Circular No. 10/2006/TT-BTNMT guides the development of Clean Development Mechanism (CDM) projects under the Kyoto Protocol.

CIRCULAR

Guidelines for Developing Clean Development Mechanism Projects

under the Kyoto Protocol

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Pursuant to Decree No. 91/2002/NĐ-CP dated November 11, 2002 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Natural Resources and Environment;

Pursuant to Directive No. 35/2005/CT-TTg dated October 17, 2005 of the Prime Minister on organizing the implementation of the Kyoto Protocol under the United Nations Framework Convention on Climate Change;

The Ministry of Natural Resources and Environment guides the preparation, development, confirmation, and approval of Clean Development Mechanism projects as follows:

I. GENERAL PROVISIONS

1. Overview of the Clean Development Mechanism and Clean Development Mechanism Projects

The Clean Development Mechanism (CDM) is a cooperation mechanism provided for in Article 12 of the Kyoto Protocol under the United Nations Framework Convention on Climate Change.

The Clean Development Mechanism allows organizations, state-owned enterprises, and private businesses from developed countries, as well as international organizations, to invest in projects aimed at reducing greenhouse gas emissions in developing countries, known as Clean Development Mechanism projects (CDM projects), to receive credits in the form of "Certified Emission Reductions." These credits can be counted towards the emission reduction targets of developed countries, helping them comply with their quantitative commitments set out in the Kyoto Protocol.

Implementing CDM projects, developing countries will receive new foreign investment and adopt advanced, environmentally friendly technologies, contributing to sustainable economic and social development, environmental protection, and climate system preservation.

CDM projects fall under investment projects, primarily foreign investments, and therefore CDM projects in Vietnam are subject to Vietnamese regulatory legal documents, including the Investment Law passed by the National Assembly of the Socialist Republic of Vietnam on November 29, 2005, and Decree No. 108/2006/NĐ-CP dated September 22, 2006 of the Government detailing and guiding the implementation of certain provisions of the Investment Law.

2. Entities Entitled to Develop and Implement CDM Projects

2.1. All state and private organizations in Vietnam operating within the framework of the law have the right to develop and implement CDM projects.

2.2. Organizations, government or private enterprises from countries that have ratified the Kyoto Protocol, permitted by their respective governments, and other international organizations, all have the right to participate in CDM activities in Vietnam.

3. Fields Where CDM Projects Can Be Developed

3.1. According to international general regulations, CDM projects can be developed in the following 15 fields:

a) Energy production;

b) Energy transmission;

c) Energy consumption;

d) Agriculture;

d) Waste treatment and disposal;

e) Reforestation and afforestation;

g) Chemical industry;

h) Manufacturing industry;

i) Construction;

k) Transportation;

l) Mining or mineral extraction;

m) Metal production;

n) Emissions from fuel (solid fuels, oil, and gas);

o) Emissions from the production and consumption of Halocarbons and sulfur hexafluoride;

p) Solvent usage.

3.2. CDM projects are encouraged to invest first in projects applying advanced technology and techniques that are environmentally friendly, reduce greenhouse gas emissions, minimize pollution, contribute to environmental protection, climate protection, and serve sustainable economic and social development. Priority investment areas include industrial zones, export processing zones, high-tech zones, economic zones, and regions with difficult socio-economic conditions.

4. Requirements for CDM Projects

CDM projects implemented in Vietnam must meet the following requirements:

a) Reduction of greenhouse gas emissions;

b) Consistency with central, sectoral, and local economic and social development programs and plans;

c) Contribution to ensuring sustainable economic and social development in Vietnam (based on defined criteria);

d) Ensuring feasibility with advanced technology and having appropriate financial resources;

e) The amount of emission reductions must be real, additional, calculated and verified directly or indirectly, and have specific monitoring and supervision plans;

f) Not using Official Development Assistance (ODA) funds to obtain "Certified Emission Reductions" transferred to the foreign project investor;

g) Having an environmental impact assessment report;

h) Receiving support from stakeholders (individuals, organizations, or communities directly or indirectly affected by project activities).

II. PREPARATION, DEVELOPMENT, CONFIRMATION, AND APPROVAL OF CDM PROJECTS

1. Preparation of CDM Projects

1.1. After identifying a promising project and finding an investor, the project developer must prepare the Project Documentation.

