Carbon market operating as intended

Vietnam’s domestic carbon market moved from policy design to trading on June 29, when the carbon exchange officially began operations at the Hanoi Stock Exchange (HNX). On its first day, it recorded a VN2025 emissions allowance transaction worth VND161.66 million ($6,218), marking the first step toward commercializing emission reductions as tradable assets. The launch came as Vietnam continued building the market’s institutional, technical, and regulatory foundations. 

Speaking at the Vietnam Carbon Forum 2026 on August 14, Deputy Minister of Agriculture and Environment Le Cong Thanh said the legal framework had basically been established and was continuing to improve, while the exchange gave businesses more options to reduce emissions at appropriate costs. “This is also why we need to bring the carbon market from policy into practice in a transparent, effective, and responsible manner,” he told the Forum. He also noted that authorities would continue improving policies, technical infrastructure, measurement, reporting, and verification (MRV) systems, and data management during the pilot phase.

Building the infrastructure

The domestic carbon exchange currently provides trading services for two main products: emissions allowances and carbon credits. Mr. Tran Trong Kien, Deputy Director of the Derivatives Market Department at HNX, said the June 29 launch was the first step in commercializing emission reductions by turning them into commodities that can be publicly traded.

The rules for participation differ between the two products. For emissions allowances, only facilities and organizations allocated such allowances by the government can trade. For carbon credits, all organizations operating in Vietnam can participate. Organizations and businesses must open accounts and trade through securities companies that are members of the Vietnam Exchange (VNX). Six securities companies had become carbon trading members as of the holding of the Forum.

The exchange currently uses a negotiated trading mechanism, under which buyers and sellers agree on transaction terms before entering their orders. The market currently has no trading price band. If two parties enter an incorrect price and the counterparty confirms it, the transaction will still be recorded as successfully executed. Orders can only be amended or canceled before they are matched or established on the system. Once established, a transaction cannot be amended or canceled through HNX.

The trading process is connected to the National Registration System managed by the Department of Climate Change (DCC) at the Ministry of Agriculture and Environment (MAE), while the custody infrastructure is operated by the Vietnam Securities Depository and Clearing Corporation (VSDC). According to Mr. Nguyen Tuan Anh, Deputy General Director of the HNX, organizations allocated emissions allowances or holding carbon credits must first register their assets with the national system. The DCC then transfers the relevant data to the VSDC, and only accounts whose custody information has been completed on the previous day can trade on the following day.

Ms. Ta Thanh Binh, General Director of the VSDC, said it worked with HNX to develop and test the infrastructure needed for custody and settlement following the issuance of Decree No. 29/2026/ND-CP on the carbon exchange. At the time of the Forum, eight securities companies had registered as custody members and 20 participant accounts had been opened, including 14 domestic and six foreign institutional accounts.

The carbon market applies a T+0 settlement cycle, meaning ownership of carbon credits and payment are transferred on the same trading day. Participants must have sufficient assets and cash before trading, while the Bank for Investment and Development of Vietnam (BIDV) is currently the designated settlement bank for carbon credit transactions. Ms. Binh said the custody and settlement system was operating “safely, stably, and accurately.”

Transparency and market supervision

The quality of emissions data and verification is a key part of the market’s operations. Mr. Nguyen Tuan Quang, Deputy Director of the DCC, said businesses and facilities subject to greenhouse gas inventory requirements must comply with the relevant regulations before their data is sent to verification organizations for review and confirmation.

Verification organizations are managed under regulations on standards and technical regulations and conduct their work according to ISO standards and approved procedures. Information cited at the Forum indicated that around 28 domestic organizations and nearly 30 foreign organizations had been recognized as eligible for verification.

The MAE is also developing an online reporting system for greenhouse gas inventories, which according to Mr. Quang is intended to help businesses report more quickly, accurately, and transparently while allowing authorities to more easily cross-check data from facilities required to conduct inventories.

The quality of this information is directly linked to the compliance mechanism under the pilot market. Mr. Nguyen Thanh Cong, Deputy Head of the Carbon Market Division at the DCC, said the pilot initially covers around 150 major emitters in thermal power, steel, and cement, with emissions allowances allocated free of charge. At the end of the compliance period, businesses must return allowances corresponding to their actual emissions.

If emissions exceed the allocated level, businesses can purchase additional allowances from entities with a surplus or use carbon credits to offset the excess. However, carbon credits can cover no more than 30 per cent of the allowances allocated to a company. Businesses can also borrow up to 15 per cent of the following period’s allowance allocation to meet current obligations.

The mechanism limits reliance on carbon credits instead of actual emissions reductions. Conversely, companies that invest in technology and reduce emissions below their allocated level can sell surplus allowances on the exchange or carry them forward to the following period. For the 2025-2026 compliance period, businesses must submit greenhouse gas inventory reports before December 1, 2027, and complete the return of allowances before December 31, 2027.

Trading activity is also subject to a three-level surveillance mechanism. Mr. Nguyen Tien Dung, Deputy General Director of the VNX, said the system is based on Decree No. 29/2026 and Circular No. 48/2026 from the Ministry of Finance and is designed around the principles of consistency, regularity, continuity, and timeliness.

At the first level, trading members, mainly securities companies, are responsible for reporting and providing information for surveillance. At the second level, the HNX directly monitors transactions using trading data and reports from securities companies. 

The surveillance system focuses on collusion, inducing others to buy or sell, using false information or rumors to manipulate the market, and other abnormal transactions. Mr. Dung also stressed the need for close coordination between market authorities and the MAE, given the carbon market’s combination of trading infrastructure and carbon asset management. 

Building liquidity and value

Beyond the operation of the exchange itself, the market will need sufficient demand and liquidity to function effectively as a tool for emission reductions.

Dr. Le Xuan Nghia, Director of the Institute for Development Consultancy (CODE), said carbon pricing should create both incentives for emission reductions and costs for those that exceed their limits. Citing a World Bank analysis, he said a carbon price of around $147 per ton could create a sufficiently strong impact on emitters’ decisions. “The goal of the carbon market is not only to create a place to buy and sell allowances or credits, but, more importantly, to create a price signal strong enough to influence the behavior of emitters,” he said. He added that tighter emissions allowance allocations could increase demand and liquidity, while investor participation, international participation, and bank interest rates would also affect market activity. 

For businesses, the market could also create a new source of value from existing emission reduction efforts. Ms. Pham Lien Anh, Program Lead, Country Advisory and Economics in Vietnam, Laos and Cambodia, at the International Finance Corporation (IFC), said many businesses had implemented energy-saving and emission-reduction measures without recognizing their potential to generate carbon credits. She recommended that businesses first understand their emissions, identify major sources, and strengthen their capacity to measure, monitor, report, and verify the data. 

According to Deputy Minister Thanh, businesses must play a central role alongside regulators, financial institutions, technology providers, and experts. “Businesses must become the central actors in the transition,” he said, adding that companies need to move beyond viewing emission reductions as an obligation and instead proactively create value from emission reduction activities.