On 9 June 2025, the Government of Vietnam issued a revised version of Decree No. 06/2022/ND-CP, which regulates the country’s domestic carbon market. The updated rules mandate the launch of the country’s pilot emissions trading system (ETS) in August 2025 and the development of a fully functional carbon market by 2029.
Building on the roadmap approved in January and the 2020 Law on Environmental Protection, the revised decree refines provisions related to the allocation, exchange, and use of allowances. It establishes institutional responsibilities and compliance procedures for covered entities. The ETS will follow an intensity-based approach, allocating allowances in proportion to production output and emissions intensity, similar to systems in China and Indonesia.
Covered sectors and allocation
The pilot ETS will cover thermal power plants, iron and steel production facilities, and cement producers. During the 2025–2026 pilot phase, emission allowances will be allocated free of charge, based on sectoral benchmarks, production data, and emissions reduction targets.
The Ministry of Agriculture and Environment (MAE), formed earlier this year from the merger of Ministry of Natural Resources and Environment (MONRE) and the Ministry of Agriculture and Rural Development, will lead coordination efforts. Line ministries, including the Ministry of Industry and Trade and the Ministry of Construction, will propose allowance allocations for installations under their jurisdiction. These proposals will feed into a consolidated allocation plan submitted to the Prime Minister for approval. MAE will then allocate allowances to individual facilities by 31 December 2025.
Subsequent allocation cycles for 2027–2028 and 2029–2030 will follow a similar process, with proposals due mid-year and final allocations issued by 31 October of the respective years.
Flexible compliance
The revised decree introduces a range of compliance flexibility mechanisms:
- Covered entities may use carbon credits to offset up to 30% of their compliance obligations.
- Entities may also borrow up to 15% of allowances from future allocation periods to meet current compliance obligations.
- Unused allowances may be banked for use in future compliance periods until the end of 2030.
Recognition of carbon credits
The regulation allows installations to fulfil part of their compliance obligations using carbon credits generated under recognized domestic or international mechanisms, provided they are generated after 1 January 2021. Eligible sources include:
- Projects under the Clean Development Mechanism (CDM) transitioning to Article 6.4 of the Paris Agreement;
- Bilateral mechanisms such as the Joint Crediting Mechanism (JCM) with Japan;
- Other programs aligned with Article 6 of the Paris Agreement.
All exchanges and offsetting activities must be conducted through Vietnam’s National Registration System and the planned Carbon Trading Exchange (CTX), to be managed by the Hanoi Stock Exchange under the Ministry of Finance’s oversight.
Toward full implementation by 2029
From 2029, the system is expected to transition toward auctioning of allowances and expanded sectoral coverage. A complementary regulation is under preparation to define the legal framework for trading operations and associated fees.