1.2. Forms of foreign investment in CDM projects include:

a) The investor provides a fixed-interest loan, in exchange for receiving part of the benefits derived from the project to offset a portion of the loan;

b) The investor contributes capital to the project to receive a share of the benefits derived from the project;

c) The investor provides technology or grants technology licenses to the project to receive a share of the benefits derived from the project.

1.3. Project developers actively seek and negotiate with investors through relevant consulting organizations to select the most suitable investment form, technology, and profit-sharing method for the CDM project.

1.4. When preparing the Project Documentation, project developers must collaborate with investors and, if possible, with designated Operational Entities expected to assess the project before submitting it to the Executive Board of the Clean Development Mechanism for registration. Designated Operational Entities are selected and authorized by the Executive Board of the Clean Development Mechanism for each specialized field related to the sectors where CDM projects are being developed.

1.5. Project Documentation is prepared in two stages: Project Idea Note and Project Design Document.

2. Development, Confirmation, and Approval of CDM Projects

2.1. Project Idea Note:

If the investor requests confirmation of the CDM project from the Ministry of Natural Resources and Environment, the relevant parties must prepare the Project Idea Note according to the model specified in Appendix 1 of this Circular.

The Project Idea Note should be prepared in 15 copies in Vietnamese and 15 copies in English and submitted to the Ministry of Natural Resources and Environment along with the following documents:

a) A letter requesting consideration of the project from the lead organization of the project;

b) A letter from the ministry, sector, provincial People's Committee, or centrally-administered city People's Committee managing the project requesting consideration and acceptance of the proposed project as a CDM project.

c) Comments from relevant parties (the district-level authority where the project is implemented, agencies or organizations or communities that use the results or are directly affected by the project activities).

Upon receipt of the Project Concept Paper, the Ministry of Natural Resources and Environment shall examine the legality of the Project Concept Paper and accompanying documents, and send them to representatives of related ministries and sectors who are members of the Steering Committee on Clean Development Mechanism for study, examination, and written comments. Based on the opinions of the Steering Committee on Clean Development Mechanism, the Minister of Natural Resources and Environment shall consider issuing a Project Confirmation Letter.

All of the above tasks must be completed within twenty-five days from the date the Ministry of Natural Resources and Environment receives the Project Concept Paper and accompanying documents.

After receiving the Project Confirmation Letter, the relevant parties shall develop the Project Design Document.

During the preparation stage of the Project Concept Paper, it may not be necessary to invite the designated operational organization to participate. If the investor does not request a Clean Development Mechanism project confirmation from the Ministry of Natural Resources and Environment, the project developers will conduct feasibility studies and prepare the Project Design Document.

2.2. Project Design Document:

The Project Design Document shall be prepared according to the model specified in Appendix II attached hereto, and shall consist of fifteen copies in Vietnamese and fifteen copies in English, along with related documents such as those required for the Project Concept Paper and Environmental Impact Assessment Report or Environmental Protection Commitment Acknowledgment Form. Any accompanying Vietnamese documents must include an English translation.

Upon receipt of the Project Design Document and accompanying documents from the lead agency, the Ministry of Natural Resources and Environment shall examine the legality of the Project Design Document and forward the project dossier to the members of the Steering Committee on Clean Development Mechanism for study, examination, and written comments.

The Steering Committee on Clean Development Mechanism shall convene a meeting to compile and evaluate the received Project Design Document. At the first session of the Steering Committee on Clean Development Mechanism, representatives of the project developers shall be invited to present a summary of the project and answer questions from the members of the Steering Committee on Clean Development Mechanism. In the second session specifically convened for the Steering Committee on Clean Development Mechanism, members shall vote and conclude on the Project Design Document.

Based on the conclusions of the Steering Committee on Clean Development Mechanism, the Minister of Natural Resources and Environment shall consider issuing a Project Approval Letter.

All of the above tasks must be completed within fifty days from the date the Ministry of Natural Resources and Environment receives the Project Design Document and related accompanying documents.

2.3. The Project Approval Letter shall be sent to the project developers to transfer to the designated operational organization chosen by themselves and the International Executive Board on Clean Development Mechanism for project registration and review.

III. IMPLEMENTATION PROVISIONS

1. This Circular shall take effect fifteen days from the date of publication in the Official Gazette.

2. During implementation, if there are any difficulties, the relevant ministries, sectors, localities, and related parties are requested to report to the Ministry of Natural Resources and Environment for consideration and resolution./.