Large Potential for CDM Projects in Vietnam

Vietnam has recently, with Danish support, developed into a very potential market for developing climate friendly investment projects applying the Clean Development Mechanism (CDM). A new report outlines the most potential sectors for applying CDM in Vietnam

The Clean Development Mechanism (CDM) establishes a trading scheme where both developed and developing countries can benefit from making climate friendly investments. Under this scheme, developed countries fulfil their international obligations for reducing emissions with relatively small economic costs, while developing countries receive technical and financial resources to promote sustainable development and invest in Green House Gas (GHG) reducing projects that would otherwise not have been implemented.

The number of CDM projects in Viet Nam is increasing month by month, however still dominated by hydropower projects. A new report, which can be downloaded here, identifies the most promising sectors in Vietnam for CDM. The report summarizes the sector status, GHG mitigation potential, and analysis of eligibility of mitigation activities under the CDM rules.

Analyzing data from countries around the world, finding relevant sectoral information in Vietnam, and making comparisons have resulted in a screening of the five most potential gross-sectors, which are identified as renewable energy, methane avoidance, biomass energy, energy efficiency and fuel switch.

The sectoral analysis with expert interviews, data surveys and field trips has been conducted for each promising sub-sector within each gross-sector in order to identify potential CDM projects. The theoretical gross-potential emission reductions from these five gross-sectors exceed 30 million tons of CO2 equivalents (tCO2e) per year.

The promising sectors of wind energy, biomass energy, waste treatment, and wastewater treatment have not received adequate investments and attention yet, although there should be good potential in these areas. With the CDM financial incentive it is expected that the number of CDM projects in these areas will soar in the near future.

The potential in the energy efficiency and fuel switch sectors are not yet sufficiently interesting from a commercial point of view due to the rather small size of most industrial enterprises in Vietnam. Unburned brick manufacture and natural gas power plants are sectors, which generate considerable amount of emission reductions. Other energy efficiency and fuel switch investment projects do not generate adequate amount of so-called Certified Emission Reductions (CERs) to be considered attractive, or are facing difficulties with proving the necessary additionality as required by the CDM rules.

The main barriers for the realization of CDM projects are technologies and finance. Applying a state-of-the-art and greener technology may cause unwanted risks such as inadequate staff, repair problems due to the lack of spare parts and non-proven performance. Large investment capital, high interest rate and stricter borrowing conditions prevent many projects from being materialized. Low or non-existing feed-in-tariffs causes many Vietnamese companies (the project owners) to delay their wind power projects because even with the CDM revenue, these projects still are not commercially feasible.

The Embassy of Denmark has from 2007 to 2010 through the project “Development of the CDM market in Vietnam” been supporting Vietnam’s effort to get the CDM market running as an important step towards fighting climate change and supporting a more sustainable development of Vietnam. The project partner Vietnam Energy and Environment Consultancy Joint Stock Company (VNEEC) is today among the leading CDM project developers in Vietnam.

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