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Documentation:Open Case Studies/FRST522/2025/Community Forestry as a Nature-Based Solution for Climate Mitigation and Livelihood Improvement: A Review of Ecosystem Services and Carbon Finance Opportunities in Lam Dong Province, Vietnam

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Positionality Statement

I am not Vietnamese and do not speak Vietnamese. I do not speak on behalf of the community members in Lam Dong Province, Vietnam. I am a Nigerian, a native of Ogun State. This page was completed as coursework, and no primary data was collected throughout the course of writing this paper. I have a budding interest in community forestry, nature-based solutions, and carbon finance as a solution for climate change adaptation and livelihood improvement. This is why I chose this topic to learn more. I understand that as an external observer relying on secondary data, my interpretation might not totally capture the full experience, culture, or local knowledge of the community members in Lam Dong. However, I have sought to present the findings responsibly and reflectively based on available literature.

Abstract

Community forestry has evolved to be known for advancing and strengthening nature-based solutions while addressing climate mitigation and livelihood improvement. This paper reviews the role of community forestry in scaling ecosystem services and carbon finance opportunities in Lam Dong province, Vietnam. Lam Dong is one of the country’s pilot sites for decentralization of forest governance and Payment for Ecosystem Services. With extensive literature review, case studies, and recent developments in REDD+ and voluntary carbon markets, the review shows that community forestry contributes to carbon sequestration, biodiversity conservation, watershed protection, and climate resilience. Also, it provides supplementary livelihood benefits through the PES model and carbon credits. Yet, challenges persist in equitable benefit-sharing, collective PES management models, and tenure security of community forests, which stifles community participation. Carbon finance projects in Lam Dong prove new income pathways for rural communities, but they require transparency and people-centered governing structures to ensure equitable outcomes.

Keywords

community forestry; nature-based solutions (NbS); payment for ecosystem services (PES); carbon finance; livelihood improvement

Introduction

The adoption of global multilateral agreements such as the Sustainable Development Goals (SDGs) and the Kunming-Montreal Global Diversity Framework, among others, gave importance and more recognition to natural ecosystems and their critical role in climate change adaptation and mitigation[1]. Forests are key role players in global strategies to mitigate climate change, loss of biodiversity, and rural poverty. Forests are estimated to absorb about one-third of carbon dioxide annual emissions, making them important in achieving global mitigation targets through the Paris Agreement[2]. Forests provide a wide range of ecosystem services, including carbon sequestration, soil protection, timber and non-timber forest products (NTFPs), and cultural and spiritual services that support rural livelihoods in the Global South[3]. However, forested landscapes are becoming threatened by agricultural expansion, development of infrastructure, and extraction activities that are unsustainable, most especially in tropical forested areas. As a result, there has been a shift in policy attention to adopt decentralized and participatory models of forest governance that engage and empower local communities as stewards of forest ecosystems[3][2].

In Asia, community forestry is a major model of participatory forest management[4] introduced as a means of addressing failure of governance tied to centralized forest control. This model enables communities to collaboratively manage their forest resources under different types of tenures or concessions, which might be legal or customary. This often translates to socioeconomic benefits and environmental benefits[4]. Several studies carried out across Asia showed that community-managed forests tend to have positive outcomes. Examples are increased forest cover, high biodiversity values, enhanced ecological resilience and adaptive capacity with strengthened local institutions[5][6]. Likewise, [7]research explained how community forestry contributes to the reduction of poverty by diversifying income and improving the livelihood of rural people who are dependent on the resource of the forest.

Vietnam remains a central hub for community-based forestry and market-based forest governance, being one of the early adopters of the community forestry model in Asia. Vietnam has carried out forest land allocation reforms on a large scale since the late 1990s. This was in a bid to devolve the management of forests to households, indigenous peoples, and local communities or minority groups[8]. Although the ownership of the land is still held by the state, some communities have been able to gain partial or full management rights. This includes NTFP harvesting and participation in Payment for Ecosystem Services (PES) schemes. These reforms have led to the development of national PES policy, REDD+ initiatives, and forest carbon market exploration[9][10].  

Lam Dong Province, located in the Central Highlands of Vietnam, is of great importance. This is because the first pilot of payment for ecosystem services and various REDD+ projects was carried out there. As a result, Lam Dong is now known to be the national model for integrating community forestry with climate finance mechanisms[8][11]. [12]reported that the indigenous communities of the province have a deep cultural relationship with forest landscapes, and they are recognized as major stakeholders in forest carbon governance. Hence, Lam Dong’s watershed areas, high forest cover, and history of community participation in forest management make it an ideal case for studying the nexus between community forestry, ecosystem services, and carbon finance opportunities.

