Vietnam Carbon Market: Practical Insights for Businesses

Overview

Vietnam's carbon credit market has rapidly matured as a critical component of the country's net-zero emissions strategy by 2050. The successful completion of Vietnam's first international carbon credit transfer - delivering over 10 million tons of CO2 to the World Bank's Forest Carbon Partnership Facility - demonstrates the country's operational capacity and establishes credibility with international buyers.

The legal framework operates under a comprehensive multi-tiered structure anchored by the Law on Environmental Protection 2020, which defines carbon credits as tradeable certificates representing emission reduction rights. Decree 06/2022/ND-CP establishes the operational carbon market roadmap, creating both compliance-based emission trading systems for regulated sectors and voluntary mechanisms for broader participation. Recent developments include Prime Minister's Decision 232/QD-TTg (January 2025), formally approving the national development plan, and Decree 119/2025/NĐ-CP (June 2025). This regulatory framework mandates completion of infrastructure and regulations for full market operation by 2028, creating clear timelines for business preparation and market readiness.

Vietnam carbon market analysis infographic showing legal framework, market structure, and business opportunities with 2028 implementation timeline.

Market Structure and Participation Framework

Vietnam's carbon market operates through two distinct categories of tradeable instruments with different participation requirements and market access rules. GHG emission quotas are allocated to specific emitting facilities and represent compliance obligations that can only be traded among designated "Emitting Entities" subject to mandatory reporting requirements. This restricted trading approach ensures that the compliance market directly addresses regulated emitters while maintaining market integrity through limited participation.

Carbon credits, representing verified emission reductions of one tonne of CO2 equivalent, operate under a more accessible framework that permits broader market participation. These credits may be sourced from domestic offset programs or international mechanisms including the Clean Development Mechanism, Joint Crediting Mechanism, and Article 6 mechanisms under the Paris Agreement. Vietnamese organizations, individuals, and foreign entities with legal status in Vietnam may participate in carbon credit trading, creating opportunities for diverse market participants including project developers, investors, and trading entities.

The market operates through two primary transaction mechanisms. Bilateral contracts between relevant parties provide direct negotiation opportunities, while the centralized Carbon Trade Exchange, operated by the Ministry of Finance, functions similarly to a stock exchange for processing buying, selling, auctioning, and transferring activities. Trial operations for the Emission Trading System began in 2025, with full operations scheduled for 2028. Facilities exceeding their allocated GHG quotas may utilize carbon credits to offset up to 20% of excess emissions, though remaining overages incur penalties and are deducted from future quota allocations.

Strategic Opportunities for Businesses and Investors

Vietnam's carbon market development presents unprecedented opportunities for both domestic and international businesses seeking to capitalize on the country's transition to a low-carbon economy. The convergence of regulatory support, natural resource potential, and growing market demand creates multiple entry points for strategic investment and business development.

Forest carbon represents the most immediate and substantial opportunity, with Vietnam's successful completion of its first international transfer serving as proof of concept for large-scale forest carbon monetization. Vietnam has received a $51.5 million payment for verified emissions reductions for reducing deforestation and forest degradation (commonly known as REDD+) and for enhancing carbon stored in forests through reforestation and afforestation, making it the first country in the East Asia Pacific region to receive a results-based payment from the World Bank's Forest Carbon Partnership Facility. This achievement demonstrates both the technical feasibility and economic viability of forest carbon projects at scale.

Renewable energy development offers significant opportunities for carbon credit generation, particularly as the growing demand for carbon credits ranks high in Vietnam. As global awareness and regulatory pressures on climate change increase, the demand for carbon credits is expected to rise. Foreign investors can leverage Vietnam's renewable energy potential while generating carbon credits through clean energy projects that contribute to both emission reduction and energy security objectives.

Agricultural carbon initiatives present emerging opportunities, particularly through sustainable rice production methods in the Mekong Delta region. The government's pilot project for sustainable, low-emission rice production demonstrates official support for agricultural carbon initiatives that can generate credits while improving farmer incomes and environmental outcomes. These projects typically require lower capital investment than industrial projects while offering substantial emission reduction potential.

