Vietnam has released an approved roadmap for a domestic carbon market, in a significant step towards achieving net-zero emissions by 2050. A phased approach will see a pilot start in June 2025, working towards full implementation by 2029.
This is a significant development for businesses operating in the region, as well as businesses and investors involved in global carbon markets, presenting new opportunities and responsibilities.
In this insight, we give a detailed breakdown of the roadmap, its implications and what businesses should do to prepare. Local businesses should prepare for compliance, while foreign businesses and investors can explore the opportunities presented by Vietnam’s evolving carbon market. For more details, reach out to your KWM contact.
Tell me in two minutes
- The carbon pricing mechanism will begin with a pilot Emissions Trading Scheme (ETS) in June 2025.
- A government-regulated exchange will facilitate the trading of greenhouse gas emissions quotas and carbon credits, providing a platform for both domestic and international participants to engage in carbon trading activities.
- Facilities in key sectors are required to submit emissions inventories starting in 2025.
- Businesses in high-emitting sectors will receive free emissions allowances during the pilot phase, which runs until December 2028.
- From 2029, the market will expand, introducing auctioning mechanisms alongside free allocations.
- Companies must prepare for these changes.
Carbon market roadmap details: When was it introduced and what does it set out?
Vietnam’s Prime Minister Phạm Minh Chính issued a decision on 24 January 2025 that sets the stage for a structured carbon market: Decision No. 232/QD-TTg.
The Ministry of Natural Resources and Environment (MONRE) will oversee the development of the ETS and the measurement, reporting and verification system. The Hanoi Stock Exchange will manage the carbon exchange, facilitating the trading of GHG emissions quotas and carbon credits.
During the pilot phase, MONRE will establish GHG emission limits and allocation plans. The government intends to continue refining regulations and infrastructure, aiming for a smooth transition to a fully functional market by 2029.
Roadmap timeline
How will the carbon market work?
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Key features
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Example
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How will the market operate?
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Emissions Trading Scheme (ETS) designed to regulate and reduce greenhouse gas emissions systematically Mandatory application for high-emitters (see below) Voluntary participation for other businesses and eligible individuals There will be two types of products:
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Which businesses are captured by the scheme?
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Primarily targets high-emitting sectors - expected to include energy, manufacturing and other industries with substantial carbon footprints Businesses within these sectors must participate in the pilot phase During the pilot phase, businesses will receive emissions allowances, initially allocated for free, to help them transition into the new system |
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How are carbon credits sourced?
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Credits will be sourced from domestic and international projects, including from international mechanisms such as:
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How are carbon credits traded?
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Carbon Trade Exchange (CTX) will operate as a government-regulated exchange for trading GHG emissions quotas Emission Quotas may be traded on the carbon credit exchange or by way of agreement via the parties’ accounts on the national registry Carbon Credit trading must occur through the carbon credit exchange |
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Can foreign businesses participate?
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Foreign businesses will only be able to trade Emission Quotas and use Emission Quotas to offset emissions if they have been allocated an emissions allowance by the Vietnamese government (see above for a list of sectors likely to be covered) Foreign businesses will be able to trade Carbon Credits so long as they are:
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Which government bodies will regulate?
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Regulatory bodies responsible for development and operation:
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How does this fit into Vietnam’s broader efforts to decarbonise?
Vietnam is strategically positioning itself to meet its net-zero emissions target by 2050. The country's carbon market development is a cornerstone of this ambition. By creating a structured market for carbon trading, Vietnam seeks to generate financial flows that will fund emissions reduction initiatives and drive a green transformation.
This is not just an economic strategy; it is a necessity. Vietnam's long coastline and low-lying regions make it highly vulnerable to climate change impacts. Developing a robust carbon market is crucial for adaptation and mitigation efforts.
Vietnam’s move aligns with broader regional efforts, where countries like Singapore and Indonesia are pioneering carbon market frameworks. Singapore has introduced a carbon tax and established a global carbon exchange, while Indonesia is developing a regulated carbon market following its voluntary initiatives.
Southeast Asia is rapidly evolving in its approach to carbon pricing. With nearly 700 million people and increasing energy demands, the region plays a crucial role in global efforts to reduce greenhouse gas emissions. Carbon trading and offsets are becoming key mechanisms for compensating emissions both within the region and globally.
Cross-border collaborations are also gaining momentum. Vietnam has partnered with Singapore and Australia to enhance its carbon market capabilities. These partnerships are crucial for fostering regional cooperation and ensuring the effectiveness of carbon trading mechanisms.
What are the next steps for businesses?
Businesses in high-emitting sectors operating in Vietnam should start to prepare. Typically, these sectors might include energy, manufacturing, and industrial operations, but the specific sectors and business sizes will be detailed in forthcoming regulations as the government finalises the framework and guidelines for the ETS.
Businesses in these sectors should:
- Conduct GHG inventories: Begin preparations to submit emissions inventories starting in 2025.
- Prepare for compliance: Align operations with Vietnam’s carbon market framework.
- Implement mitigation plans: Develop annual emission mitigation strategies.
- Monitor regulatory developments: Stay informed about evolving regulations and market opportunities.
What should investors do?
Investors should closely monitor regulatory developments and seek expert advice to navigate this evolving landscape and identify potential market opportunities.
We are watching as the carbon market develops
Vietnam’s roadmap to carbon pricing marks a potentially important moment for businesses in the region. It presents both challenges and opportunities.
Our team is ready to assist you in understanding the implications for your business and in developing strategies to thrive in this new regulatory environment.
Want to know more about carbon pricing in Southeast Asia and other developments in Vietnam?
- Navigating The Net Zero Transition - Chapter 4: Vietnam
- Developing carbon trading markets in Southeast Asia
- Unlocking green energy in Vietnam: How Corporate PPAs are a game changer
This publication is provided for general informational purposes only and should not be construed as legal advice. King & Wood Mallesons does not practice Vietnamese law. Through our KWM Circle network, we work closely with leading local lawyers to support our clients in places like Vietnam.
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