Vietnam Carbon Market: Regulatory Overview

Vietnam's regulatory framework for carbon credits has undergone substantial development as the country advances toward its net-zero emissions commitment by 2050. With the carbon market framework now established through comprehensive legislation, businesses must navigate specific compliance requirements while preparing for full market operation in 2028. This article presents an overview of the carbon market under current Vietnamese legislation and outlines what businesses can expect and should prepare for in this evolving regulatory landscape.

Discover Vietnam’s carbon market regulations, compliance roadmap, and how businesses can prepare for risks and opportunities ahead of 2028 full operations.

Current Carbon Credit Mechanism Framework

Vietnam's carbon market operates under a comprehensive legal framework established by Decree 06/2022/ND-CP, as recently amended by Decree 119/2025/ND-CP. This legislation creates a dual-track approach comprising both mandatory compliance mechanisms and voluntary market participation opportunities.

The compliance system centers on a sectoral ETS initially covering thermal power, cement, and steel facilities - approximately 150 installations representing 40% of Vietnam's total greenhouse gas (GHG) emissions. These facilities will receive free emission allowances during the pilot phase based on emissions intensity calculations, with market-based auctioning mechanisms scheduled to commence during full operations in 2028. Significantly, the framework limits carbon credit offsets to a maximum of 20% of compliance obligations, emphasizing the primacy of direct emission reductions.

Parallel to the compliance mechanism, Vietnam has established a voluntary carbon credit market that enables broader private sector participation through certified emission reduction projects. This voluntary framework provides opportunities for companies outside the mandatory ETS to engage with carbon markets while supporting Vietnam's broader decarbonization objectives.

Measurement, Reporting, and Verification Requirements

The technical foundation of Vietnam's carbon market rests on a robust Measurement, Reporting, and Verification (MRV) system mandated under Decision No. 232/QD-TTg. This system, overseen by the Ministry of Agriculture and Environment (MAE), establishes stringent standards that apply uniformly to both compliance obligations and voluntary credit generation activities.

Covered facilities must implement comprehensive monitoring systems capturing direct emissions from fuel combustion and industrial processes (Scope 1) as well as indirect emissions from purchased electricity (Scope 2). The monitoring requirements necessitate calibrated measurement equipment, continuous protocols, and regular third-party verification by accredited bodies. This technical infrastructure creates significant operational and financial obligations for covered entities.

The reporting framework requires annual submissions following prescribed methodologies, including detailed activity data, emission factors, calculation procedures, and uncertainty assessments. Quality assurance protocols ensure data accuracy and consistency, while mandatory third-party verification provides independent validation of reported emissions. Only verified data qualifies for quota compliance or carbon credit certification, underscoring the critical importance of robust MRV implementation from the outset.

GHG Quota Distribution Roadmap and Implementation Timeline

Vietnam's GHG quota distribution follows a carefully structured roadmap designed to balance environmental effectiveness with economic considerations throughout the market's development phases. This distribution mechanism operates through distinct phases, each employing specific allocation methodologies and strategic coverage expansion plans that directly impact business compliance costs and competitive positioning.

During the pilot phase (2025-2028), quota distribution centers on free allocation based on emissions intensity benchmarks derived from historical emission data, production levels, and sector-specific performance standards. This approach protects industrial competitiveness while facilities develop carbon pricing adaptation strategies and emission reduction capabilities. The government conducts regular benchmark reviews considering international best practices while accounting for Vietnam's specific industrial conditions and technology deployment levels, with annual allocation adjustments possible based on facility operational changes and overall cap stringency requirements.

The systematic expansion of sectoral coverage between 2027 and 2030 prioritizes industries with significant emission levels, established monitoring capabilities, and demonstrated readiness for carbon pricing implementation. Chemicals, aluminum, paper manufacturing, and other energy-intensive sectors represent the most likely candidates for inclusion during this expansion phase, with annual reviews determining the precise timing and scope of coverage extensions.

The transition to full market operations in 2028 fundamentally transforms the allocation landscape through the introduction of auctioning mechanisms alongside continued free allocation for specific circumstances. This auction-based system creates essential price discovery mechanisms while generating revenue streams for climate finance initiatives. The auction design addresses critical market functionality concerns including liquidity management, price volatility controls, and small participant access considerations.

Strategic Compliance and Preparation Framework

The evolving regulatory landscape demands immediate and strategic action from businesses across multiple sectors. Companies currently covered under the pilot ETS face the most urgent compliance obligations, requiring immediate establishment of comprehensive emission monitoring systems, data management protocols, and specialized staff training. These organizations must engage qualified technical consultants to ensure monitoring adequacy and reporting compliance capability.

Financial planning becomes paramount as covered facilities must prepare for potential quota purchase requirements and carbon credit acquisition costs. Organizations should develop comprehensive carbon budgets projecting emission levels, quota allocation expectations, and compliance costs under various regulatory scenarios. Early engagement with carbon market intermediaries and trading platforms provides strategic advantages through enhanced market intelligence and risk management capabilities.

Companies anticipating future ETS inclusion should proactively implement monitoring systems and develop carbon management expertise. This preparation reduces implementation risks while providing competitive advantages through operational experience and institutional knowledge. Such organizations must monitor sector expansion announcements and regulatory developments to ensure timely compliance readiness.

Legal and Operational Recommendations

Given the complexity and evolving nature of Vietnam's carbon market framework, we recommend that clients undertake comprehensive legal compliance reviews to ensure alignment between current environmental permits, operational procedures, and emerging carbon market requirements. This assessment should identify potential gaps and establish remediation timelines well in advance of applicable compliance deadlines.

Companies should also establish systematic processes for monitoring regulatory developments, participating in government consultation processes, and adapting business strategies to accommodate changing requirements. Besides, staff training and development is also an essential part of long-term investment to enhance strategic decision-making while reducing dependence on external resources. 

Regular monitoring of regulatory developments remains crucial throughout the preparation period, as Vietnam's carbon market framework continues evolving through 2027 when complete regulations are scheduled for finalization. Companies should establish systematic processes for tracking regulatory updates, participating in public consultation processes, and adapting business strategies to accommodate changing requirements that emerge from ongoing policy development. The dynamic nature of Vietnam's carbon regulations requires proactive engagement and continuous adaptation strategies that enable businesses to remain compliant while positioning themselves to capitalize on emerging opportunities within Vietnam's developing carbon economy.

Conclusion

Vietnam's carbon market represents both a significant compliance challenge and a substantial commercial opportunity for businesses operating within the regulatory framework. The phased implementation approach provides time for strategic preparation, but the complexity of technical requirements and the compressed timeline for full market operations demand immediate action.

Organizations that invest early in compliance preparation and strategic positioning will be best equipped to navigate regulatory requirements while capturing emerging opportunities in Vietnam's developing carbon economy. We recommend that clients engage with specialized legal and technical advisors to develop comprehensive compliance strategies tailored to their specific operational circumstances and business objectives.

This advisory reflects current regulatory requirements as of August 2025. Given the evolving nature of Vietnam's carbon market framework, clients should seek specific legal counsel regarding their particular circumstances and maintain ongoing monitoring of regulatory developments.