The Economic Drivers and Environmental Outcomes of the Clean Development Mechanism in Vietnam

Abstract

The Clean Development Mechanism (CDM) is the principal source of carbon offsets in the global market, and is intended to be a key driver of sustainable development and technical transformation in developing countries. The distribution of CDM projects by country has been skewed, with over 75% of registered projects having taken place in just four countries, namely China, India, Brazil and Mexico. A change in this pattern of development may be occurring, however, as smaller developing countries become increasingly active in the carbon market. An example of this is the rapid rise in the number of CDM projects based in Vietnam since early 2009. This paper investigates factors contributing to the growth of CDM projects in Vietnam and describes some of the key features of the projects that have been developed. Hydropower projects are found to dominate new CDM project development in Vietnam. It is suggested that CDM project development in Vietnam may be a tool to support domestic energy security rather than being primarily driven by the intended climate change mitigation and sustainable development objectives of the CDM. It is also possible that Vietnam is emulating the development strategy of China, and may serve as a model for other members of the Least Developed Countries group. A country’s domestic policy choices are critical in determining its attractiveness as a host country for offset projects, and Vietnam’s policy strategies are successfully harnessing synergies between domestic agendas and regulated foreign markets.