The increased emphasis on nature-based solutions in international negotiations presents a compelling framework for assessing the contribution of community forestry in mitigating climate change and scaling sustainable development. Nature-based solutions, according to[3], refer to actions that protect, restore, or sustainably manage ecosystems while delivering benefits for climate resilience, biodiversity, and human well-being. [2]argues that nature-based solutions possess mitigation potentials when they are incorporated with strong ecological safeguards and inclusive governance. Community forestry in tandem with these principles represents a culturally grounded, nature-based solution with potential application in tropical forest regions. However, the effectiveness of community forestry as a nature-based solution and its capacity to generate carbon finance opportunities depend on the strength of governance, tenure type, and equitable sharing of benefits. In Vietnam, challenges of land tenure rights, limited technical capacity for carbon measurement, and inequality in benefit allocation reduce the long-term sustainability of community forestry initiatives [13].

Therefore, this paper synthesizes evidence from peer-reviewed literature, case studies, and policy documents. It evaluates the role of community forestry in Lam Dong province as a nature-based solution for climate mitigation and livelihood improvement. This paper reviews i) the ecosystem services provided by community-managed forests, ii) the socioeconomic outcomes of community forestry for rural households, and iii) the opportunities and challenges associated with carbon finance mechanisms such as PES, REDD+, and carbon markets.

Community Forestry in Asia and Vietnam

Concept of Community Forestry

Community forestry is defined by the Food and Agriculture Organization of the United Nations (FAO) as “any situation that intimately involves local people in a forestry activity. It embraces a spectrum of situations ranging from woodlots in areas that are short of wood and other forest products for local needs, through the growing of trees at the farm level to provide cash crops and the processing of forest products at the household, artisan, or small industry level to generate income, to the activities of forest-dwelling communities” [14].

The concept of community forestry has expanded over the past few decades from a strictly defined technical field to one that encompasses all facets, initiatives, science, policies, institutions, and procedures that strengthen the role of locals, including women, youth, and marginalized groups, in the management and governance of forest resources[15]. It is made up of official or government-led efforts as well as informal, traditional, and indigenous ones. Indigenous management of culturally significant sacred sites, direct community control or management of forest areas, small-scale forest-based enterprises, forest out-grower schemes, company-community partnerships, and other forms of decentralized and devolved forest management are all examples of community forestry[15][16].

Community forestry takes place in various forms[15]. It can be cooperative (joint), as in the case of West Africa's co-management of forests, India's joint forest management (JFM), Nepal's community forestry, Mexico's community management of forests, or the Philippines' community-based forest management (CBFM). Smallholder management of plantations and natural forests is another aspect of community forestry.

Community Forestry in Asia

Community forestry in Asia is one of the central governance transformations over the last four decades. Community forestry was first introduced in the early 1970s and 1980s with the need to reduce deforestation and poverty and strengthen sustainable resource management[4]. Currently, community forestry has transformed into a multiple approach that empowers local communities to manage forests under participatory, devolved, or co-management arrangements[17][4]. Asia has one of the longest histories of community forestry management models, which have been implemented in Nepal, Myanmar, India, Thailand, Indonesia, and the Philippines with distinct history, culture, and policy[16]. Examples include the Forest User groups of Nepal and the Adat Forests of Indonesia, amongst many others[17][7].

Nepal’s community forest model is often used as a success story[16]. The 1993 Forest Act in Nepal legalized the local Forest User Groups as autonomous, self-governing institutions, which contributed to the reversal of forest degradation, increased forest cover, and strengthened local governance institutions[16][7]. The Joint Forest Management model in India in the 1980s showed how community participation in forest management can reverse degradation trends due to the alignment with rights and incentives[17]. Also, in the Philippines, a community-based forest management program was introduced in 1995 with the aim to reduce poverty with forest rehabilitation through long-term tenure instruments granted to local communities[18]. In Myanmar, community forestry also promotes the adaptive capacity of local communities by providing income sources and improving natural resource governance[19].

Community forestry is also renowned as a means of reducing rural poverty across Asia[7]. [4]found that community forests contribute to the improvement of livelihood through the sale of non-timber forest products, employment opportunities via forest patrolling and restoration, and equitable sharing of benefits. However, challenges such as elite capture, free-riding, bureaucratic interference, and persistent tenure ambiguity undermine outcomes in several countries[8].

