In the context of increasingly severe climate change, reducing greenhouse gas emissions is an important goal for every country. Vietnam is no exception when it made strong commitments at the 26th Conference of the Parties (COP26) to reduce emissions and achieve net zero emissions by 2050.
To achieve this goal, Vietnam has demonstrated its determination by:
- Issuing the Law on Environmental Protection 2020 on greenhouse gas emission mitigation in Article 91, protecting the ozone layer in Article 92, organizing and developing the carbon market in Article 139;
- Issuing Decree No. 06/2022/ND-CP dated January 7, 2022 of the Government regulating the mitigation of greenhouse gas emissions and ozone layer protection;
- Second updated Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat on 8 November 2022.
One of the important contents that businesses need to pay attention to is the emission quota.
Emission Quota
An Emission Quota (GHG) is the amount of GHG that a country, organization, or individual is allowed to emit in a specified period of time, calculated in tons of carbon dioxide (CO2) or equivalent tons of carbon dioxide (CO2).
The quota is issued by the Ministry of Natural Resources and Environment and can be traded on the market
Where do emission quotas come from?
The concept of emission quotas originates from the Kyoto Protocol, which was adopted in 1997 and took effect in 2005. This is the first foundation for global efforts to control greenhouse gas emissions, especially from developed countries in Annex I of the Protocol.
The Ministry of Natural Resources and Environment shall base its determination of emission quotas on the national strategy, the results of the greenhouse gas inventory in the most recent inventory period and the emission reduction roadmap, ensuring conformity with the actual conditions and international commitments of each country.
Through the GHG emission reduction targets, roadmap and the results of the GHG inventory in the most recent inventory period of the establishments, the Ministry of Natural Resources and Environment shall submit to the Prime Minister for promulgation of the total GHG emission quotas.
Based on the total GHG emission quotas, the results of the greenhouse gas inventory in the most recent inventory period and the implementation of GHG emission reduction at the grassroots level, the Ministry of Natural Resources and Environment shall preside over and coordinate with relevant sectoral management ministries to develop and promulgate GHG emission norms per unit of product for all types of production and business establishments, and organize the allocation of GHG emission quotas to establishments for the period 2026 - 2030 and annually.
Emission Quota Management
Enterprises and production facilities are only allowed to emit GHG within the allocated quota. There are 3 cases where enterprises emit greenhouse gases compared to the quota:
Case 1: The actual emission of the enterprise is in accordance with the allocated quota;
Case 2: The enterprise invests in production technology, resulting in actual emissions lower than the allocated quota. In this case, the enterprise can:
+ Sell quotas on the carbon market;
+ Transfer to subsequent years in the commitment period;
+ The allocated greenhouse gas emission quota will be automatically recovered by the Ministry of Natural Resources and Environment when the facilities stop operating, dissolve or go bankrupt.
Case 3: The actual emission of the enterprise is higher than the allocated quota. In this case, the enterprise can:
+ Buy quotas from the carbon credit exchange;
+ Borrow the GHG emission quota allocated for the following year;
+ Use the GHG emission quota transferred from the previous year (if any);
+ If at the end of the commitment period, the facility still emits more than the quota, it must pay for the excess GHG emissions and the excess GHG emissions will be deducted from the quota allocated for the following commitment period.
It is worth noting that emission quotas are different from carbon credits. Carbon credits are a type of certificate that represents the reduction of one ton of GHG emissions - 1 ton of CO2tđ. So that businesses can better understand carbon credits, Nanoen will introduce this topic in the following article.
It can be seen that emission quotas are not only a tool for managing greenhouse gas emissions but also promote innovation in the fields of clean technology and renewable energy. The application of emission quotas and Nationally Determined Contributions (NDCs) creates a global platform for efforts to combat climate change, encouraging countries to continuously improve and enhance their commitments, ensuring a more sustainable future.
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Nanoen is a unit specializing in providing consulting services and technological solutions in the environmental field. We are committed to accompanying your business to properly implement regulations related to “Inventory and mitigation of Greenhouse Gas emissions”, through consulting and legal information support. If your business needs more detailed information related to the implementation of Greenhouse Gas Inventory, please contact Nanoen for direct consultation and support.
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