On June 29, 2026, the Ministry of Finance, in coordination with the Ministry of Agriculture and Environment and other relevant authorities officially launched the country’s Domestic Carbon Exchange (the “Carbon Exchange”), marking the commencement of Vietnam’s domestic carbon market. On its first trading day, the market recorded transactions totaling 400 metric tons of carbon dioxide equivalent (“CO₂e”), with a total value of approximately VND 54 million, and the most recent transaction price stood at VND 136,000 per metric ton of CO₂e, marking an important milestone in the development of Vietnam’s carbon market.

The pilot operation of the Carbon Exchange during the 2026-2028 period not only contributes to Vietnam’s commitment to achieving net-zero emissions by 2050, but also establishes a transparent mechanism for enterprises to conduct carbon transactions, laying the groundwork for the future rollout of a mandatory carbon market. At the same time, this development signals that businesses should proactively review their emission-reduction strategies, carbon credit management, and compliance with related legal requirements.

1. Greenhouse gas emissions quotas must be registered, assigned domestic identification codes, and deposited in the national registry system to be traded; carbon credits are not yet included in the pilot phase

Under Decree No. 29/2026/ND-CP governing the Domestic Carbon Exchange, the trading system is organized and operated by the Hanoi Stock Exchange (HNX), while clearing, custody, and settlement services are provided by the Vietnam Securities Depository and Clearing Corporation (VSDC). Information relating to greenhouse gas emissions allowances and carbon credits is centrally maintained through the National Registry System, which is administered by the Ministry of Agriculture and Environment.

There are two categories of tradable commodities on the carbon market: Greenhouse gas emission quotas and Carbon credits. Greenhouse emission quotas are the quantity of greenhouse gases that a nation, organization, or individual is permitted to emit within a specified period, measured in metric tons of CO2 or CO₂e, and reflects a pre-allocated emission quantity; a carbon credit is a certificate representing the right to emit one metric ton of CO2 or CO₂e (Article 1 of Decree 29/2026/ND-CP; Article 3 of the 2020 Law on Environmental Protection; Section III.1 of Decision No. 232/QD-TTg dated January 24, 2025 approving the scheme for establishing and developing Vietnam’s carbon market).

Unlike conventional securities markets, where investors trade shares and other financial instruments to raise capital, the carbon market facilitates transactions involving greenhouse gas emission quotas and carbon credits. The market is designed as a cap-and-trade system, under which the Government allocates emissions quotas to enterprises subject to regulation. Enterprises that emit below their allocated quotas may sell the surplus, while enterprises exceeding their quotas must purchase additional allowances or carbon credits to meet compliance requirements. As a result, enterprises capable of reducing emissions efficiently will not only reduce compliance costs but also gain the opportunity to generate additional economic value by transferring surplus quotas and, once the legal framework is expanded, by trading carbon credits. In this way, the carbon market creates incentives for enterprises to invest in clean technology, improve energy efficiency, and accelerate the transition toward a sustainable development model.

During the pilot phase, the only tradable product is the greenhouse gas emission quota; carbon credits are not yet included. Under Decision No. 263/QD-TTg dated February 9, 2026, the Prime Minister approved a total greenhouse gas emission quota of over 500 million metric tons of CO₂e for the thermal power, steel, and cement sectors for the 2025–2026 period. Quota allocation is carried out pursuant to Article 12 of Decree 06/2022/ND-CP, as amended by Clause 8, Article 1 of Decree 119/2025/ND-CP, based on the emission intensity per unit of product; the sector’s and facility’s emission-reduction targets under their business plans; the facility’s emission-reduction potential; and the facility’s technical, technological, and financial capacity to implement emission reductions.

To be legally tradable, under Article 11 of Decree 29/2026/ND-CP, both greenhouse gas emission quotas and carbon credits must be registered, assigned a domestic code, and centrally deposited on the National Registry System for quotas and carbon credits. The Ministry of Agriculture and Environment is the competent authority responsible for issuing and managing domestic codes and for cancelling the registration of emission quotas and carbon credits.

