Vietnam Carbon Market Analysis
- Jul 9
- 3 min read
Objective
The purpose of this project is to achieve the Nationally Determined Contribution (NDC) by setting the reduction target of greenhouse gas emissions at cheaper costs for businesses and society, creating new financial flows for greenhouse gas emission reduction activities, promoting clean and green transformation, creating low-emission technologies, involving to improve the competitiveness of Vietnamese enterprises domestically and internationally, creating a low-carbon economy and proactively responding to climate change, aiming to achieve a net emission of zero by 2050.
Regulatory structure
The Ministry of Natural Resources and Environment will govern the Emission Trading System (ETS) that regulates policies, sets a cap for emissions, and controls the measurement, reporting, and verification protocols (MRV)
Hanoi Stock Exchange is responsible for operating the carbon exchange platform. The carbon credits are traded only on the carbon exchange platform, and the emission quotas (cap and surplus) are traded through a carbon exchange platform or by agreement with parties who have accounts on national registries.
Roadmap
The project is classified in three ways:
The First phase (before Jun 2025) is to develop a legal framework for emission trading and carbon credits and implement the necessary infrastructure for carbon market operations.
The second phase (Jun 2025 – Dec 2028) is to launch the pilot phase of ETS with free emissions allowances for high-emitting sectors, and also improve compliance and regulatory frameworks.
The third phase (from January 2029) is to launch the entire market operation officially with expanded sectoral coverage, introduce bidding mechanisms along with the free allocations.
Pilot phase (2025-2028)
During the pilot phase, the high-emitting sectors such as steel manufacturing, cement production and thermal power plants are the primary targets. Those sectors will receive emissions allowances, free of cost, at the initial stage, which will help them to transition into the new system.
After all the arguments and revisions, the Vietnamese government officially approved new legislation on June 9, which offers more transparency on its emissions trading scheme (ETS). The program will include industries responsible for roughly 50% of the country's emissions in its first phase. In 2029, the second phase will be implemented, which will expand to cover freight transport and commercial buildings.
Emission allowances are allocated cost-free until 2029 as per the current plan. By the end of 2025, the emission allowances for 2025–2026 will be announced, with future allocations released on June 30 of 2027 and 2029, respectively. Companies that cross their emissions quotas can buy allowances through the carbon market, while those with remaining quotas can sell them. Only 30% of the company's emissions can be offset by the use of domestic and international credits, significantly higher than the 10% cap in places like Singapore and Taiwan.
Official market launch (2029 onwards)
The carbon market will become fully operational in 2029, extending sectoral coverage and proposing bidding mechanisms along with the free allocation of caps. The government will continue updating regulations, infrastructure, and reviewing to enhance market efficiency and long-term effectiveness.
Stricter rules will be imposed on obligated entities from the day of launch. So, the entities should conduct the GHG inventories, prepare for compliance, implement mitigation plans, and monitor regulatory developments.
Eligible Instruments and Offset Integration
Two kinds of Instruments will be traded on the carbon market: emission quotas and carbon credits. Emissions quotas are compliance-grade allowances allocated by the government that are primarily traded to domestic projects and also to foreign projects that have emission allowances from the government, while carbon credits represent verified emission reductions generated either domestically or through internationally recognised mechanisms.
This scheme will approve offset credits from the Clean Development Mechanism (CDM), the Joint Crediting Mechanism (JCM), and Article 6.4 of the Paris Agreement. These credits may be used for legal purposes, imposed to eligibility criteria and safeguard provisions that prevent double counting.
International participation and market access
The emission quotas will be traded by foreign businesses only when the Government of Vietnam allocate the emission allowance to the entity.
Eligibility of foreign entities to participate in the carbon trade platform is only when:
Developing projects under the domestic offset mechanism or the eligible international offset mechanisms (CDM, JCM and Article 6.4 of the Paris Agreement).
A Company that is eligible to participate in the trading system and carbon credits investment
Conclusion
In June 2025, Vietnam's pilot carbon market is going to be launched, which reflects a structured and technically grounded approach to implementing climate policy through market-based mechanisms. The Vietnam carbon market is expected to evolve into an optimal, regulated system that supports innovation, clarity, and accountability, laying the groundwork for a sustainable net-zero pathway by 2029.
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