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May 26, 2025

Decision on Forest Carbon Management in Laos

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On September 6, 2024, Laos’ Ministry of Agriculture and Forestry (MOAF) issued Decision No. 4565/MAF on Forest Carbon Management. This decision, which took effect on October 29, 2024, enables Laos to participate in both domestic and international carbon markets. It outlines comprehensive guidelines for forest carbon activities, including investment procedures, carbon credit trading, and benefit allocation. The Department of Forestry (DOF), under the MOAF, oversees these activities and grants relevant permissions.

Definitions

The decision defines key terms related to forest carbon management:

  • Forest carbon: Carbon dioxide (CO₂) absorbed by forests, calculated in tonnes per hectare.
  • Forest carbon credit: Quantity of CO₂ reduction, absorption, and storage, measured in tonnes of carbon dioxide equivalent (tCO2e), achieved through various projects or activities. These credits are verified for the reduction, absorption, and storage of CO₂ to mitigate greenhouse gas emissions. They can be exchanged and traded in accordance with established standards for greenhouse gas emissions.
  • Forest carbon trading: An agreement between a buyer (domestic or foreign legal entity or government) and a seller (the owner of a forest carbon project) to trade tCO2e . This trading allows the buyer to offset greenhouse gas emissions that exceed the emission allowances set out in the Paris Agreement on climate change. The forest carbon sold becomes the property of the buyer.

Forest Carbon Business Operations

According to the decision forest carbon business operations include:

  • Cooperation between the government and development partners: This involves bilateral and multilateral cooperation based on international agreements and treaties. The use of carbon credits from this cooperation is not market-based but agreement-based, contributing to Laos’ national climate change goals.
  • Forest carbon investment: This includes direct government investments and joint investments with the private sector, international organizations, or communities. These investments aim to create forest carbon credits without granting exclusive rights to forest resources. Joint investments are partnerships, not land concessions.

Investment Requirements

Investors in forest carbon credits must:

  • Be a legally registered company.
  • Have a business operating license for forest carbon trading issued by the MOAF.
  • Have experience with forest resources and biodiversity.
  • Demonstrate commitment to investing in forest management.
  • Be technically ready and able to access forest credit markets.
  • Possess land use rights or a village land concession agreement for forest plantations.
  • Obtain approval from the DOF for the proposed investment area.

Proposal Procedures

Investment in forest carbon credits proceeds along the following steps:

  1. The investor submits project documents to the MOAF through the DOF.
  2. The DOF reviews the proposal, inspects the area, and prepares a proposal for the MOAF regarding MOU approval.
  3. After the investor and the DOF sign the MOU, the investor must pay a deposit based on the project area size: USD 15,000 for areas up to 300,000 hectares and USD 30,000 for areas exceeding 300,000 hectares.
  4. The investor conducts a feasibility study within one year, extendable for one additional year.
  5. The DOF reviews the feasibility study and decides whether to issue a certificate of approval.
  6. Negotiate a memorandum of agreement (MOA) and seek government approval.
  7. If the MOA is not implemented within 180 business days, the MOAF may propose its cancellation.

Registration and Trading

Forest carbon project registration involves the legal issuance of certificates to business owners to develop projects aimed at reducing greenhouse gas emissions from deforestation and forest degradation. This is done through bilateral or multilateral cooperation on forest carbon and trading.

Forest carbon trading may be conducted by allowing project investors to purchase carbon credits directly from the government, with the investment amount deducted up front from the project. Upon completion of the trading, the project investor pays a percentage of the total forest carbon value generated by the project to the government and fulfills other obligations.

For trading forest carbon credits generated from natural forests, the MOAF will propose government approval. For credits generated from forest plantations, the project owner will seek approval from the MOAF.

Benefit Sharing

Benefits derived from forest carbon activities are distributed between the government and investors or partners. Financial gains or carbon credits from natural forest areas or mixed plantations within the area of areas designated as protection forest, conservation forest, or production forest are to be shared between the government and project investors or other participants. The government will allocate financial benefits to central and local forestry sectors, as well as to communities and individuals in the project and surrounding areas, as appropriate or through specific mechanisms. For plantation forests, benefits are shared between the plantation owner and the government or other participants.

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