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1. What are Carbon Credits?

Carbon Credits are certificates for commercial transactions, representing the right to emit a certain amount of CO2 or other greenhouse gases (GHGs) into the atmosphere. A Carbon credit is measured in tons of CO2 or the mass of another GHG equivalent to 1 ton of CO2 (tCO2e).

The main goal of Carbon credits is to reduce emissions of CO2 and other greenhouse gases into the atmosphere from industrial activities. Countries will remove emissions from the air through a Carbon Reduction Project. Thereby reducing the phenomenon of global warming.

Carbon credits give the credit holder the right to emit emissions and can be traded to individuals, organizations or countries.

2. History of Carbon Credits

The Carbon Market originates from the 1997 United Nations Kyoto Protocol on climate change. This is the first time there has been international participation in the Carbon market. Under the Protocol, countries with excess Carbon credits are bought or sold by countries that are emitting more or less than the target.

Since then, a new type of commodity called Carbon Credits has been born in the world. Carbon (CO2) is the greenhouse gas equivalent to all greenhouse gases, so transactions are collectively called buying and selling Carbon credits, forming the Carbon market.

By 2005, the Kyoto Protocol officially took effect. The first EU-ETS emissions trading session was conducted in the electricity, steel, oil refining, and cement sectors in 25 member states. Marks the birth of the world's first emissions trading system.

The turning point in international climate policy negotiations was the birth of the Paris Agreement at COP 21 in 2015. Considered a follow-up to the Kyoto Protocol, linked, domestic Carbon markets were also gradually established. formed based on the climate policies and goals of one or more countries and territories.

3. Regarding carbon credit licensing

According to the European Commission, Carbon credits are licenses issued and certified by a competent authority to an organization or project for reducing or avoiding emissions of an equivalent amount of Carbon Dioxide (CO2). The competent authority here can be a government agency or an international organization.

4. What is the carbon market? 

The Carbon Market is a trading system that allows organizations to buy and sell the right to emit greenhouse gases, specifically CO2. Companies or individuals can use carbon markets to offset greenhouse gas emissions by purchasing carbon credits from entities that eliminate or reduce greenhouse gas emissions.

Currently, there are two main carbon markets:

• Mandatory carbon market: Carbon trading is based on the commitments of countries in international conventions, agreements, and programs... to achieve the goal of effectively reducing greenhouse gases. Carbon credits traded in this market are quotas and emission limits, traded on exchanges through GHG emissions trading programs and systems.
• Voluntary carbon market: Market based on bilateral or multilateral agreements between companies, organizations, or countries. Accordingly, the buyer meets environmental, social, and corporate governance policies. And carbon credits when traded in this market must be inspected, certified, and issued by organizations acting as third parties corresponding to the amount of greenhouse gas emissions that have been reduced.

5. About buying and selling carbon credits

Which organizations can sell carbon credits?

The seller of carbon credits can be any organization if the "carbon footprint" of carbon emission activities throughout the entire operation (including direct business, supply chain, and distribution chain) has a total negative net CO2 emission. . They can do this through afforestation projects, protecting ecosystems and the environment, businesses developing renewable energy projects, producing electric vehicles...

Each carbon credit is equivalent to one ton of CO2 or other GHG emissions (NH4, NO2) equivalent. The larger the batch of carbon credits, the higher the value.

Which organizations need to buy Carbon credits?

Carbon credit buyers are businesses with positive net CO2 emissions (>0) such as Companies producing cement, petrochemicals, chemicals, steel, and garments... These fields account for more than 90 % of industrial emissions in the EU, importers will have to report emissions when importing goods.

From 2026, if these emissions exceed EU green standards, these parties must buy "emission certificates" - Carbon Credits. Otherwise, the EU will impose taxes based on the intensity of GHG emissions in the production process in the host country.

6. Carbon credit trading platform

Carbon credits are a special commodity. The Carbon Credit Exchange is the center for processing transactions on buying and selling Carbon credits, greenhouse gas emission quotas, and auctioning, borrowing, paying back as well as transferring greenhouse gas emission quotas ( GHG).

Specifically, the formation of the Carbon Credit Exchange will help connect buyers and sellers in the market with each other, increasing market transparency in carbon valuation. When all buyers and sellers transact on the centralized market, buyers will be able to buy at the most optimal and effective price. In addition, businesses will increase their position and competitiveness, have more sources of profit, promote the development of low carbon emission technologies, increase the use of renewable energy, and reduce greenhouse gases, aiming for a green economy.

7. Some Carbon credit exchanges

Currently, in the world, there are a total of 58 countries developing carbon markets, and 27 countries applying carbon taxes. Some countries apply both. These countries have had many transactions on the Carbon credit exchange, a huge source of revenue, creating an attractive attraction for countries that have not yet participated.

• First to mention the European market, the EU Emissions Trading System (EU ETS) exchange helps EU member countries limit or reduce greenhouse gas emissions by allowing participants to buy or sell gas quotas. waste.
• In the US, the California Cap-and-Trade Progam exchange is operating in the state of California, USA, and is part of the Western Climate Initiative.
• Japan Carbon Credit Trading Scheme (J-Credits): J-Credits floor on the Tokyo Stock Exchange. Initially, there were 188 companies and organizations participating in buying and selling Carbon credits through the use of renewable energy and forest management.
• China National Emissions Trading Scheme: China tested the trading system in 2021.
• In many Southeast Asian countries, there are also Carbon trading floors such as the Singapore Stock Exchange and the Malaysian Carbon Credit trading floor opening in 2022. The Indonesian trading floor will join in 2023.

In the Vietnamese market, it is expected that by 2025, Vietnam will begin the pilot operation of the Carbon Credit Exchange. By 2028, it will go into official operation. Although still quite new, many private entities are already preparing to participate in the voluntary carbon market. Developing renewable energy projects, regenerative agriculture, forest conservation, and marine ecosystem restoration... are potential fields.