Results-based Payments for Viet Nam’s Forest Emission Reductions Approved
Viet Nam is set to receive nearly USD 72 million in results-based payments from the Green Climate Fund (GCF), following verified progress in reducing emissions from deforestation and forest degradation. The approval, made at the GCF’s 44th Board meeting, marks an important step in continuing to translate forest-related climate results into tangible financial support to Viet Nam.
The funding proposal is based on emission reductions achieved under the REDD+ (Reducing Emissions from Deforestation and Forest Degradation; conservation, sustainable forest management, and enhancement of forest carbon stocks) framework. It was developed with support from the Japan International Cooperation Agency (JICA), acting as the accredited entity to the GCF. Rather than being linked to a single project site or forest area, the reported emission reductions were generated through forest-related mitigation efforts at the national scale, drawing on Viet Nam’s national forest monitoring and accounting systems. The proposal notes that plot measurement data from the National Forest Inventory, Monitoring, and Assessment Program (NFIMAP) served as a key source for estimating emission and removal factors used in the accounting process.
Under the approved funding package FP294, Viet Nam reported a total of 18.72 million tonnes of CO₂ equivalent (tCO₂-eq) in emission reductions, of which 14.04 million tonnes were accepted for payment calculation. The reduced acceptance rate reflects the application of the GCF’s scorecard-based discount system. With a score of 36 out of 48, Viet Nam’s proposal was eligible for 75% of the proposed volume. The score was constrained by technical gaps, particularly in data consistency, completeness and methodological rigor. With a valuation set at USD 5 per tonne of CO₂ equivalent, the core payment amounts to over USD 70.2 million. An additional 2.5% bonus, equivalent to about USD 1.75 million, was included to reflect non-carbon benefits such as biodiversity conservation and social co-benefits, bringing the total approved payment to approximately USD 71.96 million.
Over the next six years, the funding will be reinvested to strengthen policies and institutional arrangements related to forest management. This includes improving monitoring systems, enforcement, and addressing underlying drivers of deforestation. There is also an emphasis on ensuring that local communities, particularly those dependent on forest resources, benefit from these efforts. The benefit-sharing mechanism operates across multiple levels: funds are managed centrally and then transferred to provinces for implementation. Financing is channeled into forest management, restoration, and livelihood activities, through which local communities benefit indirectly. Priority implementation areas cover provinces in the Northwest and Northeast regions, namely Dien Bien, Lai Chau, Lao Cai, Son La, Phu Tho, and Tuyen Quang.
Forest carbon market in Viet Nam: growing potential and remaining gaps
Beyond this latest approval, Viet Nam is increasingly positioning itself as a potential supplier in the global forest carbon market. The country has significant natural advantages and possesses substantial mangrove resources (~200,000 ha). The forestry sector therefore plays a central role in Viet Nam’s climate strategy, as the only sector currently capable of delivering net negative emissions in large quantities.
In 2023, IKI-funded project VN SIPA I has provided technical support to the Viet Nam Administration of Forestry (VN-FOREST) through reviewing forest carbon credit projects, analysing their potential contributions to the Nationally Determined Contributions (NDC), and providing recommendations to develop a sustainable forest carbon credit market that aligns with national climate goals and mobilises financial resources for forest protection. Under Viet Nam’s commitments to reduce greenhouse gas emissions by 15.8% unconditionally and up to 43.5% conditionally by 2030, the Land Use, Land Use Change, and Forestry (LULUCF) sector is expected to contribute significantly, estimated at 84.47 million tCO₂-eq and up to 106.31 million tCO₂-eq, respectively. The recently GCF’s approved package FP294 further reinforces this linkage between forest finance and national climate commitments. The proposal explicitly states that the programme will support Viet Nam in achieving its NDC targets, noting that REDD+ activities could generate an additional net mitigation potential of approximately 82.2–166 million tCO₂-eq during 2021–2030. One of the most notable precedents is Viet Nam’s participation in the World Bank’s Forest Carbon Partnership Facility (FCPF). In 2024, the country received USD 51.5 million in results-based payments for verified emission reductions, becoming the first in the East Asia and Pacific region to access this financing. Therefore, together with the newly approved GCF funding recently, it signals a gradual shift from pilot initiatives toward more structured and sustained engagement in carbon credit mechanisms.
However, several challenges remain. The legal and regulatory framework for carbon markets in Viet Nam is still evolving, with key gaps in areas such as carbon ownership, benefit-sharing mechanisms and monitoring systems. Coordination across institutions also remains a constraint, while relatively low carbon prices raise concerns about the long-term value of credits and the risk of overselling mitigation outcomes.
The importance of NDC alignment is already visible in practice in the ongoing negotiation with Emergent (the operating body of the LEAF – Lowering Emissions by Accelerating Forest Finance Coalition, an international initiative that channels private and public finance toward tropical forest protection) for 5.15 million forest carbon credits from the Central Highlands and South-Central Coast. On 4 May 2026, Deputy Prime Minister Ho Quoc Dung directed the MAE to begin formal Emission Reduction Purchase Agreement (ERPA) negotiation in June 2026, immediately following the issuance of a draft Decree on Forest Carbon Sequestration and Storage Services. This decree, currently being finalised, aims to fill a critical legal gap: although forest carbon absorption and storage has been recognised as one of five forest environmental services under the 2017 Forestry Law, it has yet to be operationalised due to the absence of a concrete regulatory mechanism. Once issued, the decree will establish the framework for how forest carbon credits are formed, verified and transacted, and will also decentralise credit issuance procedures to provincial authorities to streamline administration. Crucially, Viet Nam has stipulated that all credits transferred under the ERPA with Emergent will be retained and counted toward its NDC, illustrating how the country is navigating the tension between attracting international finance and safeguarding its mitigation commitments. Taken together, these developments, although implementation details are still evolving, marks important steps toward strengthening the institutional and accounting framework for carbon transactions, particularly in relation to NDC alignment and avoidance of double counting.
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