Community Forestry Evolution in Vietnam

Vietnam’s is a dynamic community forest landscape in Southeast Asia, and its engagement is rooted in land-use policy and rural development. Vietnam’s community forestry gained its legal status in 2004[20]. Vietnam moved from a centralized forest management system under the Doi Moi economic reforms in 1986 to a decentralized system[16]. This system incorporated the involvement of households, individuals, and private actors as legitimate forest managers[21]. Also, the Forest Land Allocation policy launched in the 1990s transferred forest use land rights of over 9 million hectares from state forest enterprises to households and individuals[21]. In 2004, the land law (Forest Protection and Development Law) was changed, and forest lands were allocated to communities and not just households or individuals[20]. This means that lands can be allocated to a village or hamlet in rural communities[20]. Although the state still owns the land constitutionally, communities now have long-term rights to access and use resources from the forest. This is formalized by giving Land Use Rights Certificates, also known as Red Books, with a 50-year renewable term. This was in a bid to motivate local people to steward responsible forest management and meet their livelihood needs[21].

Despite the increase in tenure allocation in the early 2000s, the community forestry model of Vietnam has limitations whereby state-management objectives often clash against local autonomy. Community forests in Vietnam that are formally recognized by the state are managed via community forest management groups. These groups are responsible for the development of forest management plans and forest area patrol, ensuring compliance with state regulations. The state approves management plans and timber harvesting[10] and gains oversight through Forest Protection Management Boards and State Forest Enterprises (SFEs). This questions how administrative decentralization genuinely gives room for the empowerment of community in comparison to countries like Nepal.

Several studies have shown that only a small portion (< 2%) of Vietnam’s forests are formally recognized as community forests compared to the high portions of community forests in Nepal or the Philippines[16]. This could be partially due to the vague formal recognition of communities before the enactment of the 2004 Forest Protection and Development Law[20]. After this legal milestone, the implementation of the 2004 Land Law remained uneven. For instance, communities in the Central Highlands with many ethnic minority groups are still slaves to tenure insecurity and the weak enforcement of community rights. Also, customary stewardship practices integration, such as swidden agriculture and spiritual forest protection into policies, seems unattainable. However, community forest arrangements are different across provinces, reflecting differences in local governance capacity, ethnicity, and forest type.

Similarly, community forestry impacts livelihood and equity in benefit-sharing. Research has shown that community forests provide benefits such as non-timber forest products, small-scale timber harvesting, and payments for forest environmental services (PFES)[22]. Yet, the sharing of these benefits is uneven, especially for poorer households who face barriers in participation and lack resources to fully use the forest resources[4]. Also, powerful influences outside these communities undermine local authorities, which has constrained the ability of the villagers to fully harness the resource of the forests[4].

Overall, the community forest management approach in Vietnam compared to other Asian countries is less autonomous, largely formalized, and more focused on environmental protection than livelihood diversification, which reflects national priorities[4]. Lastly, it is increasingly becoming market-oriented with the introduction of PES and carbon finance initiatives that pay communities[9].

Fig. 1 Map showing Lam Dong Province and Districts

Community Forestry in Lam Dong Province

Lam Dong province is one of the key sites for the evolvement of community forestry in the country. It is in the South-Central Highlands of Vietnam, having an altitude of 300 m to 1500 m, with Dat Lat as its capital[8]. The province has an extensive evergreen forest with key biodiversity hotspots and high-altitude montane systems, thereby making it ecologically significant. The province has a total physical area of 977,219 hectares, with 602,243 hectares of both natural and planted forest[8]. Lam Dong ranks third in Vietnam in terms of forest cover[8].

The forest area in Lam Dong is classified into three categories, which are 345,003 hectares of production forests, 172,800 hectares of protection forests, and 83,674 hectares of special-use forests[8]. These forest areas are managed under eight groups of actors, which are households and communities that manage 1% of the provincial forest; communal people’s committees that manage 2% of the forest area; management boards for protection forests that manage 24%; management boards for special-use forests that manage 17%; state-owned companies that manage 29% (formerly known as State Forest Enterprise); joint-venture companies that manage 2%; the armed forces that manage 14%; and other entities, such as private companies, that manage 11%. Lam Dong province is home to indigenous groups such as the K’ho, Ma, and Chu Ru that have a deep cultural tie with the forest[12]. Lam Dong has been a national testing ground for testing pilot projects such as PES, REDD+, and emerging carbon finance programs. This is in a bid to understand the nexus between community forestry and climate mitigation as well as livelihood improvement[8][9].

Community forestry emerged in the early 2000s in Lam Dong province as one of the decentralization reforms in Vietnam, and donor-backed programs aimed to include local communities in forest protection[4][8]. Lam Dong’s community forestry development is strongly attached to state allocation policies and trial projects meant to test new institutional structures for forest stewardship. Meanwhile, in northern Vietnam, community forests are frequently related to prolonged customary management. Lam Dong province was instrumental in the establishment of the national PFES program, which started from 2008 to 2010 [8]. This project paid communities to preserve watershed forested areas that provide domestic water, hydropower plants, and irrigation systems[8]. Lam Dong, one of the two PFES pilot provinces, served as a testing ground for investigating benefit-sharing schemes, community management models, and multi-stakeholder cooperation[22][13]. Lam Dong is home to diverse examples of community forestry implementation, such as the community forest management groups and co-management agreements between indigenous peoples and State Forest Enterprise.