Industrial decarbonization creates opportunities for technology providers and project developers to work with Vietnamese manufacturers in developing carbon credit projects through energy efficiency improvements, fuel switching, and process optimization. Companies can make money by selling carbon credits when they work on projects that reduce emissions, like planting forests or developing renewable energy. This creates opportunities for businesses to integrate carbon revenue streams into their core business operations.

Investment opportunities extend beyond project development to include carbon credit trading and portfolio management activities. The planned Carbon Trade Exchange will create opportunities for financial institutions and trading companies to provide liquidity and risk management services to carbon market participants. Early engagement with the pilot phase operations can provide competitive advantages as the market transitions to full operation.

Foreign participation is explicitly encouraged through recent regulatory amendments, with Decree 119/2025/NĐ-CP permitting foreign organizations to provide forest carbon sequestration services under specified conditions. This regulatory opening creates opportunities for international companies with carbon project expertise to enter the Vietnamese market through service provision, joint ventures, or direct investment in carbon credit generation projects.

The scale of Vietnam's financing needs for net-zero achievement, estimated at USD 473 billion, creates substantial demand for carbon credit revenue that can help bridge funding gaps for climate initiatives. This demand dynamic supports long-term price stability and market growth, providing confidence for investors considering multi-year project commitments in carbon credit generation or trading activities.

Critical Risk Assessment and Challenges

Despite substantial progress, Vietnam's carbon market development faces several challenges requiring careful legal and strategic consideration. The current regulatory framework remains somewhat fragmented as multiple agencies coordinate implementation across overlapping jurisdictions. This fragmentation creates uncertainty for businesses and investors, as the policy framework continues evolving toward full alignment with international standards for carbon credit trading.

The Measurement, Reporting, and Verification (MRV) system requires significant enhancement to align with international best practices, as current inconsistencies could undermine the credibility of Vietnamese carbon credits in global markets. The complexity and cost of implementing robust MRV systems often necessitates reliance on international expertise, highlighting the urgent need for domestic capacity building in carbon auditing and project development.

Clarity regarding carbon rights and benefit-sharing mechanisms remains incomplete, creating potential for disputes over land use and community participation in forestry projects. The absence of comprehensive guidance on calculating emission reductions and precise procedures for international carbon credit trading creates additional uncertainty that requires ongoing legal monitoring and strategic adaptation.

Recommendations for Business Strategy

Companies should timely assess whether their operations fall under mandatory GHG inventory requirements and develop internal carbon accounting systems in preparation for the expanding regulatory framework. Businesses should engage qualified legal counsel specializing in Vietnamese environmental law to navigate the evolving compliance landscape and identify strategic opportunities for carbon credit generation or trading participation.

Organizations should evaluate their carbon credit generation potential from existing operations while considering partnerships with established international carbon project developers who possess the technical expertise and market access necessary for successful project implementation. Supply chain assessment becomes critical as carbon pricing mechanisms may create cost implications throughout business operations, requiring comprehensive ESG governance frameworks that incorporate carbon management at the board level.

The dynamic nature of Vietnam's carbon credit regulations necessitates continuous monitoring of regulatory developments through 2027, when the complete framework will be finalized. Early preparation and proactive compliance positioning will provide competitive advantages as the market transitions from pilot to full operational status in 2029.

Vietnam's carbon market development represents a fundamental shift in environmental regulation with far-reaching business implications. While regulatory uncertainty persists, the government's unwavering commitment to achieving net-zero emissions by 2050, combined with substantial financial incentives driving implementation, ensures continued momentum in carbon market development. Companies that treat carbon market preparation as a strategic priority rather than mere compliance exercise will be best positioned to capitalize on the opportunities created by Vietnam's transition to a low-carbon economy.

This advisory provides general information based on current regulations. Given the evolving nature of Vietnam's carbon credit framework, companies should seek specific legal advice regarding their particular circumstances and ongoing compliance obligations.