Vietnam is considered to boast major potential in creating carbon credits. According to the Department of Forestry and Forest Protection at the Ministry of Agriculture and Environment (MAE), if the forest carbon credit market is operated smoothly, Vietnam could earn hundreds of millions of dollars each year from selling greenhouse gas emission reduction rights. “With a forested area of over 14.8 million ha, forest protection and development is not only an ecological conservation task but also a basis for mobilizing financial resources from domestic and foreign partners,” Mr. Tran Quang Bao, Department Director, told a consultation workshop on a draft decree regulating forest carbon sequestration and storage services held in mid-August in Hanoi.
New legal framework
According to MAE, Vietnam’s forests have the potential to generate significant revenues from the sale of carbon credits, developing attractive eco-tourism areas, and sustainably exploiting forest products. In 2022, the government issued Decree No. 107/2022/ND-CP on piloting the transfer of emission reduction results and financial management of greenhouse gas emission reduction payment agreements in the country’s north-central region, which was implemented from the date of signing and is being piloted until December 31, 2026.
After nearly three years of the pilot, results confirm that this represents a new source of funding for investment in long-term forest protection and development.
However, in the implementation process, there are still some difficulties and issues regarding the use of funds from the transfer of emission reduction results by forest owners that are organizations, as well as in determining beneficiaries. In particular, there are no specific regulations on payment levels and costs for activities related to essential tasks such as measuring, reporting, and evaluating emission reduction results, as well as checking and monitoring forest carbon. “Vietnam still lacks specific regulations on forest carbon absorption and storage, carbon credit pricing, and transparent and effective trading mechanisms in the market,” Mr. Bao said.
In addition, a number of international partners are actively cooperating with MAE to discuss and sign carbon credit exchange agreements. Several localities have been approved by the Prime Minister to pilot the development of projects for forest carbon absorption and storage services, but so far they have not been implemented due to the absence of a nationwide legal framework for the exchange and transfer of emission reduction results and forest carbon credits.
MAE therefore drafted a decree on forest carbon sequestration and storage services, the draft of which establishes a legal framework for forest carbon sequestration and storage services, and clearly defines principles, conditions, subjects, pricing procedures, and the granting and trading of carbon credits. Suppliers include forest owners, Commune People’s Committees, and organizations assigned to manage forests, while users are emission facilities and domestic and foreign organizations or individuals.
According to experts, the most notable change is the introduction of the first standardized pricing process. While the previous decree it will replace only allowed the ministry to issue pricing methods and Provincial People’s Committees to develop price lists, the latest version adds a roadmap: proposing starting prices, checking documents, approving, publicizing for at least 30 days, negotiating, signing contracts, or listing on the exchange. The processing time for each stage is clearly defined, ranging from five to 45 working days. Project publicizing must also clearly state the location, area, starting price, participation conditions, and negotiation timeframe.
Experts believe that the issuance of the decree will overcome the current “spontaneous” approach to implementing forest carbon projects, creating a unified legal framework for localities and businesses to confidently participate. In particular, a transparent benefit-sharing mechanism between the State, businesses, and communities will be key to ensuring consensus.
“The draft decree is designed to provide maximum support to forest owners, especially in simplifying procedures and facilitating participation in the carbon market,” said Mr. Bao. “Once issued, it will ‘untie’ carbon credit owners, allowing them to be more proactive in exchanging, transferring, or offsetting credits, not only domestically but also with international partners.”
Mr. Pham Hong Luong, Deputy Director of the Department of Forestry and Forest Protection, added that many businesses are currently pursuing sustainable development strategies through the application of ESG (environmental, social, and governance) criteria. “Recognizing this trend, the draft provides specific regulations, clarifying the role and participation mechanism of businesses in providing forest carbon sequestration and storage services,” he explained. “This not only meets the growing demand of businesses to contribute to reducing greenhouse gas emissions but also creates conditions for businesses to be recognized for their positive contributions to climate commitments.”
Boosting links
In parallel with the draft decree on forest carbon, Decree No. 119/2025/ND-CP, which took effect in August, also created a legal foundation for the domestic carbon market. Under the associated roadmap, Vietnam will pilot a carbon trading floor from 2025 to 2028 before officially putting it into full operation in 2029.
Experts told the workshop that connections between forest carbon credits and the trading floor will create stable “output”, helping businesses have tools to offset emissions while expanding revenue sources for forest owners.
Globally, the price of credits in Emissions Trading Systems (ETS) ranges from $0.5 per tCO₂e in Massachusetts, US, to nearly $100 in the UK. If operated transparently, Vietnam’s forest carbon credits would become a significant financial resource, easing reliance on the State budget or international aid. “Revenue from carbon credit exchange and transfer will become an economic incentive for people to protect forests,” Mr. Bao believes. “This payment not only helps forest owners reinvest in forest protection and development but also opens up new livelihood opportunities for local communities.”
Experience from the Emission Reductions Payment Agreement (ERPA) in Vietnam’s north-central region reveals the huge financial potential of the sector. In 2020, the Ministry of Agriculture and Rural Development (now MAE) signed an agreement with the World Bank (WB) to transfer more than 10.3 million tons of CO₂, bringing in $51.5 million, which has been disbursed to six provinces in the north-central region. Some 86.9 per cent of total funds were paid directly to forest owners and communities, of which households and individuals received about 16.9 per cent and communities 11.5 per cent. This method of allocation not only helps improve people’s lives but also raises awareness about forest protection, which demonstrates that forest carbon credits can fully become a sustainable source of income if there is a transparent legal corridor.
MAE is urgently completing the draft decree on forest carbon sequestration and storage services to submit to the government in September after completing the final round of consultations. “This is a combination of conservation and development: both protecting the forests - the ‘green lungs’ of the country - and opening a new door to climate finance, linking economic benefits with environmental responsibility,” Mr. Bao said. “Vietnam will then move closer to its goal of net-zero emissions by 2050.”
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