Lam Dong’s community forestry is managed by a blend of institutional frameworks that includes community forest management boards at the local level, indigenous traditional leaders, state forest businesses, forest management boards for protection, and Funds for Provincial Forest Protection and Development (FPDFs). Vietnam’s forest tenure system is layered, with communities receiving long-term land-use rights while forests land remain state-owned[19]. Communities in Lam Dong often receive rights solely over poor or degraded forests via forest land allocation certificates (Red Books), which are often contested[11]. Nonetheless, the 2017 forestry law’s recent amendments have improved community rights to forest conservation and formalized their involvement in carbon sequestration and ecosystem services[22]. Most especially for indigenous people who are becoming more acknowledged as co-managers of forest carbon assets. These changes have improved the institutional legitimacy of community forestry in Lam Dong[12].

One of Vietnam’s most active indigenous-led community forestry models is found in Lam Dong[12]. For instance, indigenous groups such as the K’ho have traditionally engaged in customary forest patrolling, rotational agriculture, and the preservation of sacred forests. This represents a major shift from traditional subsistence forestry to organized incentive-based conservation as shown in these communities' increasing participation in PFES and carbon programs. An uncommon development in Vietnam’s forest governance is the participation of Indigenous Peoples in Lam Dong in forest monitoring, reporting, and verification operations for carbon projects[12]. This involvement is facilitated by the province’s jurisdictional Forest Carbon Program, which attempts to combine traditional knowledge with sophisticated carbon accounting technologies. Despite these advancements, several obstacles limit community forestry efficacy in Lam Dong, including the complexity of administration, inequitable benefit sharing, limited technical capacity, etc.

Community Forestry as a Nature-based Solution

Nature-based Solutions (NbS) entail people interacting with nature as a part of nature to address social issues, which enhances biodiversity and human well-being[2]. Community forestry is now being recognized as a type of nature-based solution that incorporates climate change mitigation, conservation of biodiversity, and human well-being under a single governance framework. The International Union for Conservation of Nature defined nature-based solutions as “actions that protect, sustainably manage, and restore natural or modified ecosystems that address societal challenges effectively and adaptively, simultaneously providing human well-being and biodiversity benefits”[3]. Community forestry embodies this definition because it makes local communities the stewards of forest ecosystems, with an emphasis on locally led governance, restoration, and sustainable use of forest resources.

The IUCN Global Standard outlines eight core criteria for effective NbS with a strong emphasis on ecological restoration and resilience, rights-based socioeconomic benefits and equity, and inclusive governance[3][2]. These principles are reflected in community forestry design. Firstly, community forestry strengthens ecological restoration by empowering local communities in managing forests for long-term benefit, thereby reducing deforestation and increasing forest regeneration rates. Secondly, community forestry enhances livelihood by providing people with rights to access and benefits from forest resources, which are essential to NbS’s goals of tackling societal issues like food security, poverty, and climate vulnerability[23]. Thirdly, by incorporating communities in decision-making processes pertaining to forest use, restoration, and conservation, community forestry institutionalizes participatory governance, which is essential for the successful implementation of NbS[22].

Empirical research shows how community forestry generated environmental benefits mostly in places that have historically had centralized forest management. In Vietnam, for instance, research carried out by[24] showed how community-managed forests showed better outcomes in terms of lower rates of illegal logging, high canopy cover, and fire prevention compared to state-managed forests.  Also, forests managed by local communities in the Central Highlands and northern mountainous region showed improved regeneration patterns due to frequent community patrols, traditional ecological knowledge application, and local norms that discourage unsustainable harvesting[8]. General findings from the research by[25] across 16 countries nested in Latin America, Africa, and Asia showed that protected areas lose about 1.47% of forest cover yearly compared to 0.24% from community-managed forests. These outcomes are in alignment with the principles of NbS of scaling ecosystem resilience while addressing climate change adaptation and mitigation[3].

Community forestry is a scalable nature-based solution for striking a balance between conservation and development objectives as the global policy environment increasingly prioritizes climate-resilient development. Vietnam’s pledge to reach net-zero emissions by 2050 and increase forest cover to 45% establishes community forestry as a key tool for accomplishing national climate goals[13][9]. In highland and ethnic minority areas, where strong social links to the environment and indigenous knowledge systems enable adaptive forest management under climatic uncertainty, community forestry is especially important[8]. Improved water regulation, catastrophe risk reduction, and landscape-scale connectedness have all been associated with the incorporation of community forests into nature-based solutions plans internationally. As a result, community forestry not only exemplifies the nature-based solutions principles but also shows how innovations in local governance can produce outcomes for climate governance and sustainable development that are internationally applicable.