Considerations for Businesses

To proactively participate in the carbon market and ensure compliance with Decree 29/2026/ND-CP, enterprises, particularly those in the thermal power, steel, and cement sectors, should consider the following actions:

a) Review applicability and legal obligations: Determine whether the enterprise falls within the scope of entities entitled to allocated greenhouse gas emission quotas under applicable law, and review obligations relating to greenhouse gas inventories, emissions reporting, and quota compliance.

b) Strengthen greenhouse gas emissions management systems: Develop or improve inventory, measurement, monitoring, and data-retention systems for greenhouse gas emissions in order to accurately determine actual emissions, allocated quotas, and potential quota surpluses or shortfalls.

c) Prepare the conditions required to participate in trading on the Carbon Exchange: Complete registration, coding, and deposit of greenhouse gas emission quotas on the National Registry System as required, and prepare the necessary trading and depository accounts to be eligible to trade on the Carbon Exchange.

d) Develop a strategy for managing and utilizing emission quotas: Assess quota requirements across different stages of production and develop appropriate plans for purchasing additional quotas or transferring surplus quotas, in order to optimize compliance costs and business operations.

e) Invest in emission-reduction solutions: Review technology, production processes, and investment plans to improve energy efficiency and reduce greenhouse gas emissions, thereby reducing the need to purchase quotas and increasing the potential to generate tradable surplus quotas.

f) Establish internal governance mechanisms for carbon trading activities: Assign a dedicated department or personnel to monitor legal developments, manage emission quotas, execute trades, and manage risks arising from participation in the carbon market.

g) Monitor the roadmap for carbon credit policy development: Although only greenhouse gas emission quotas are traded during the pilot phase, enterprises with emission-reduction projects, renewable energy projects, afforestation projects, or other carbon-credit-generating projects should proactively prepare documentation and monitor new regulations in order to be ready to participate in carbon credit trading once the legal framework is expanded.

2. Entities participating in the carbon exchange

The current membership structure of the Carbon Exchange comprises the first 6 securities companies and 110 emitting facilities on the list allocated pilot greenhouse gas emission quotas under Decision No. 699/QD-BNNMT of the Ministry of Agriculture and Environment. This indicates that, in its initial phase, the carbon market has been designed with tight controls, prioritizing large emitting facilities before gradually expanding the scope of tradable commodities and participating entities.

Entities engaged in trading or supporting trading in the domestic carbon market are set out under Article 16 of Decree 06/2022/ND-CP (as amended and supplemented by Decree 119/2025/ND-CP), comprising:

(i) Entities trading greenhouse gas emission quotas are facilities allocated quotas under Article 12 of Decree 06/2022/ND-CP (as amended),

(ii) Entities trading carbon credits are agencies and organizations operating within the territory of Vietnam,

(iii) Trading-support entities are organizations providing financial services that support trading activities in greenhouse gas emission quotas and carbon credits on the carbon market, in accordance with the law on the domestic carbon exchange

Trading-support entities include carbon trading members (securities companies approved by the Vietnam Stock Exchange to participate in the carbon trading system), carbon depository members (securities companies approved by the Vietnam Securities Depository and Clearing Corporation to participate in the carbon depository and settlement system), and settlement banks (commercial banks established and operating in Vietnam that provide payment services for transactions in greenhouse gas emission quotas and carbon credits) (Article 16.3 of Decree 06/2022/ND-CP (as amended); Articles 3.1, 3.8, 3.9, and 26.1 of Decree 29/2026/ND-CP). These entities must satisfy strict conditions regarding financial capacity, operational status, and safety ratios under specialized law. These conditions are intended to ensure that participating organizations have adequate financial capacity, maintain stable operations, and limit risks when providing trading, depository, and settlement services in the carbon market.

Considerations for Businesses

Based on the regulations governing carbon market participants, enterprises should take note of the following:

a) Accurately determine the enterprise’s legal status in the carbon market: Enterprises should assess which category they fall under pursuant to Decree 06/2022/ND-CP (as amended and supplemented) and Decree 29/2026/ND-CP, namely: (i) a facility allocated greenhouse gas emission quotas; (ii) an organization eligible to trade carbon credits; or (iii) an organization providing trading-support services. Correctly determining the enterprise’s status forms the basis for establishing its rights, obligations, and scope of activity in the market.

b) Review organizational structure to identify the entity directly conducting trades: Enterprises with multiple subsidiaries or production facilities should clearly identify which legal entity or facility has been allocated emission quotas by the State and will serve as the trading party of record. Groups with multiple emitting units should assess the need for a centralized or decentralized management mechanism for carbon trading activities.

c) Prepare legal documentation for engaging with intermediary organizations: Since trading may only be conducted through carbon trading members and carbon depository members, enterprises should prepare internal documentation such as decisions appointing authorized representatives, powers of attorney, transaction-approval regulations, and other legal documents required to enter into service agreements with securities companies and settlement banks.

d) Review existing contracts relating to emission rights: For joint ventures, investment cooperation projects, EPC contracts, O&M contracts, or plant operation leases, enterprises should review such contracts to clearly determine which party holds the right to manage, use, and benefit from emission quotas or carbon credits. Where such contracts do not address this issue, enterprises should consider negotiating supplementary provisions to limit disputes once the carbon market becomes fully operational.

e) Assess the potential to participate in future phases of the market: Enterprises not currently among the 110 facilities allocated pilot quotas should monitor the Government’s roadmap for expanding participation, and assess their potential to enter the market through emission-reduction projects or other carbon-credit-generating activities, in preparation for participation once the market's scope is expanded.

