Although recent years have seen great efforts in furthering Clean Development Mechanism projects, Vietnam still lags behind other regional countries in terms of CDM-registered projects receiving UN approval.

CDM projects can benefit the environment and firms’ profit margins.

As CDM projects gather speed internationally, such initiatives in Vietnam are moving at a snail’s pace. As of the start of this month, Vietnam had 97 project design documents (PDD) approved by the country’s designated national authority, compared to around 20 projects in the pipeline by the end of 2007. Despite a boom in approved PDDs, the country had only seven registered projects with the UN CDM’s executive board, of which only one, the Rang Dong oil field associated gas recovery and utilisation project, had been granted Certified Emission Reductions (CERs).

This large-scale CDM project, brought 4.5 million CERs (equivalent to 4.5 million tonnes of CO2 reduction) or 1.4 per cent of the world’s total issued CERs for Vietnam and an average annual reduction of around 900,000 tonnes of CO2. Despite these projects Vietnam ranks among the countries with the smallest number of CDM-registered projects and the lowest average annual reduction in South East Asia. The Philippines has 39 registered projects and an average annual reduction of 1.4 million tonnes of CO2 and Malaysia 58 projects and 3.4 million tonnes. China and India take the lead in the global race with 601 projects and 182 million tonnes and 448 projects and 35.9 million tonnes, respectively.

Under the Kyoto Protocol, CDM projects are projects that use clean technology and contribute to the reduction of greenhouse gas (GHG) emissions, which is seen as the main cause of global warming. Countries listed in the protocol’s Annex 1 must limit or reduce their GHG emissions. By setting such targets, emission reductions have taken on economic value.

To help these countries meet their emission targets and to encourage the private sector and developing economies to contribute to emission reduction efforts, the Kyoto Protocol’s CDM allowes industrialised nations to invest in projects that reduce emissions in developing ones as an alternative to more expensive emission reductions at their homes. The CDM provides capital for emission reduction projects contributing to the sustainable development objectives of the host country, which could then capitalise on emission reductions through the sale of CERs from the CDM projects.

A senior official at the Department of Meteorology, Hydrology and Climate Change’s (DMHCC) Climate Change Division and member of Vietnam’s CDM National Executive and Consultative Board, said Vietnam’s modest number of registered projects was due to almost all CDM projects having just been developed recently, while project validation and verification procedures were time-consuming. “It often takes from three months to two years to validate and verify a project, depending on its scale and complexity,” he said, adding that the number of international agencies in charge of validating projects, called Designated Operational Entities (DOEs), was limited and projects were often in a long queue to be validated and verified.

He said that it took the Rang Dong oil field associated gas recovery and utilisation project about 21 months to be validated and two years to be monitored and verified by the UN CDM programme.
He also said around 70 projects initiated in Vietnam were undergoing DOEs’ validation processes. However, the delay is just one of the biggest issues facing projects as developers say DOE validation is not the root of the problem. CDM project legal framework shortcomings and the lack of accurate and official statistics to establish a baseline estimating future emissions in absence of the registered project were the primary hindrances for developers and DOEs in development and validation.

Le Thi Bao Ngoc, a carbon centre manager with the RCEE Energy and Environment Joint Stock Company, said hydropower had been one of the most appealing sectors for CDM projects in Vietnam. However, one of the biggest obstacles for hydropower projects was the lack of a common Baseline Emission Factor (BEF) on the national grid. Since each developer had to establish a baseline on its own, its project has a national grid baseline emissions factor that was different from other projects.

“This [BEF] difference somehow puzzles and confuses DOEs,” said Ngoc. With project developers having to prove the expected reductions would not have materialised without the incentives provided by emission reduction credits, Ngoc said this was a legal concern. “The UN CDM executive board required that a project’s feasibility study report must take into consideration the revenues gained from CER sales. However, Vietnam has no guidance regarding this requirement,” said Ngoc.

A CDM consultant said obtaining licences to use the surface water required for hydropower projects was another headache for investors and consultancy companies. “Under current regulations, this licence can be acquired only after we obtain the certificate of land use right and the reservoir operation process approval,” he said. He noted both papers were issued after the starting date of the project, while CDM procedures needed to be completed before the project came into operation.

He said Vietnam-designated national authority recently allowed investors to delay the licence for six months. But, this provisional measure could not completely address the problem and prevent unhealthy business practices. Experts say it is time for Vietnam to further improve its legal framework, introduce official baselines and give further incentives for CDM projects to catch up with other countries, contributing to the nation’s sustainable development and taking advantage of the global carbon trading market.

VietNamNet/VIR