Role of Community Forestry in the Payment for Ecosystem Services Schemes

The global pressure to reconcile economic development with ecological sustainability has scaled the adoption of incentive-based conservation mechanisms. Payment for Ecosystem Services (PES) evolved into a central approach for motivating stewards of land to conserve or restore ecosystems. Payment for ecosystem services is defined as a transaction that is voluntary in which ecosystem services beneficiaries give financial compensation to providers for taking management actions that ensured the continuous supply of that service[8][13]. Some of the ecosystem services include watershed management, biodiversity conservation, landscape aesthetics, and carbon sequestration, which make up essential public goods.Vietnam became the first country to formalize payment for ecosystem services through the PFES program under the national decree 99/2010/ND-CP[8]. This program was designed to limit state expenses on forest protection, increase forest quality, and strengthen poverty alleviation among local communities. This made it a pillar of the country’s forest governance reform[8]. The Lam Dong province served as a key pilot site for PES from 2008 to 2010 to test the institutional and financial sustainability of PES, especially with regard to the conservation of the Dong Nai River watershed. The nationwide scale-up of this program was dependent on the empirical justification of the pilot’s success[8].

This changing regulatory environment made Community Forestry (CF), or the joint management of forests by local communities and Indigenous Peoples (IPs), increasingly important. In highland regions, community forestry is very important because of the ethnic minority groups that rely majorly on forests for food and cultural identity. This is because it is based on the customary tenure structures since time immemorial and the communal labor arrangements[4][7].The PFES institutional design works by collecting fees from service users, including state forest companies, through Provincial Forest Protection and Development Funds to community forest groups (service providers). Based on [8]study, these finances were collected primarily from hydroelectricity producers, drinking water suppliers, and tourism companies. Lam Dong province started tourism-based PFES payments for landscape aesthetics and showed early success in obtaining payments from hydropower plants.

PFES was originally designed for individual forest landholders; however, the socio-ecological realities demanded collective participation. The ethnic minority groups are dependent on customary-based forest governance systems, thereby making collective community-based forest management a necessity[13]. Community forestry aligns with nature-based solution principles in terms of local stewardship, cultural integrity, and ecosystem-based climate resilience[3][6]. However, the integration of collective forest groups into PFES has exposed different governance challenges, which include;

Equity, Benefit Sharing, and Social Cohesion: The collective PES models required structures for distributing benefits within communities, which is very complex. The research carried out by [13] revealed that PES mechanisms incur high transaction costs, are administratively complex, and can reproduce local power hierarchies. The payments are sometimes equally distributed among households rather than according to labor contribution, which leads to free-riding as shown in the Kinh-led village model[13].  Also, elite capture was identified as an important risk in PES schemes. For instance, [13]research highlighted that state forest enterprises (like Loc Bac SFE) received large sums of PES revenue but did not always redistribute benefits to local communities living within the forest area. [8] also argued that PES strengthened the financial position of state forest enterprises more than that of poor households. Also, commune leaders or forest rangers had disproportionate influence on contract decisions and payment distribution.

Land Tenure and State Dominance: [8] also recorded that many PES participants lack formal land-use certificates, and those who have them are faced with tenure insecurity due to their limited power, making them de facto rather than de jure forest owners. This limits their bargaining power and long-term investment in forest restoration. The state forest enterprise and commune authorities most times retain substantial control over forest management decisions, which constrains community autonomy. [8] concluded that PES in Vietnam can be characterized as ‘state-led PES” rather than market-based decentralization.

Low financial leverage and additionality: Vietnam’s PFES scheme has a fixed set payment rate as opposed to the theoretical PES, which most times leads to a low payment insufficient to offset the high opportunity cost for forgone land uses such as agriculture. This was in tandem with the research carried out by [13] in a Hmong-majority village and a Kinh-led village. Although PFES payments account for a stable portion of income, they are insufficient to cause a shift in land-use behavior, especially in areas with competing land use.

Institutions and Governance: [8] also noted that PES contracts were often too standardized and did not account for local cultural systems or livelihood realities of ethnic minority peoples. The paper emphasizes that local communities were rarely included in the design phase, leading to low ownership and mechanical participation. Nguyen highlights that PES worked best where communities already had strong local institutions, pre-existing forest stewardship norms, and active social cohesion.

