(VEN) – The Clean Development Mechanism (CDM) market is in its very first stage in Vietnam. Apart from technology, human resources and state financial policies, investors are very concerned about capital for CDM projects.
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Most CDM projects in Vietnam, which have gained recognition from the CDM Executive Board (EB), are medium to small-sized hydropower projects, while technology projects account for only two percent. To encourage businesses to enter the CDM market and to apply solutions to minimize carbon emission during their production, the Vietnamese Government has combined many financial mechanisms with its economic development policies such as the Green Growth Strategy, a prime ministerial decision on financial policies for CDM projects and wind power project development in Vietnam.
|Vietnam has entered the CDM market following the Joint Crediting Mechanism (JCM). Initially a number of projects were concluded under a Vietnam-Japan Development Cooperation Program. However, negotiations over the projects are needed to make them workable. Following the Vietnamese-Japanese JCM, Japanese businesses will lend Vietnamese companies for greenhouse gas emission reductions such as saving energy and applying advanced technology. Nothing is required for JCM-applying businesses. It is important for them to find their partners.|
Vietnam Environmental Protection Fund (VEPF) CDM Department Director Nguyen Anh Dung said, “By March 4, 2013, the Ministry of Natural Resources and Environment had given 287 Letters of Acceptance (LoAs) to CDM projects, and 233 Vietnamese CDM projects had been registered at the EB. The VEPF has granted certificates to 22 CDM projects with 7,198,243 Certified Emission Reductions (CERs). So far 14 of all 22 CDM projects have been verified in terms of fee rates for CER sales and transfer, which have amounted to more than VND42 billion, with more than 70 percent coming from the Rang Dong (Sunrise) associate gas recovery project.”
Fee revenues, which amount to VND42 billion, are too modest when compared with the amount of capital needed for CDM projects. For example, the Vietnam Renewable Energy One-member Co., Ltd.’s wind power project in Binh Thuan Province alone spent VND38.3 billion in the first six months of 2011. The VEPF provided more than VND2 billion for the Department of Hydro-meteorology and Climate Change under the Ministry of Natural Resources and Environment in order for it to work on climate change and CDM from 2008-2012. The VEPF is currently looking for adoption of VND43.5 billion worth of wind power price subsidy from 2012-2013 following the Ministry of Industry and Trade’s proposal.
With fee revenues, which make up 1.2-2 percent of all CER sales and transfers of CDM projects, the VEPF has provided financial support for CDM projects. However, CER fee revenues are modest, while the demand for capital for CDM projects is high and the price of CERs is falling worldwide reaching only US$0.41 per CER on April 17, 2013, causing difficulties for CDM projects. The rapid decline in the price of CERs is partially the result of Europe’s statement showing that after 2012 they would only buy CERs from undeveloped countries, rather than developing ones such as China and Vietnam. Supply has exceeded demand in the global CDM market, while the cost of CER production is higher than CER sales which have discouraged investors in CDM projects. To reach the goal of a low-carbon economy and to better cope with climate change, the government and domestic and foreign organizations need to provide financial support for CDM projects./.
By Minh Ky