Vietnam is gearing up to pilot a national carbon market by the end of this year, with full implementation targeted for 2029. A comprehensive master plan for establishing and developing such a market has already been approved by the Prime Minister, with the Ministry of Finance (MoF), developing a domestic carbon exchange platform that is expected to begin trial operations sometime this year.

Vietnam has introduced a series of legal and policy frameworks in recent times to support its ambitions. Grounded in Article 139 of the Law on Environmental Protection, the government issued Decree No. 06/2022/ND-CP detailing mechanisms for organizing and developing a carbon market, followed by key decisions from the Prime Minister identifying priority sectors and greenhouse gas-emitting facilities required to conduct inventories, along with a national carbon market development scheme.

To address emerging challenges and align with evolving international practices, the government tasked the Ministry of Natural Resources and Environment, in coordination with other relevant ministries, to draft Decree No. 119/2025/ND-CP. This new Decree will revise and supplement several provisions of Decree No. 06, with a focus on strengthening governance over a carbon market. Taking effect on August 1, it aims to provide clearer mechanisms for generating domestic carbon credits and facilitating international carbon trading, contributing to Vietnam’s long-term climate goals.

Carbon market rollout

The roadmap for developing Vietnam’s carbon market is outlined in Decree No. 06, detailed in the Master Plan on Carbon Market Development, and formalized in Decree No. 119.

According to Mr. Nguyen Van Minh, Head of the Carbon Market Division at the Department of Climate Change under the Ministry of Agriculture and Environment (MAE), during the initial phase - to the end of 2026 - Vietnam will focus on allocating emission quotas to major greenhouse gas emitters in three key sectors: thermal power, steel production, and cement manufacturing, covering around 150 facilities. In the next phase, the program could expand to include facilities in other sectors, as identified in a list issued by the Prime Minister.

Decree No. 119 also introduces new market principles concerning quota surrender, borrowing, transferring, offsetting, and trading. Under the borrowing mechanism, facilities may borrow up to 15 per cent of the greenhouse gas emission quota allocated for their next compliance period, to meet current obligations.

“Notably, the allowable use of carbon credits for offsetting has been increased from 10 per cent to 30 per cent of a facility’s allocated quota,” Mr. Minh noted. “This is intended to ease the burden on facilities that are not yet technologically ready to cut emissions and instead can purchase carbon credits on the domestic exchange to offset their excess.” All trading of quotas and carbon credits will take place on Vietnam’s domestic carbon exchange.

In addition to the domestic credit trading mechanism, the Decree also regulates international carbon credit exchange and offsetting. There are three main mechanisms, including offsetting under the United Nations Framework Convention on Climate Change (UNFCCC) via Article 6.2, as well as mechanisms under Article 6.4.

Vietnam has prior experience in international carbon trading mechanisms, notably through the Clean Development Mechanism (CDM) under the Kyoto Protocol, and has cooperated with the Japanese Government since 2013 to implement the Joint Crediting Mechanism (JCM).

According to Mr. Minh, Vietnam’s experience with the JCM provides a strong foundation for bilateral cooperation and aligns with the framework established by the UNFCCC under Article 6.2. Looking ahead, its priority in international cooperation is to attract investment in large-scale projects with high emissions reduction potential, using advanced, cutting-edge technologies that are not yet widely available in the country.

During the pilot phase, to 2028, Vietnam will also focus on establishing the technical infrastructure necessary to operate a carbon exchange. The MoF is leading the development of the domestic carbon trading platform, which is expected to be launched this year.

Meanwhile, the MAE is developing a national registry system for greenhouse gas quotas and carbon credits, and is also collaborating with relevant ministries to establish an online platform for greenhouse gas inventory reporting and verification, to facilitate digital submission by participating facilities.

Vietnam will officially operate a national carbon market from 2029. This will be accompanied by a series of updated policies, including potential quota auctions, revisions to allocation ratios, expanded eligibility for quota allocation, and the finalization of regulations supporting domestic carbon credit generation mechanisms.

Laying the groundwork

To support its net-zero emissions by 2050 goal, Vietnam plans to adopt a mechanism for greenhouse gas emission quota allocations and establish a centralized carbon market exchange for both greenhouse gas quotas and carbon credits. According to experts, this is a widely-used global mechanism to reduce such emissions and protect the environment. A carbon exchange also provides a market-based solution to address environmental issues.

Sharing details on the establishment of the domestic carbon exchange, Mr. Tran Minh Giang, Deputy Head of the Financial Market Legal Division under the Department of Legal Affairs at the MoF, said that early this year the Ministry submitted to the Prime Minister Decision No. 232/QD-TTg 2025, approving the Scheme on the Establishment and Development of the Carbon Market in Vietnam. Under the plan, the Prime Minister assigned the MoF to lead the drafting of a decree on the domestic carbon exchange.