Despite these challenges, [8] highlighted positive environmental outcomes, which entail reduced illegal logging, better patrol coverage, and improved forest canopy conditions in certain areas. Also, PES helped raise awareness of forest conservation, even if payments were not transformative.


Livelihood Outcomes of Community Forestry

Diversification of income: Community forestry provides communities with opportunities to involve themselves in market-oriented activities, collaborate with forest-based enterprises, and participate in equitable benefit-sharing schemes. In the Central Highlands of Vietnam, payment for ecosystem services is now a subsidiary source of income for households that participate in community forest management [13]. [13] research provides evidence from multiple provinces showing that payment for ecosystem services schemes helps complement household incomes, especially for poorer households. Although forest areas and contract conditions might vary[22]. The payments help in supporting their basic needs and enable them to invest in other income pathways such as livestock, agricultural crops, and education [22].

The early assessment of PES in Lam Dong province also showed that the PES schemes increased the financial income of the local communities while promoting forest protection[8][13]. Also, forest carbon finance has opened a new potential revenue stream for local communities[12]. [12] explained that indigenous people and local communities in Lam Dong province are now playing active roles in carbon monitoring and forest stewardship within the emerging jurisdictional REDD+ programs. This has led to increasing income stability and participation in carbon market schemes. The evaluation of the feasibility of carbon finance showed that improved forest management (IFM) can provide performance-based payment for communities with community tenure and monitoring structures[11].

Strengthening communities’ adaptive capacity and reducing vulnerability: Livelihood outcome goes beyond income generation. Community forestry also strengthens the adaptive capacity of communities by increasing their access to forest resources, enhancing social institutions, and increasing landless and female forest users’ knowledge of forest management[8]. This is an outcome documented by [19] in the Myanmar tropical dry forest. The strengthening of institutions and collective action helped improve communities’ ability to adapt to climate vulnerabilities, manage their natural resources, and maintain ecosystem services.

Build Social Capital and Community Governance: Community forestry helps build social cohesion through the empowerment of communities to participate in decision-making and management. [4] stated that when communities are empowered, there is increased accountability, a low level of conflict, and shared benefit systems, which strengthen livelihood stability. However, Vietnam's collective PES model is saddled with governance challenges coupled with unequal participation and a vague benefit-sharing mechanism [13]. Community forestry also supports indigenous rights and self-determination in Vietnam. [12] reported how the involvement of indigenous groups in forest conservation in Lam Dong has strengthened recognition of rights, diverse knowledge systems, and customary governance institutions.

Opportunities through Nature-based Solutions and Forest Carbon Markets: Opportunities for livelihood improvement increase as community forestry interacts with carbon markets and nature-based solutions (NbS). Nature-based solutions put community forestry in a position that channels climate funds to local communities [2]. Also, indigenous and traditional knowledge increases the efficacy of NbS treatments, placing communities at the center of long-term management, monitoring, and restoration [6]. This potential is strengthened by Vietnam’s developing carbon market structure. Communities now have more obvious opportunities to profit from forest carbon efforts thanks to the implementation of legislation for emissions trading and carbon credit recognition[13][9][6]. Forest management may benefit livelihoods and the climate when it is accompanied by clear tenure rights, capacity building, and open governance, as demonstrated by pilot programs in Lam Dong.

Carbon Finance Oppourtunities in Lam Dong Province

The recognition and input of forestry as a global mitigation strategy for climate change has made carbon finance an important mechanism for achieving sustainable development[2]. Carbon finance refers to the allocation of finance or sets of financial instruments to activities or projects that sequester greenhouse gas emissions (GHG)[9]. This concept is majorly operationalized through mechanisms like Reducing Emissions from Deforestation and Forest Degradation (REDD+) and voluntary carbon market schemes positioning forests as critical nature-based solutions for climate change mitigation[2][3]. These schemes reward developing countries that achieve their verifiable reduction of emissions via forest conservation, sustainable forest management, and increase of forest carbon stock[9].

These schemes are not stand-alone policies; rather, they are built on existing national forest governance frameworks[9]. Vietnam, a pioneer of PFES, provided the administrative and financial structure for PES, including the Forest Protection and Development Fund necessary for disbursing payments to forest owners. This created an environment that can be easily adapted to the context of carbon finance and markets[8][9]. Forest carbon schemes are also seen as a perfect example of nature-based solutions given their capacity to achieve global climate mitigation coupled with local co-benefits such as biodiversity conservation and improved livelihoods[3][2]. The outcome of these initiatives is not judged based on the number of CO₂ tonnes reduced but also by the social equity outcome[9].

