As Vietnam prepares to pilot a domestic carbon market and continues bilateral initiatives like the Joint Crediting Mechanism (JCM) with Japan, how will these efforts support the country’s emission reduction, sustainable development, and net-zero by 2050 goals?

Vietnam has been working to establish the legal, infrastructural, technological, financial, and human resources foundations necessary for a domestic carbon market. Government Decree No. 06/2022/ND-CP, dated January 7, 2022, which regulates greenhouse gas emission reductions and ozone layer protection, provides detailed guidance on Article 139 of the Law on Environmental Protection regarding the organization of a carbon market. Additionally, the Prime Minister approved a national roadmap for establishing and developing a carbon market under Decision No. 232/QD-TTg dated January 24, 2025.

More recently, Government Decree No. 119/2025/ND-CP dated June 9, 2025, amending and supplementing several provisions of Decree No. 06, has clarified requirements on greenhouse gas inventory, emissions reduction, carbon credit generation, participation in the carbon market, and greenhouse gas emission quota trading. Under this regulation, major greenhouse gas-emitting facilities in the steel, cement, and thermal power sectors will be allocated emission quotas and be required to participate in the domestic carbon market from the initial phase. A draft decree on the establishment of a carbon credit trading exchange, jointly developed by the Ministry of Finance, the Ministry of Agriculture and Environment, and other relevant ministries, has been submitted to the government for review and approval.

I believe the issuance of these legal documents provides a critical foundation for Vietnam to launch the pilot operation of its carbon market in the near future.

Vietnam has also participated in bilateral mechanisms such as the JCM, an initiative proposed by the Japanese Government to promote cooperation with developing countries. The mechanism aims to stimulate investment and the transfer of low-carbon technologies, products, services, and infrastructure to partner countries, including Vietnam, supported by financial and technological aid from the Japanese Government.

The JCM was signed and implemented in Vietnam in 2013. Between 2013 and 2020, Japan partnered with 17 countries under the mechanism, which has since been expanded to 30 countries, with 256 projects and 106 approved methodologies for generating carbon credits.

In Vietnam, a joint committee between the two countries was established to oversee JCM implementation, which to date has approved 15 methodologies and registered 14 projects, mostly focusing on energy efficiency, energy-saving technologies, and equipment upgrades for higher performance. So far, 35,000 carbon credits have been issued, backed by approximately $35 million in financial support from the Japanese Government.

Since 2021, countries party to the United Nations Framework Convention on Climate Change and the Paris Agreement have been required to reduce their greenhouse gas emissions according to their Nationally Determined Contributions (NDCs). Both Vietnam and Japan are committed to fulfilling their national emission reduction targets. JCM projects are intended to facilitate the transfer of low-emission technologies and green investment from Japan to Vietnam, with the resulting projects generating carbon credits.

Regarding credit allocation, the joint committee assigns a portion of the generated credits to the governments of Vietnam and Japan, another portion to Japanese businesses, and the remainder to Vietnamese corporate partners.

As Vietnam develops its carbon market, the demand for tradeable goods is increasing. Alongside greenhouse gas emission quotas, which can be exchanged on the carbon trading platform, carbon credits also serve as a commodity. Enterprises that exceed their emission quotas can purchase carbon credits to offset their surplus. Conversely, if a company increases production without timely technology upgrades to reduce emissions, it will need to buy emission quotas from other firms or acquire carbon credits to comply with regulations.

Credits allocated to the Vietnamese Government may contribute to the country’s NDCs. Those designated for Vietnamese enterprises may also be used to meet NDC goals or to offset emissions that exceed the government’s permitted thresholds.

Going forward, JCM projects are expected to drive the development of Vietnam’s carbon market while also supporting the implementation of national emission reduction targets under the NDC framework.

How do you view the outcomes, effectiveness, and value of Japan’s cooperative projects with Vietnam under the JCM?

Between 2013 and 2020, Vietnam participated in the pilot phase of the JCM to gain experience and become familiar with its operation. The projects supported by the Japanese Government focused on transferring low-emission and environmentally-friendly technologies to Vietnam.

In addition to the JCM, Vietnam and Japan are also engaged in other complementary initiatives, such as the Asia Zero Emission Community (AZEC), which focuses on energy transition and the application of low-emission technologies.

Japan is proposing the implementation of multi-purpose projects involving advanced technologies, including co-firing technologies in thermal power and biomass plants, as well as renewable energy development projects under the broader framework of a Just Energy Transition. These projects are expected to contribute to Vietnam’s green and low-emission development efforts and support its goal of achieving carbon neutrality by 2050.

Looking ahead to 2030, which sectors will be prioritized for cooperation in the JCM?

Previously, the JCM mainly focused on technology upgrades and energy efficiency. Now, Japan is proposing to expand the scope to include high-productivity, low-emission projects in agriculture, forestry, wind power, and green transportation.

Both countries are also considering investment in more complex and capital-intensive projects, such as carbon capture, utilization, and storage (CCS/CCUS), and offshore wind power development.

CCS/CCUS is a new and challenging field. Vietnam encourages the transfer of advanced technologies and aims to attract FDI to develop its economy, promote technology transfer, mobilize financial resources, and reduce emissions while protecting the environment.

What are the key benefits and opportunities for businesses participating in JCM projects?

Vietnamese enterprises involved in JCM projects will benefit from access to cutting-edge technologies, capacity building, and knowledge exchange. They will also gain exposure to the operational methods and best practices of Japanese companies, helping improve domestic capabilities.

What measures are needed to encourage and attract more Vietnamese businesses to participate in the JCM and contribute to green development?

Most participants in the JCM are Japanese companies, largely because Japan provides the funding, has access to project information, and possesses the advanced technologies required.

Vietnamese companies have yet to proactively access JCM funding. Therefore, promoting awareness through forums and industry dialogues is crucial to helping Vietnamese enterprises access information, build partnerships, and actively participate in the mechanism.

If they meet the eligibility criteria, Vietnamese companies can benefit from financial and technological support under the JCM. At the same time, it’s important to encourage capable domestic consulting organizations to take part in carbon credit methodology development and project validation.

Vietnam urgently needs local entities with the qualifications and expertise to advise, measure, verify, and develop carbon credit methodologies, and to support businesses in implementing greenhouse gas reduction projects.

I believe these steps will help foster independent third-party validation institutions in Vietnam, such as research institutes, centers, or companies, which can verify emissions inventories, assess mitigation outcomes, and generate carbon credits.

This is still a new area for Vietnam, and we are in the process of developing it. Recently-issued legal frameworks will provide a foundation to encourage and support the formation of a capable domestic ecosystem. Some Vietnamese organizations and companies are already qualified to conduct greenhouse gas assessments and verifications in accordance with relevant ISO standards.