It has completed this draft and submitted it to the government for review. Once enacted, the carbon exchange will operate as a centralized trading platform, acting as a price discovery mechanism for market participants while providing a transparent, fair, open, and secure trading environment.

A key principle throughout the development of the carbon market and the drafting of the Decree has been the integration of both greenhouse gas quotas and carbon credits into one centralized exchange. “Though these commodities are not financial or securities products, the government intends to link the carbon exchange’s operation with experienced securities market institutions,” Mr. Giang explained. “This approach allows Vietnam to leverage existing infrastructure, technology, human resources, and operational experience from the stock market, helping reduce costs and accelerate the pilot phase.”

Accordingly, the carbon exchange will serve both the compliance and voluntary carbon market models. The applicable model will depend on the nature of the traded commodities and participating entities.

During the pilot phase, the MoF plans to allow spot trading while continuing to explore the potential for derivative products, depending on market demand and size.

The Hanoi Stock Exchange (HNX) is expected to provide trading services for both greenhouse gas quotas and carbon credits. Meanwhile, the Vietnam Securities Depository and Clearing Corporation (VSDC) will offer custody and clearing services. Trading activities will be facilitated by licensed securities firms acting as intermediaries, authorized by HNX and VSDC. In addition, several commercial banks will support payment settlements for greenhouse gas quota and carbon credit transactions.

Under this model, the forthcoming Decree will provide a legal foundation for market operators and intermediaries to prepare infrastructure and personnel for market service provision.

Regarding the trading mechanism, participants will be required to post a margin before transactions. During the initial pilot stage, trading is expected to occur via negotiated transactions on an electronic platform. The Ministry noted that due to limited market size, low liquidity, and a lack of standardized products, order-matching systems would not be suitable at this early stage. In the future, new trading mechanisms, such as order matching, may be introduced, depending on market maturity.

Mr. Giang emphasized that the goal is to have information technology infrastructure ready when greenhouse gas quotas are allocated. During the pilot phase, to December 31, 2028, service providers will not charge transaction or custody fees, in order to support market development. During this period, the MoF will also study and refine policies related to pricing, taxation, and fees applicable to the trading of greenhouse gas quotas and carbon credits.

To support market growth, the Ministry will work closely with the MAE after the pilot phase to explore new products, such as derivatives, and trading mechanisms, like order matching, to further develop the market.

Strengthening bilateral efforts

At a recent forum entitled “Promoting Business Engagement in the Joint Crediting Mechanism (JCM) in Vietnam towards Readiness for Vietnam’s Carbon Market”, co-hosted by the MAE and Japan’s Ministry of the Environment, experts affirmed that, under current regulations, carbon credits from JCM projects will be traded on Vietnam’s domestic carbon exchange.

On the creation of carbon credits through the JCM mechanism, Mr. Iino Satoru, Director of the Office of International Carbon Markets under the Global Environment Bureau at the Ministry of the Environment, emphasized that the JCM is a bilateral cooperation framework in which Japanese agencies collaborate with partner countries, including Vietnam, to jointly account for emissions reductions. The mechanism offers multiple benefits, such as contributing to countries’ Nationally Determined Contributions (NDCs), supporting sustainable socio-economic development, reducing costs, and generating additional value across supply chains.

According to Mr. Satoru, among the JCM’s 30 partner countries worldwide, which have over 250 projects and combined investment of more than $3 billion, Vietnam is one of the most active participants in Southeast Asia. Of these 250 projects, around 50 are in the country, focusing on energy efficiency, energy consumption, wind power, and transportation. Notable examples include a 20 MW biomass power project in the Mekong Delta’s Hau Giang province (now part of Can Tho city), which supports green energy development, and a large-scale waste-to-energy project in northern Bac Ninh province designed to reduce methane emissions from landfills and mitigate overall greenhouse gas emissions.

Highlighting the potential of the deployment of the JCM, Mr. Satoru believes new sectors offer strong opportunities in emissions reductions. “In addition to these promising fields, we are implementing numerous projects in the energy sector, particularly in large-scale renewable energy, energy storage, agriculture, forestry, and carbon capture, utilization, and storage (CCUS),” he said.

Regarding updates to the JCM’s operational rules and guidelines, both governments are actively working to revise the framework to align with Article 6 of the Paris Agreement. Once finalized, this will allow JCM credits to be officially approved and recognized as internationally transferred mitigation outcomes (ITMOs).

Fundamentally, the principles, procedures, and supporting infrastructure, such as data and information systems, are being finalized. Mr. Satoru assured private sector stakeholders that the system is ready for implementation. He stressed the importance of mobilizing investment flows into high-potential areas such as agriculture, forestry, energy transition, and carbon capture technologies, where Japanese businesses have already seen successful deployment in Vietnam.

To further support this effort, last April the Japanese Government established a new agency - the JCM Implementation Agency (JCMA) - to streamline the end-to-end process, from project development to carbon credit issuance, for partner countries like Vietnam.