Assessing the carbon trading potential and economic efficiency of low-emission rice farming in the Mekong Delta: evidence from Thang Loi Cooperative

This thesis examines whether low-emission rice production can simultaneously reduce greenhouse gas (GHG) emissions and increase agricultural incomes under real-world conditions for smallholder farmers, and how these results can be translated into carbon finance opportunities for the Vietnamese rice sector. The thesis analyzes a pilot model on an area of43.1 hectares implemented by 20 households at Thang Loi Agricultural Cooperative (Lang Bien commune, Thap Muoi district, Dong Thap province) in the autumn-winter 2024 crop under the national program “One Million Hectares of High-Quality, Low-Emission Rice Sustainable Development Project linked to Green Growth in the Mekong Delta by 2030”. The pilot model applies a bundle package of practices – alternate wetting and drying (AWD), site-specific nutrient management (SSNM), mechanical direct seeding with lower seed rates, short-duration varieties, and straw management – designed to reduce emissions intensity while improving production efficiency. A before-after quasi-experimental design was combined with the 2019 IPCC Tier-2 rice methodology to estimate seasonal methane emissions, using national baseline emission factors and observed management measures. Cooperative accounting data were used to construct both an “engineering” marginal abatement cost (MAC, based on production costs) and a “private” MAC (based on net profits) for the bundled intervention. Results showed that the bundle packages reduced emissions by approximately 4.9 tCO₂ equivalent per hectare compared to continuous flooding and conventional straw burning, while simultaneously increasing yield, reducing production costs per unit of output, and increasing net profits per hectare. At the cooperative scale, the pilot project delivered approximately 212 tCO₂ equivalent mitigation over a season, providing a credible volume for participation in emerging carbon markets. The estimated MACs are strongly negative, meaning that each tonne of CO₂ equivalent reduced is associated with cost savings and increased farm income, and this finding remains robust to careful sensitivity tests of productivity, costs, and global warming potential. Plotting the joint change in emissions and income in the Environmental Kuznets Curve (EKC) space reveals a clear “bend” towards higher incomes and lower emissions at relatively low income levels, emphasizing the role of targeted technological and institutional interventions rather than income growth alone. By integrating the Tier- 2 compatibility measure, empirical MAC estimates, micro EKC interpretations, and carbon price benchmarks, this thesis provides new evidence on the economics of emissions reductions from smallholder and offers specific design insights for results-based payment schemes and carbon trading programs in the rice sector in Vietnam.