The U Minh mangrove forest in Kiên Gian Province — VNA/VNS Photo

Việt Nam is taking concrete steps towards establishing a carbon market, aiming to reduce greenhouse gas (GHG) emissions and fulfil its commitment to achieving net zero emissions by 2050.

The roadmap for this market has become increasingly clear, with key regulatory frameworks being developed and a pilot carbon trading exchange set to be launched in June this year.

Deputy Prime Minister Trần Hồng Hà signed on January 25 a decision approving the Scheme for the Establishment and Development of the Carbon Market in Việt Nam.

According to the plan, Việt Nam will proactively establish and develop a centralised carbon market, ensuring market principles under the management and supervision of the State.

Tăng Thế Cường, director general of the Department of Climate Change under the Ministry of Natural Resources and Environment (MONRE), said: “The development of Việt Nam's carbon market is progressing phase by phase. We are working to finalise the legal framework for carbon trading, ensuring transparency and compliance with international standards."

The legal foundation for Việt Nam's carbon market is primarily based on the revised Law on Environmental Protection (2020) and the 06/2022 government decree, which outlines the management of GHG emissions and the operation of carbon credit markets. The decree mandates the establishment of a national GHG inventory and an emissions quota allocation system.

To facilitate carbon trading, MONRE, in collaboration with the Ministry of Finance and other relevant agencies, is developing detailed regulations on the issuance, trading and verification of carbon credits.

The Hanoi Stock Exchange (HNX) has been designated as the operator of the national carbon trading platform, ensuring regulated transactions and market stability.

Carbon trading mechanisms

Việt Nam's carbon market will consist of two primary components. The first is the Emissions Quota Trading System (ETS), in which the Government assigns GHG emission quotas to regulated industries, allowing them to trade allowances based on their actual emissions.

Initially, these quotas may be allocated for free, with an eventual shift towards auctioning to enhance market efficiency.

The second component is the Voluntary Carbon Credit Market, enabling businesses to generate carbon credits through GHG emission reduction projects such as afforestation, renewable energy expansion, and energy efficiency improvements.

These credits can be traded domestically and internationally, leveraging mechanisms under Article 6 of the Paris Agreement and collaborations with countries like Japan through the Joint Crediting Mechanism (JCM).

Notably, major Vietnamese corporations such as Vingroup, Vinamilk and Masan have already taken proactive steps to integrate carbon credit trading into their sustainability strategies. These companies are investing in low-carbon technologies and renewable energy projects to capitalise on emerging carbon credit opportunities.

A wind farm in Trà Vinh Province. VNA/VNS Photo

Emissions reporting, quota allocation

According to Cường, under a decision issued on August 13, 2024 by the Prime Minister, more than 2,166 enterprises were required to conduct GHG inventories and report their emissions levels in 2024 under the Carbon Market Establishment and Development Project in Việt Nam.

Those enterprises included thermal power plants, industrial production facilities consuming at least 1,000 tonnes of oil equivalent (TOE) per year, freight transport companies with an annual fuel consumption of at least 1,000 TOE, commercial buildings using at least 1,000 TOE per year, and solid waste treatment facilities processing no less than 65,000 tonnes annually.

From now until the end of 2028, high-emissions industries such as thermal power, steel production and cement manufacturing will be allocated emissions quotas based on an overall cap approved by the Prime Minister.

Enterprises under this scheme will be allowed to buy and sell quotas and carbon credits to offset emissions exceeding their assigned limits.

One of the most critical developments in Việt Nam's carbon market will be the launch of a pilot carbon trading exchange in June this year. This initiative aims to test trading mechanisms, regulatory compliance and market stability before full implementation. The trial phase will focus on high-emissions industries such as energy, manufacturing and transportation.

“In parallel, MONRE is implementing capacity-building programmes to assist businesses in conducting accurate GHG inventories and developing carbon reduction strategies. Our goal is to ensure that Vietnamese enterprises are well prepared to participate in carbon trading while aligning with international market standards," Cường said.

Despite these promising steps, challenges remain. The lack of a fully established legal framework, the need for standardised carbon credit verification and limited corporate awareness about emissions trading pose significant hurdles.

Additionally, Việt Nam has yet to introduce specific tax policies for carbon trading, though the Ministry of Finance is considering tax exemptions on carbon credits to encourage market participation.

Globally, over 70 carbon pricing mechanisms, including emissions trading systems and carbon taxes, covered approximately 23 per cent of total GHG emissions by 2023, according to the World Bank’s State and Trends of Carbon Pricing 2023 report.

The European Union (EU) has already implemented the Carbon Border Adjustment Mechanism (CBAM), requiring high-carbon imports like steel and cement to comply with EU emissions regulations. If Việt Nam does not develop its carbon market effectively, domestic exporters could face significant trade barriers.

"Looking ahead, Việt Nam's carbon market could generate up to 57 million carbon credits annually, exceeding initial projections of 40 million per year," Cường said.

"If successfully implemented, this could yield approximately US$300 million in annual revenue, with proceeds reinvested into green development projects.

"The carbon market is not just a regulatory mechanism; it is a strategic tool for Việt Nam to integrate into the global green economy, attract sustainable investments and strengthen corporate environmental responsibility." VNS