Vietnam has officially approved the transfer of one million metric tons of surplus CO₂ emission reductions to the International Bank for Reconstruction and Development (IBRD), a key arm of the World Bank Group. The decision, formalized under Resolution No. 261/NQ-CP on August 29, 2025, marks a significant step in Vietnam’s evolving approach to carbon finance and sustainable land use.

This transaction builds on Vietnam’s existing Emission Reductions Payment Agreement (ERPA) with the IBRD. The original agreement, signed in 2020, covered a total of 10.3 million tons of emission reductions from reforestation and forest management activities across the north-central region. Stronger-than-expected results between 2018 and 2019 created a surplus of 5.9 million tons, of which a portion is now being monetized through this newly approved deal.

Financial Impact and Revenue Allocation

Based on prior payment terms under the ERPA, the average price per ton of transferred carbon credits is estimated at $5. This suggests that the newly approved one million ton transfer will generate approximately $5 million in proceeds. These funds are not going into general government coffers; instead, they will directly support the local stakeholders who helped achieve the emission reductions.

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Beneficiaries include individual forest owners, commune authorities, and various organizations involved in forest conservation and management in five provinces: Thanh Hoa, Nghe An, Ha Tinh, Quang Tri, and Thua Thien Hue. A significant portion of the revenue will also be reinvested into programs that strengthen forest protection, improve sustainable livelihoods, and generate income for rural communities.

Alignment with Paris Agreement Targets

The agreement also includes a provision that ensures around 95 percent of the transferred credits will be reassigned to Vietnam. This means that even though the credits are technically being sold to the World Bank, they will still count toward Vietnam’s own climate commitments under the Paris Agreement.

This credit reassignment mechanism is critical for Vietnam as it works to meet its Nationally Determined Contributions (NDCs), which outline the country's climate targets and mitigation strategies. The arrangement allows Vietnam to unlock climate finance while still retaining credit for its emission reductions in the global accounting system.

Limited Market Appetite for Additional Credits

While this transaction utilizes one million tons of surplus credits, the Vietnamese government has confirmed that the remaining 4.9 million tons will be held in reserve. Officials cited current market conditions and limited global demand for additional voluntary or compliance carbon credits as key reasons for pausing further transfers at this time.

By retaining these credits, Vietnam keeps its options open for future monetization or for direct use in meeting its long-term emission reduction goals. The government’s cautious stance reflects the complex dynamics of the carbon markets, where supply often exceeds verified demand, especially in forestry-based offsets.

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A Growing Role for Forests in Climate Finance

Vietnam’s successful mobilization of carbon finance through reforestation projects signals the increasing value of natural climate solutions in national sustainability strategies. With forest-based offsets becoming more central to climate action, especially in tropical countries, the Vietnam-IBRD agreement may serve as a model for other nations seeking to combine carbon finance with local development.

As global demand for high-quality, nature-based carbon credits grows particularly those tied to measurable co-benefits such as biodiversity protection and community development Vietnam’s north-central forest regions could play a larger role in the country’s climate finance strategy going forward.

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