of Forestry and Forest Protection is urgently advising on the construction of a legal framework and technical conditions to prepare for participation in domestic and international forest carbon markets. The legal framework must aim not just at selling credits, but at building a high-quality forest carbon market system linked to sustainable forestry development, community livelihoods, and the nation’s international reputation.

Dat reiterated the opinion of a leader from the Department of Climate Change at the opening session of the dialogue on November 25, underscoring Vietnam's consistent view on establishing a carbon market: It is a tool to transition to a low-emission growth model. Vietnam is not pursuing high volumes of cheap credits but is focusing on quality to ensure national interests and international prestige.

The practical experience of pioneering countries shows that the typical barriers Vietnam needs to overcome include clearly defining land use rights, stakeholders’ benefits from credit revenue, and challenges in data collection for Measurement, Reporting, and Verification (MRV).

According to Dat, Vietnam is promoting the traceability of carbon in its wood processing and aviation industries. This presents a major opportunity to link forest carbon credits with the sustainable wood value chain, creating a competitive advantage for businesses and encouraging private sector participation in the market.

The global market has shifted sharply from low-cost reduction credits to removal credits with long-term sequestration, placing forestry at the centre of compliance demand. International buyers increasingly require clear land-use rights, transparent benefit-sharing, and detailed monitoring data, making community participation and provincial-level governance crucial.

Vietnam’s positioning is favourable due to its 14.8 million hectares of forest, longstanding experience with forest environmental service payments, and early engagement with results-based payments through the North Central emission reduction program. However, the country must upgrade digital infrastructure for monitoring and establish consistent rules for credit ownership between the state, local authorities, and private entities. As global prices for high-integrity removal credits remain resilient, countries able to ensure robust governance are expected to capture the strongest market share in the coming years.