Carbon credits are not money falling from the sky, nor are they an excuse for businesses to delay action. Implementing a carbon credit project is not easy or cheap. In fact, there are currently misunderstandings about carbon credits. A correct and clearer understanding of carbon credits helps businesses avoid falling into a state of excessive optimism or extreme skepticism, missing out on opportunities with this tool...
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Lawyer Truong Tu Long, Sustainable Development Policy Expert, Vietnam Green Innovation JSC.
In recent years, carbon credits have become an important tool in corporate and national climate strategies. However, there are misconceptions that are hindering their effective use and access.
On the one hand, many people are overly optimistic about the profit potential from selling carbon credits, thinking that this is an “easy way to get rich.” On the other hand, companies are still hesitant and do not dare to buy carbon credits for fear of being accused of greenwashing.
During the green transformation consulting process, Lawyer Truong Tu Long, Sustainable Development Policy Expert of Vietnam Green Innovation Joint Stock Company (GREEN IN), said that he encountered many such misunderstandings and often took time to explain and clarify before providing suitable solutions for businesses.
DOING A CARBON CREDIT PROJECT IS NOT AS EASY AND CHEAP AS MANY PEOPLE THINK
PV: Sir, the term carbon credit has become more and more popular since COP26, along with many stories about the benefits of carbon credits from very normal activities, such as Ben Tre farmers "sitting still" can earn hundreds of billions of VND from carbon credits, or rice farmers sell carbon credits... In your opinion, can carbon credits be easily created from available resources?
LS: The answer is clearly no. There is a lot of misinformation in the media that makes people think that getting carbon credits is easy.
I agree that coconut trees have the ability to absorb and store carbon, but that alone is not enough because to generate carbon credits, a project must demonstrate additionality.
First, the project's activities help reduce or avoid greenhouse gas emissions into the atmosphere compared to the absence of the project.
Second, the project owner must demonstrate the need for the funds generated from selling carbon credits. Specifically, without that money, the project will face difficulties, cannot be maintained or expanded in scale, or even cannot be implemented.
PV: So if we want to get carbon credits according to the correct procedure, what should we do, sir?
LS: If you want to get carbon credits from coconut trees, you first need an organization that can gather a project area of significant scale. The project must be large enough to generate enough revenue to cover costs and ensure the expected profit for the project owner. At the same time, they must also prove that the project will need money from carbon credits to implement emission reduction actions.
Possible activities to generate credits include using coconut by-products to create biochar, or combining sustainable farming practices such as increasing the time to cut down coconut trees to collect coconut tubers, reducing the amount of nitrogen fertilizer or changing the way nitrogen fertilizer is applied to limit nitrous oxide (N2O) emissions...
To demonstrate results, they will have to conduct highly technical work such as measuring, monitoring, and independently verifying/verifying the project's greenhouse gas emission reduction or avoidance results.
Finally, the carbon credit obtained is not the entire amount of CO2 absorbed and stored by coconut trees as many people think, but only corresponds to the amount of CO2 from project activities that help reduce or avoid emissions into the atmosphere.
In addition, project owners must also bear and take precautions against risks such as leakage or reversal. For example, improperly stored biochar can burn, causing greenhouse gas emissions to be released back into the atmosphere.
When these risks occur, the project owner will be the one to bear the losses, from not receiving money from selling carbon credits to having to compensate the buyer for not delivering enough credits according to the signed contract.
Through the points I analyzed above, it is clear that doing a carbon credit project is not as easy and cheap as many people think.
BUSINESSES NEED TO UNDERSTAND CARBON CREDITS
PV: Currently, many people still believe that carbon credits are only created from tree planting and afforestation when a series of afforestation activities are introduced as aiming at the Net Zero target. Is this understanding complete, sir?
LS: Carbon credits do not only come from “tree planting – afforestation” activities. In fact, carbon credits can be issued from many types of projects, such as renewable energy projects, projects to reduce fossil fuel consumption in transportation, waste treatment projects, smart agriculture. And carbon projects from forests are one of them.
Even with forest carbon projects, the value of carbon credits comes not only from trees, but also from ecosystem conservation and restoration activities such as: soil regeneration, biodiversity enhancement, erosion prevention, and support for local livelihoods. Projects with more co-benefits are often valued higher by buyers.
PV: Buying carbon credits allows businesses to offset emissions that exceed a threshold. Is it true that businesses can become carbon neutral simply by buying enough credits? Is this thinking correct, sir?
LS: Committing to a Net Zero roadmap or achieving carbon neutral certification are typical actions to mark a company’s green transformation journey. Many companies around the world, as well as in Vietnam, have been certified for that.
However, many people mistakenly believe that simply buying carbon credits to offset costs does not require companies to do anything else to reduce greenhouse gas emissions. This is a common and dangerous misconception, often referred to as Greenwashing.
We should not think of carbon credits as “emission permits,” but rather as a last resort for unavoidable emissions.
There are common misconceptions about carbon credits - Photo 1
Currently, to achieve Net Zero certification under the SBTi standard, businesses need to reduce their emissions by at least 90–95% by 2050 and can only offset the remaining amount (up to 5–10%) with high-quality carbon credits.
Similarly, the ISO 14068-1:2023 carbon neutrality standard also requires businesses to reduce emissions as much as possible, and then purchase carbon credits to compensate for the emissions that cannot be reduced.
PV: In addition to the above, in your opinion, are there any other misunderstandings that businesses often make that need to be changed?
LS: Many businesses today still confuse carbon credits and emission quotas. Because both are measured in tons of CO2e, it is easy to misunderstand, but in other aspects, they are completely different.
First of all, carbon credits are generated from activities that reduce/avoid emissions or remove greenhouse gases from the atmosphere. While emission allowances are emission rights granted by the Government to establishments participating in the mandatory carbon market (ETS).
Second, in terms of function, carbon credits are financial instruments to promote actions to reduce emissions. Meanwhile, emission quotas are policy instruments for the Government to control the total emissions of businesses, sectors and countries.
Third, in terms of market trading, carbon credits can be traded on the voluntary carbon market or on the emissions trading system (ETS), for example in Vietnam in the near future. While emission allowances are only traded on the ETS.
Clearly, carbon credits are not a windfall, nor an excuse for companies to delay action. When understood and used properly, they are a useful tool for all parties to achieve their goals. It is important to understand the nature of carbon credits, and avoid falling into either extreme of excessive optimism or extreme skepticism.
Source: https://vneconomy.vn/dang-co-nhung-cach-hieu-lam-pho-bien-ve-tin-chi-carbon.htm