A carbon market is where the right to emit greenhouse gases is bought and sold. In Vietnam, the commodities are emission allowances (the permitted amount of emissions allocated to covered facilities) and carbon credits (certification of greenhouse gas reductions or removals from projects). The Law on Environmental Protection 2020 and Decree 06/2022/ND-CP on greenhouse gas mitigation and ozone layer protection form the legal basis of this market.
Key takeaways
- Allowances: allocated to large emitters; surpluses can be sold, shortfalls must be bought.
- Credits: generated by eligible emissions reduction projects and can be used for offsetting as permitted.
- The roadmap includes a pilot phase before the domestic carbon exchange officially begins operating.
How do allowances and credits differ?
| Emission allowances | Carbon credits | |
|---|---|---|
| Origin | Allocated by the State | Certified emissions reduction/removal projects |
| Who holds them | Facilities subject to allocation | Project owners, investors |
| Purpose | Capping total emissions | Offsetting and generating revenue for emissions reduction activities |
The roadmap for the domestic carbon market
Decree 06/2022/ND-CP sets out the roadmap for developing rules on credit management and exchange, piloting a trading platform and moving towards official operation. Businesses should follow the latest guidance from the regulator, as the technical details are still being finalised.
Opportunities for businesses
- Large emitters: reduce emissions early to avoid having to buy allowances, or even have surplus allowances to sell.
- Businesses with green projects: renewable energy, energy efficiency, waste treatment, and forest planting and protection can be developed into credit projects.
- Exporters: a domestic carbon price may be taken into account in the CBAM deduction mechanism under EU rules.
Start with emissions reduction
Every opportunity in the carbon market starts with reliable emissions data. A business without a greenhouse gas inventory cannot prove its reductions, cannot sell credits and will struggle to optimise its allowance obligations.
A carbon credit is only worth something when the emissions reduction is real, measurable and verifiable.
Frequently asked questions
Can small businesses take part in the carbon market?
Small businesses are usually not subject to allowance allocation, but they can take part as owners of credit-generating projects or as voluntary buyers of credits as permitted.
Does buying carbon credits help achieve Net Zero?
Under reputable standards, credits should only offset residual emissions after maximum reductions; using credits instead of cutting emissions may be seen as greenwashing.
How do voluntary credits differ from compliance credits?
Voluntary credits are issued under independent international standards for businesses to offset on their own initiative; credits in the compliance system must meet the regulator's requirements to be used for compliance obligations.
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