Vietnam Releases Proposed Amendments to Decree on Greenhouse Gas Reduction

On March, 2024, the Ministry of Natural Resources and Environment (MONRE) of Vietnam published Draft Decree Amending and Supplementing the Decree No. 06/2022/ND-CP on Reduction of Greenhouse Gas Emissions and Protection of the Ozone Layer (hereinafter “the Draft”) soliciting public comment. The Draft proposes to delete, amend, and supplement 21 out of the total 33 articles and several annexes of the Decree 06/2022/ND-CP. The main revisions include i) adding target facilities subject to GHG inventory requirements, ii) making the review of GHG inventory results mandatory, iii) revising the roadmap for allocating GHG emission quotas, iv) clarifying eligibility for companies to participate in the carbon market, and v) adding quota targets regarding controlled substances.

Addition of target facilities subject to mandatory GHG inventory

According to the　Decree 06/2022/ND-CP, facilities that emit GHGs equivalent to 3,000 tons of carbon dioxide (CO2) equivalent or more, or that meet any of the following conditions, must conduct GHG inventory. The specific facility names are stipulated in Prime Minister’s Decision No. 01/2022/QD-TTg (January 18, 2022).

• Coal-fired power plants and different industrial production facilities with annual energy consumption of 1,000 TOE (tons of oil equivalent) or more
• Road transporters with annual energy consumption of 1,000 TOE or more
• Shopping malls, etc. with annual energy consumption of 1,000 TOE or more
• Solid waste treatment facilities with an annual throughput of 50,000 tons or more

Based on a request from the Ministry of Agriculture and Rural Development, the Draft proposes to add a new item “Cattle barn facility with annual capacity of 1,000 head or more and pig barn facility with annual capacity of 3,000 head or more” to the above four conditions.

Mandatory review of GHG inventory results

The implementation schedule for the GHG inventory mandated under the Decree 06/2022/ND-CP is defined as follows:

• Every two years, beginning in 2023, information and data on activities during the previous year shall be provided by March 31, in accordance with guidance from the competent ministries/agencies.
• Every two years beginning in 2024, the GHG inventory data of the facility shall be compiled and a periodic GHG inventory report shall be prepared and submitted to the local People’s Committees by March 31. The initial deadline will be March 31, 2025 (for data from January 1, 2024 to December 31, 2024). Beginning in 2025, this report shall be completed and submitted to the Ministry of Natural Resources and Environment (MONRE) by December 1 of the fiscal year of the above-mentioned GHG inventory reporting. The initial deadline will be December 1, 2025.

The current regulations require that the results of the GHG inventory be reviewed by Local People’s Committees. However, given the critical importance of the accuracy of these results, the Draft proposes to require an independent review by an external review body instead of the Local People’s Committees prior to the submission of the results to the MONRE. Requirements for the review bodies are set to be equivalent to the requirements for review bodies for GHG emission reduction results stipulated by Article 14 of the same Decree. Amendment to this rule is proposed because it has been difficult for review bodies in Vietnam to meet such requirements.

*However, this provision applies only to facilities that will be allocated GHG emission quotas, as described below. Facilities that will NOT be allocated GHG emission quotas will be reviewed by the People’s Committees, as in the previous regulation.

Renewal of GHG Quota Allocation Roadmap

The most important amendment in the Draft is the revision of the emission allocation roadmap. Under the Decree 06/2022/ND-CP, as a basis for the preparation and implementation of GHG emission reduction plans, GHG emission quotas will be allocated to facilities subject to the mandatory GHG inventory for the period from 2026 to 2030. In order to allocate GHG emission quotas, information and data on GHG emissions in 2023 and beyond are required, but many target facilities have failed to provide such information. There is also a recent global trend, where the European Union (EU) has enacted regulations on the EU Carbon Border Adjustment Mechanism (CBAM) on May 16, 2023 (transition period: October 1, 2023 – December 31, 2025) that covers steel, aluminum, cement, electricity, hydrogen, and fertilizer imported into the EU region. The U.S. also plans to apply a system similar to the CBAM to exports from Vietnam (8 product categories).

In such a context, the Draft proposes a tiered allocation of GHG emission quotas, with the largest GHG-emitting industries being allocated first. Specifically, it is divided into the following three phases:

As described above, the Draft distinguishes between “Target facilities that are allocated GHG emission quotas” and “Target facilities that are NOT allocated GHG emission quotas” and proposes to impose the following GHG emission reduction obligations for the period 2025-2030:

• Target facilities that are allocated GHG emission quotas must take and implement GHG emission reduction measures appropriate to their allocated quotas.
• Eligible facilities that are NOT allocated GHG emission quotas must develop and implement GHG emission reduction plans as specified in Article 13 of the same Decree.

Clarified eligibility for businesses to participate in the carbon market

The Draft proposes to designate eligible businesses participating in the domestic carbon market as follows:

In addition, a National Registry System is being considered for the unified management of GHG emission quotas and carbon credits in the domestic carbon market.

Addition of controlled activities

Under Decree 06/2022/ND-CP, the quota is allocated annually by MONRE to manufacturers/importers of controlled substances (detailed list is specified in Annex III to Circular No. 01/2022/TT-BTNMT), which center on ozone-depleting substances (ODS). However, actually, there are businesses that are exporting such controlled substances from Vietnam, so it is currently proposed to add “export” to the scope of application in this draft.