Lam Dong province, with its large pool of carbon stocks, is well-positioned to leverage both international and national carbon market opportunities. The technical evaluation asserted the potential of Lam Dong Forest to generate carbon credits that are marketable through improved forest management and avoided deforestation. [11] carried out research on the feasibility of carbon finance at the Loc Bac State Operating Company in Lam Dong. It was discovered that improved forest management (IFM) activities, including reduced logging intensity and silvicultural enhancements, have the technical viability to generate carbon credits. This showed that local groups such as state forest enterprises and community forests are well-positioned potentially to participate in voluntary carbon markets[11][9]. Similarly, the province has a high potential carbon density, which increases the revenue value of any conservation and restoration projects carried out in the region.

Several pieces of literature expose that indigenous peoples and local communities in Lam Dong province are engaging positively with forest carbon finance[12]. [12] documented in their article a statement made by a villager from the Lam Dong community during the execution of LEAF (Lowering Emissions by Accelerating Forest Finance). He said, "our community now have a better understanding of their responsibilities and rights and are more confident when participating in carbon initiatives" [12]. Ka Sa K’Uy, from Cho Re village in Ta Nang says, “I now know that forests not only support local livelihoods but also contribute to reducing climate change. And I have the confidence to share my opinions, even in large groups" [12]. This showed that local actors understand that carbon payments provide a higher payment compared to PES schemes, thereby providing a more substantial economic foundation for conservation[12]. Furthermore, carbon finance can provide the necessary carbon capital for sustainable rural development if it is managed equitably. [9] highlights that financial incentives like REDD+ and carbon markets are very effective when they provide direct cash and non-cash forms such as investments in community infrastructure, job creation, and securing land use certificates for forest-dependent households. This depicts that stable financial income from forest ecosystem services positively affects the livelihoods of households in the Central Highlands[9]. Also, the role of community forestry in increasing social capital and providing secure tenure makes these groups ideal partners for carbon projects[4][7][19][6].

Vietnam is currently trying to establish a domestic carbon market, with its commencement slated to start officially in 2028-2029[9]. This will allow major domestic emitters to buy emission quotas, thereby creating a demand for forest carbon credits domestically from provinces like Lam Dong[9]. The successful sale of Vietnam’s 10.3 million forest carbon credits from the North Central region to the World Bank’s Forest Carbon Partnership Facility showed the nation’s capacity to participate in result-based finance[9]. This sets the precedent that national governance and MRV systems are empowered to handle international carbon transactions on a large scale, leading to future jurisdictional REDD+ programs that could encompass the Central Highlands[9]. There are now emerging legal governing frameworks that address the designation of carbon ownership. This is developed to confirm that revenue from the sale of the verified emission reduction belongs to the forest owner. This ensures that households or communities are direct beneficiaries of their conservation efforts, encouraging long-term investments in forest quality. Also, the Vietnamese government is developing policies to encourage state forest enterprises to invest in forest carbon projects[9]. This is in a bid to create a blended finance model using public finance to gather private capital that can fund large-scale forest restoration and IFM projects across the province[9].


Challenges and Limitations of Carbon Finance Opportunities

Despite the opportunities for livelihood improvement and forest conservation that carbon finance offers, there are institutional and governance, technical, and socio-economic challenges.

Institutional Challenges: Reviewing the lessons drawn from the PES scheme, there is a high risk of elite capture for the equal distribution of carbon benefits[13][9]. The lack of fairness and transparency in benefit-sharing documented by [13] during the assessment of three community PES models shows concerns for the distribution of carbon revenue. This is because it excludes the poorest and most marginalized households from receiving equitable benefits[13][22][4]. Also, the lack of technical expertise and human capital to engage and understand complex carbon markets can be a limitation for community forest managers and local authorities[22]. This is in terms of understanding contract negotiation, financial management, rigorous monitoring, reporting and verfication (MRV), etc. [12]. Also, [9] highlights institutional fragmentation among agencies (MONRE, MARD, and provincial forest protection departments), leading to overlapping mandates and coordination gaps.

Technical and Financial Challenges: Compliance with rigorous standards (e.g., VCS, Gold Standard) is necessary for participation in international voluntary carbon markets. The processes involved in baseline setting, leakage estimation, and continuous monitoring are difficult, complex, and expensive procedures [11][9]. These expenses may be unaffordable for small-scale community-based projects, necessitating outside funding and technical support[11]. Markets also require transparent pricing mechanisms, yet Vietnam lacks a clear method for determining carbon credit prices domestically [9]. Likewise, projects must prove additionality, that the carbon sequestered would not have happened without the payment, and permanence, that the carbon stays stored for the contract length, usually 30-100 years, in order to provide valid carbon credits [9]. It can be challenging to demonstrate additionality in regions that are already well-protected. Local pressures, climate change hazards (such as wildfire), and policy volatility pose a challenge to permanence. Furthermore, the risk of leakage. Activities at the project level, like banning logging or forest clearing in a particular area, may unintentionally shift those activities to nearby unprotected forests outside the project boundary, negating the overall climate benefit [9]. Hence, costly comprehensive jurisdictional-level accounting is needed to address this [11].

