CIRCULAR

GUIDING THE FORMULATION OF CLEAN DEVELOPMENT MECHANISM (CDM) PROJECTS WITHIN THE FRAMEWORK OF KYOTO PROTOCOL

In accordance with the Government's Decree 91/2002/ND-CP dated 11 November 2002 stipulating functions, duties, limits of power and organisational structure of MONRE;
In accordance with the Prime Minister's Directive 35/2005/CT-TTG dated 17 October 2005 on the implementation of Kyotol Protocol within the UN Framework Convention on climate change;
Ministry of Natural Resources and Environment is responsible for guiding the preparation, formulation, certification and approval of CDM projects as follows:

I. GENERAL STIPULATIONS

1. Overview on Clean Development Mechanism and Clean Development Mechanism projects

Clean Development Mechanism (CDM) is a mechanism of cooperation stipulated in Clause 12 of Kyotol Protocol within the UN Framework Convention on climate change.

Clean Development Mechanism allows public and private organisations and enterprises of industrialized and developed nations and international organisations to invest into projects designed to reduce greenhouse emissions in developing countries, which are termed CDM projects so that these projects are able to receive credits in the form of certified emission reductions - CER. The credits are used to measure the quota of greenhouse emission reductions in industrialised and developed nations so that they abide by commitments on quantitative emission reduction indicated in the Kyotol Protocol.

While implementing CDM projects, developing countries will receive new investments from abroad and gain access to high and environment-friendly technology, contributing to sustainable socio-economic development, environmental and climatic protection.

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2. Subjects that are entitled to formulate and implement CDM projects

2.1 All state and private organisations in Vietnam that operate within the legal framework are entitled to formulate and implement CDM projects.

2.2 State and private organisations and enterprises of the countries that have approved Kyoto Protocol and permitted by their governments and other organisations are entitled to partaking in activities of CDM projects in Vietnam.

3. Areas that CDM projects can fall into:

3.1 According to international regulations, CDM projects are formulated in the following 15 areas:

a) Production of energy

b) Transmission of energy

c) Consumption of energy

d) Agriculture

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e) Forestation and reforestation

g) Chemical industry

h) Manufacture industry

i) Construction

k) Transport

l) Mining or mineral exploitation

m) Production of metals

n) Emissions from fuels (solid fuels, petroleum and gas)

o) Emissions from production and consumption of Halocarbons and Sulphur hexafluoride

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3.2 CDM projects that are encouraged for investment are, first and foremost, the ones of technology application, advanced and environment-friendly techniques, reduction of greenhouse gas emission, reduction of pollution, contributing to environmental and climatic protection and sustainable socio-economic development. Areas that are encouraged for investment primarily concentrate on industrial zones, processing zones, hi-tech zones, economic zones and economically and socially underprivileged zones.

4. Requirements for CDM projects

CDM projects implemented in Vietnam must meet the following requirements:

a) Reduce greenhouse emission

b) In conformity with socio-economic plans and programmes put forward by central and local authorities

c) Contribute to Vietnam's sustainable socio-economic development (according to the stipulated criteria)

d) Guarantee the feasibility with advanced technology and appropriate financial sources

đ) Reduction of greenhouse gas must be real, complimentary and directly or indirectly measured and examined. The examination and supervision must be concretely planned.

e) ODA is not to be utilised in order to gain certified emission reductions that are transferred to foreign CDM investors.

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h) Attract support from relevant parties (individuals, organisations and communities that are directly or indirectly subject to the impact of the project).

II. PREPARATION, FORMULATION, CERTIFICATION AND APPROVAL OF CDM PROJECTS

1. Preparation of CDM projects

1.1 Having determined the potential of project and found investors, project formulators must propose Project Documents.

1.2 Foreign investment into CDM projects can take one of the following forms:

a) Investors provide a loan with a fixed interest rate. In return they enjoy benefits generated by the project; and this is used to partially deduct their loan.

b) Investors contribute their shares to the project so that they can enjoy benefits generated by the project.

c) Investors provide technology and copyright of technology to the project in order to receive benefit from the project.

1.3 Project formulators can, by themselves or via a relevant consultancy organisation, seek and negotiate with investors to select the mode of investment, technology and modes of sharing benefits generated from the project in the most appropriate way.

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1.5 Project documents are formulated in 2 steps: Project idea documents and Project formulation documents.

2. Formulation, certification and approval of CDM projects

2.1 Project idea documents

If the investor requests the project be certified by MONRE, relevant parties formulate project idea documents based on the standard template stipulated in Annex I of this Circular.

Project idea documents are made in 15 copies in Vietnamese and 15 copies in English, submitted to MONRE and attached with the following documents:

a) Memoranda requesting the consideration of the project made by the project owner.

b) Memoranda of Ministry, provincial or city people's committee supervising the project that request the proposed project be a CDM project.

c) Evaluation papers of relevant parties (authorities of the district where the project is being implemented; institutions, organisations or communities that use the output of the project or directly benefit from impacts of the project).

Having received project idea documents, MONRE examines the legality of the documents and other attached documents and sends all these documents to relevant ministries and branches being members of the Advisory and Steering Committee on Clean Development Mechanism for consideration, comments and feedback in written memoranda. Based on the comments and feedback of the Advisory and Steering Committee on Clean Development Mechanism, Minister for Natural Resources and Environment will ponder to issue the Certification letter to the project.

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Having received the Certification letter of the project, relevant parties can start writing the Project formulation documents.

While formulating Project idea documents, it might be not necessary to call for the designated specialised organisation. If the investor does not request the certification of CDM projects from MONRE, project formulators can conduct feasibility study and prepare the Project formulation documents.

2.2 Project formulation documents

Project formulation documents are prepared according to the standard template stipulated in Annex II of this Circular. The documents are made in 15 copies in Vietnamese and 15 copies in English. All of them are sent to MONRE, attached with all the other relevant documents, as stipulated for Project idea documents, together with the report on impacts on the environment or a Commitment Paper for environmental protection. All Vietnamese documents attached with English copies must be translated into English.

Having received Project formulation documents and other relevant documents from the project owner, MONRE examines the legality of the Project formulation documents and submits project documents to members of the Advisory and Steering Committee on Clean Development Mechanism for consideration, comments and feedback in written memoranda.

The Advisory and Steering Committee on Clean Development Mechanism will hold a meeting to sum up and evaluate Project formulation documents that they have received. During the first session of the meeting of the Advisory and Steering Committee on Clean Development Mechanism, representatives for the parties preparing Project formulation documents are called upon to make their presentations on the summary of the project and answer questions from the members of the Advisory and Steering Committee on Clean Development Mechanism. During the next session, exclusively held for the Advisory and Steering Committee on Clean Development Mechanism, members of the Committee will cast their votes and make a conclusion about Project formulation documents.

Based on the conclusion made by the Advisory and Steering Committee on Clean Development Mechanism, MONRE will consider to issue the letter that approves the project.

All the aforesaid tasks are to be completed within 50 days since the day when MONRE receives Project formulation documents, attached with other relevant papers.

2.3 The letter that approves CDM project is sent to all parties formulating projects so that it can be forwarded to the designated specialised organisation selected by the International Committee on Clean Development Mechanism for consideration and registration of the project.

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1. This circular takes effect 15 days after it is published in the Official Gazette.

2. During the implementation, if any problem arises, ministries, branches, local authorities and relevant parties send their feedback and comments to MONRE for solutions./.

FOR THE MINISTER
DEPUTY MINISTER




Nguyen Cong Thanh