In January 2022, Decree No. 06/2022/ND-CP on mitigation of greenhouse gas emissions and protection of the ozone layer (“Decree 06”) and Decision No. 01/2020/QD-TTg on issuing a list of sectors, GHG emitting establishment subject to GHG emission inventory (“Decision 01”) came into effect. Decree 06 and Decision 01 are key guiding legal documents for the implementation of the 2020 Environmental Protection Law (LEP 2020) and the implementation of the climate change mitigation activities in Vietnam. A notable component of LEP 2020 and Decree 06 is the introduction of compulsory greenhouse gas (GHG) emission inventory as a powerful measure for GHG emission reduction.
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Decree 06 defines that GHG emission inventory involves data collection on GHG emission sources, calculation of GHG emissions and GHG absorption within a specified scope and for a specific year according to the methods and procedures approved by competent authorities. The decree also specifies all establishments subject to GHG emission inventory are establishments with annual GHG emissions from 3,000 tons of CO2 equivalent or more or as follows:
According to Decision 01, a total of 1,912 establishments meeting the above condition are required to conduct a GHG emission inventory and report every 2 years from 2024 onward. Companies may feel burdened and encounter several challenges in the process. However, they may also find many opportunities and benefits from the GHG emission inventory, especially from a sustainable development standpoint.
Challenges
The implementation and reporting of GHG emission inventory in Viet Nam is a new obligation which is outside of normal business operations. It may require additional data, especially non-energy data, which may be different to data used in normal production and business activities. Many companies, especially private companies do not have the technical competence and a thorough understanding of the technical requirements, the inventory cost or how to measure and calculate GHG emissions. They will need to build capacity, conduct internal training, and develop a GHG emission database to conduct and report GHG emission inventory. Corporates may consider using advisory services or third-party verification bodies to ensure comprehensiveness, precision, and transparency of the GHG emission accounting results.
Establishments listed in Decision 01 will be allocated emission allowances and able to join the national carbon market, in addition to the compulsory GHG emission inventory. If the companies’ emissions exceed the emission cap, they will need to participate in a national trading mechanism to buy more allowance or pay a fine for the exceeded amount according to regulations.
Opportunities
GHG emission inventory identifies the sources of emissions, quantifies, and keeps track of the GHG emissions and absorptions over time. This facilitates companies to manage their emissions, review enterprise-level risks from low carbon transition, and determine corresponding measures. Managing these risks increases production and business efficiency, and ensures business sustainability. Besides, GHG emission inventory serves as the fundamental step for businesses to move towards low carbon development targets and net-zero target. Companies can also gain profits from selling allowances and carbon credits in the national carbon market by implementing GHG emission reduction measures. Because there are more and more people care about sustainability and transparency, emission management and reduction can enhance the value of the company to attract more potential investors, customers, and employees.
Pham Phuong Linh
References
Decree No. 06/2022/ND-CP on mitigation of greenhouse gas emissions
Decision No. 01/2020/QD-TTg on issuing a list of sectors, GHG emitting establishment subject to GHG emission inventory
https://www.wri.org/research/bottom-line-corporate-ghg-inventories
https://vietnamnet.vn/en/companies-stumped-by-ghg-emission-obligations-2055838.html