Socio-economic challenges: The long-term financial stability of the conservation mechanism may be threatened by local forest managers’ reliance on the voluntary carbon market, which exposes them to price volatility, liquidity problems, and changes in corporate buyer demand[9]. In comparison, the domestic PFES plan offers more stable, albeit lower, payments. Even while carbon payments might be large, they might not be enough to offset the high opportunity costs associated with turning forestland into profitable cash crops like coffee and pepper that are common in the Central Highlands[9]. The incentive to preserve the forest for carbon value will eventually fail if payments fall short of the potential income from agriculture[9]. Carbon markets can only succeed with strong social safeguards, ensuring that local communities, particularly ethnic minorities, are not disadvantaged.

Recommendations

  • Legal recognition and tenure security should be reinforced in Vietnam for community forest user groups and ethnic minority households. This is because in the absence of it, long-term contracts for carbon credits are not viable, and there is a high financial risk.
  • Likewise, community consultation with respect to their free, prior, and informed consent should be incorporated into the national standard for carbon markets. This secures local support and meets the international market standards.
  • MRV training centers for local community leaders and local government staff can be established in Lam Dong province. The training can covers IPCC methodologies and compliance with international standards to ensure the resulting credits are of integrity and marketable at a premium price.
  • Community forest governance should be strengthened by developing transparent rules for benefit allocation to curb elite capture and free riding highlighted in the PES model.
  • Trainings on financial management and conflict resolution for community forest leaders can be carried out. This will ensure that communities receive a befitting reward for forest protection and climate mitigation.
  • Socio-ecological learning and knowledge exchange can help sustain community forestry as an adaptive nature-based solution by incorporating peer-to-peer learning networks, youth-centered programs, etc.

Conclusions

Community forestry in Lam Dong province, Vietnam, shows how local forest governance has the capacity to provide ecological, social, and economic benefits. Community forestry is an effective nature-based solution that supports climate change mitigation, protects biodiversity, and strengthens ecosystem resilience through secured land tenure, inclusive governance, and incorporation of indigenous and local knowledge. Payment for ecosystem services and carbon finance mechanisms provides livelihood opportunities, but it is dependent on equitable benefit-sharing and institutional governance. In a nutshell, this paper shows the importance of empowering communities that are dependent on the forest as central actors in the sustainable forest management in Vietnam.

Theme: Community Forestry
Country: Vietnam
Province/Prefecture: Lam Dong

This conservation resource was created by Oyinkansola Happiness AKINADE.
It is shared under a CC-BY 4.0.


References

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  10. ↑ 10.0 10.1 Pham, T.T; Campbell, B.M; Garnett, S; Aslin, H; Hoang, M.H (2010). "Importance and impacts of intermediary boundary organizations in facilitating payment for environmental services in Vietnam". Environmental Conservation. 37(1): 64–72.
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  17. ↑ 17.0 17.1 17.2 Poffenberger, M (2006). "People in the forest: Community forestry experiences from Southeast Asia". International Journal of Environment and Sustainable Development. 8(2): 57–69.
  18. ↑ Guiang, E.S; Castillo, G (2006). "Trends in forest ownership, forest resources tenure and institutional arrangements in the Phillipines: Are they contributing to better forest management and poverty reduction?". FAO Working Paper: 282–323.
  19. ↑ 19.0 19.1 19.2 19.3 Lin, T.H; Htun, K.T; Gritten, D; Martin, A.R (2019). "The contribution of community forestry to climate change adaptive capacity in tropical dry forests: Lessons from Myanmar". International Forestry Review. 21(3): 324–340.
  20. ↑ 20.0 20.1 20.2 20.3 Sunderlin, W.D (2006). "Poverty alleviation through community forestry in Cambodia, Laos, and Vietnam:An assessment of the potential". Elsevier. 8(4): 386–396.
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  23. ↑ Sunderlin, W.D; de Sassi, C; Sills, E.O; Duchelle, A.E; Larson, A.M; Resosudarmo, I.A; Awono, A; Kweka, D.L; Huynh, T.B (2018). "Creating an appropriate tenure foundation for REDD+: The record to date and prospects for the future". Elsevier. 106: 376–392.
  24. ↑ IUCN (2011). Community forest management in Vietnam: summary of initial analysis of processes and outcomes. RECOFTC- The center for People and Forests.
  25. ↑ CIFOR (2011). "Deforestation much higher in protected areas than forests run by local communities".
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