Explore the Carbon Market Knowledge Library

A carbon credit is a certificate or permit representing the right to emit one ton of carbon dioxide (CO₂) or the equivalent amount of a different greenhouse gas. Each credit also signifies that one ton of CO₂ has been successfully avoided, reduced, or removed from the atmosphere by a specific project. Essentially, a carbon credit is a tradable commodity that can be bought and sold on the carbon market. Businesses that generate credits through emission-reduction projects can sell them for additional revenue, while businesses that need to offset their own emissions can purchase them to meet their goals.

Compliance Carbon Market

The compliance carbon market is established and operated based on national or international agreements and legally binding commitments to reduce carbon emissions. Key examples include the Kyoto Protocol (which required developed countries to reduce average greenhouse gas emissions by at least 5% below 1990 levels during the 2008-2012 period) and Article 6 of the Paris Agreement. A common model for the compliance market is the Emission Trading System (ETS), also known as "cap-and-trade." Under this mechanism, a government sets a cap on total emissions and then allocates or sells a limited number of emission allowances to regulated entities. These entities are only…

What is MRV?

The Measurement, Reporting, and Verification (MRV) process is a multi-step system for assessing the amount of greenhouse gas emissions reduced or removed by a specific mitigation activity, such as a project to prevent deforestation or improve energy efficiency. The process begins with Measurement (M) of the emissions impact, followed by Reporting (R) the findings to an independent third party. Finally, this third party conducts Verification (V) to confirm the accuracy and integrity of the reported data before carbon credits can be certified and issued. The ultimate goal of MRV is to ensure that an emission reduction or removal is real, permanent, and…

Two foundational international agreements have been instrumental in establishing and evolving the global framework for carbon credits and their trading.

The Kyoto Protocol

The Kyoto Protocol, operating under the United Nations Framework Convention on Climate Change (UNFCCC), was the first international treaty to establish legally binding emission reduction targets for developed nations. To achieve these targets, it introduced three market-based mechanisms: Joint Implementation (JI), Emission Trading (ET), and the Clean Development Mechanism (CDM). Together, these mechanisms established the foundational framework for the global carbon market, creating the first large-scale opportunities…

To achieve its commitment of reaching Net Zero emissions by 2050, Vietnam has been progressively building a comprehensive legal framework to govern its domestic carbon market. The development of this framework can be understood through three distinct phases: the establishment of foundational policies, the issuance of detailed implementation regulations, and the creation of sector-specific guidance.

Foundational policies and Strategic orientations

The groundwork for Vietnam's carbon market was laid by several key strategic documents: | Resolution No. 24-NQ/TW (2013) | This resolution from the Party Central Committee was a landmark document that identified greenhouse gas…