According to the 2025 national forest status report released by the Ministry of Agriculture and Environment (MAE) in March, Vietnam has more than 14.97 million ha of forest, including 10.08 million ha of natural forest and nearly 4.9 million ha of planted forest.
Forests are increasingly recognized as one of Vietnam’s most important carbon sinks as the country responds to climate change and works to meet its greenhouse gas emission reduction commitments. Total carbon stored in the country’s forest biomass is estimated at about 780.9 million tons, of which natural forests account for more than 663 million tons, or about 85 per cent of the total. The remainder is stored in planted forests.
Opportunities from carbon sinks
In recent years, forest carbon sequestration and storage services have gradually emerged as a source of financing for the forestry sector. Agreements to transfer emission reduction results have created opportunities to mobilize additional resources for forest protection and development while supporting Vietnam’s climate commitments.
Notably, the Emission Reductions Payment Agreement (ERPA) for the North Central Region was Vietnam’s first agreement to transfer emission reduction results in the forestry sector, marking an important step in turning the carbon sequestration and storage value of forests into financial resources.
At COP26 in 2021, the MAE signed a Letter of Intent on an emission reduction purchase agreement with the Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition. Under the agreement, Vietnam is expected to transfer 5.15 million tons of CO2 from the central highlands and south-central coast at a minimum price of $10 per ton. Early results from emission reduction and carbon credit transactions suggest that forest carbon sequestration and storage could become a significant new source of financing for the forestry sector.
Some localities are already developing policies to tap into this potential. On August 18, the Da Nang City People’s Committee approved a project to develop and manage forest carbon credits for 2026-2030, with a vision to 2035. The city will survey forest conditions, calculate carbon stocks, and identify 100 per cent of forest areas with potential for carbon projects.
By 2030, Da Nang aims to have one to three approved forest carbon projects, cooperate with at least two domestic and international partners, complete one or two project and carbon credit registration dossiers, and sign at least one domestic or international carbon credit purchase agreement.
The Quang Ngai Provincial Party Committee has issued a resolution on sustainable forestry development through 2030, with a vision to 2035, to expand its forest-based economy beyond timber harvesting to include forest ecosystem services, including the forest carbon market.
As green and circular economic models gain momentum and climate adaptation requirements increase, a forest carbon market could raise the forestry sector’s value-added while creating stronger incentives to protect and restore forests. By 2030, Quang Ngai’s forestry sector aims to reduce emissions by about 1.129 million tons of carbon while absorbing and storing approximately 10 million tons, creating a foundation for future participation in the carbon credit market.
Determining credit prices
Forest carbon credits are increasingly viewed as a potential resource as Vietnam develops its carbon market. But as the market moves toward actual transactions, the key questions are no longer simply how many credits forests can generate or what price they can command. Credit quality, the mechanism under which credits are recognized, and the markets where they can be used are becoming equally important.
One ton of CO2 absorbed or stored by a forest does not automatically translate into a commercially-valuable carbon credit, as each credit must meet requirements covering baselines, additionality, measurement, reporting, and verification (MRV), leakage, permanence, reversal risks, carbon rights, social and environmental impacts, and double counting. These factors determine a credit’s credibility, eligibility, and ultimately its market value.
According to Mr. Nguyen Trung Thong, Forest Carbon Specialist at Forest Trends, forest credits are no longer traded at a single price. Rather, prices are increasingly determined by quality ratings.
The share of supply from forestry and land use has risen to 36 per cent, while supply from renewable energy has fallen 38 per cent from the previous reporting period. Mr. Thong noted that even projects of the same type can command very different prices, with higher quality projects generating price differences of up to five-times.
A survey by Swiss climate consultancy South Pole, released in late 2025, found strong interest in Vietnam’s carbon market among potential buyers and an openness to purchasing credits from the country. Some 33 per cent of respondents said they had a high level of interest in Vietnamese forest carbon credits, viewed the sector as a priority, and saw significant potential. Another 40 per cent said they were willing to consider and further explore purchasing opportunities.
However, projects must meet buyers’ requirements and priorities and undergo due diligence before contracts can be signed.
From an investor perspective, a representative from VinaCarbon highlighted credit quality as a key consideration at a recent carbon forum. Investors want to know how credits are generated, whether they meet relevant standards, how they are independently assessed and verified, and whether they are eligible for trading. They also need clarity on their potential connection to domestic and international carbon markets.
Project efficiency and sustainability are equally important. Investors are particularly concerned with land-use rights, ownership, revenue-sharing arrangements, and impacts on local communities and the environment.
They must also account for all project costs, including benefit sharing with local people, forest owners, and relevant authorities, to determine whether the remaining revenue is attractive enough to support long-term investment.
Quantifying carbon absorption
Mr. Pham Hong Luong, Deputy Director of the Department of Forestry and Forest Protection at the MAE, told a recent carbon forum that forestry holds an advantage because systems for surveying, inventorying, monitoring, and reporting forest conditions have been maintained for many years. This data provides a foundation for calculating emission reductions and submitting the results for verification.
The ERPA for the North Central Region demonstrates the potential. During the first reporting period alone, Vietnam verified 16.2 million tons of CO2 in emission reductions, which were recognized by the World Bank. It subsequently completed two transfers totaling 11.3 million tons, generating $56.5 million in revenue.
The figures demonstrate that large forest areas and carbon sequestration capacity are only “potential” sources of value. To generate financial returns, the amount of carbon absorbed or emissions reduced must be quantified using appropriate methodologies, supported by monitoring data, and independently verified. A clear benefit-sharing mechanism is also essential.
Experience from payments for forest environmental services has helped shape the allocation of carbon revenue. Under the mechanism used in the north-central region program, the central government retains 3.5 per cent for management, provincial governments retain 10 per cent, and the remainder goes to forest owners and other beneficiaries. Clear allocation rules help ensure that funds are distributed transparently and promptly.
Revenue from the program has been distributed to approximately 80,000 forest owners, including around 40,000 households, individuals, and communities. This experience is particularly relevant as Vietnam develops its legal framework for forest carbon sequestration and storage services.
Notably, Decree No. 180/2026/ND-CP on forest carbon sequestration and storage services, which took effect on July 15, requires local authorities to prepare data and assess the current status and carbon sequestration potential of forests.
The decree establishes Vietnam’s first relatively-comprehensive legal framework for developing, managing, and trading forest carbon credits. It covers service providers and users, payments for services, forest carbon project development, emission reduction results, credit issuance, and the trading and transfer of emission reduction results and forest carbon credits. It also sets procedures for developing and registering forest carbon projects, managing carbon-related revenues, and conducting inspection, monitoring, reporting and information sharing.
In addition, Circular No. 31/2026/TT-BNNMT, issued by the MAE, provides detailed rules on forest valuation, forest price brackets, and methods for determining payments for forest carbon sequestration and storage services.
Together, these regulations are expected to standardize the valuation of forest resources and provide a clearer foundation for the development of forest environmental service markets and Vietnam’s forest carbon market.
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