3. Operating and trading mechanism of the carbon market

Under the principles set out in Article 14 of Decree 29/2026/ND-CP, entities trading on the domestic carbon exchange must hold an account with a securities company and may use only one trading account, held with a single carbon trading member, to conduct trades. Decree 29/2026/ND-CP also sets out conditions for the trading mechanism, requiring participating entities to have sufficient funds when placing buy orders, and sufficient greenhouse gas emission quotas or carbon credits when placing sell orders. Trading must observe the principle of segregating carbon trading activities from other trading activities. Settlement of transactions on the Carbon Exchange is carried out through the carbon depository and settlement system on the same trading day, on a trade-by-trade real-time settlement basis, without the use of a central counterparty clearing mechanism (Article 15 of Decree 29/2026/ND-CP).

Compared with other operating markets, the carbon market therefore has its own distinct operating mechanism reflecting the specific nature of greenhouse gas emission quotas and carbon credits. Under Decree 29/2026/ND-CP, these differences are reflected in the management of tradable products, market-entry conditions, and settlement methods.

First, the Hanoi Stock Exchange functions solely as the trading-service provider, while all information relating to tradable greenhouse gas emission quotas and carbon credits (including product type and trading start and end dates) is synchronized from the National Registry System for greenhouse gas emission quotas and carbon credits, managed by the Ministry of Agriculture and Environment. This ensures that all exchange transactions are conducted on the basis of unified data managed by a state authority.

Second, market participation is tightly controlled through the account system. Only accounts that have been confirmed by the Vietnam Securities Depository and Clearing Corporation and transferred to the trading system prior to the trading date are permitted to trade. In addition, eligible trading entities are also classified according to each type of tradable asset.

Third, the settlement mechanism of the carbon market is designed on a trade-by-trade real-time settlement basis. Under this mechanism, a transaction may only be executed where the buyer has sufficient funds and the seller has sufficient emission quotas or carbon credits in its depository account. Once these conditions are met, asset transfer and payment are executed immediately, without going through a central counterparty clearing mechanism.

During the pilot operation of the domestic Carbon Exchange, through December 31, 2028, enterprises will not be charged service fees for use of the domestic Carbon Exchange. From January 1, 2029, entities trading on the carbon market will be required to pay service fees for use of the domestic Carbon Exchange in accordance with applicable law (Article 34 of Decree 29/2026/ND-CP).

Considerations for Businesses

To meet the operating requirements of the Carbon Exchange under Decree 29/2026/ND-CP, enterprises should proactively prepare the following::

a) Establish internal procedures for carbon trading activities: Enterprises should issue dedicated internal procedures governing trading plans, approval of buy and sell orders, trade confirmation, record-keeping, and post-trade controls, to ensure that all transactions are conducted consistently, within proper authority, and in a manner that satisfies audit and inspection requirements when needed.

b) Establish a mechanism for managing trading accounts and authorization: As each enterprise may use only one trading account with a single carbon trading member, enterprises should adopt account-management regulations clearly defining who is authorized to place orders, who approves transactions, and who is responsible for trade oversight, and should establish controls over digital signatures, passwords, and access rights to limit the risk of unauthorized trading.

c) Develop cash-flow and quota management plans prior to trading: Given the real-time, trade-by-trade settlement mechanism, enterprises should establish procedures to verify available funds and the quantity of emission quotas or carbon credits before placing orders, to avoid failed transactions due to unmet payment or asset-transfer conditions.

d) Segregate carbon trading activities from other financial and investment activities: As the law requires carbon trading activities to be managed independently, enterprises should establish separate accounting records and maintain separate transaction files, and should clearly delineate responsibilities between the department responsible for carbon trading and other finance, investment, or procurement departments to ensure compliance.

e) Budget for trading costs following the pilot phase: Although enterprises will not be charged for use of the Carbon Exchange’s services through December 31, 2028, they should proactively estimate and incorporate future trading, depository, and settlement fees (once issued by the competent authority) into their financial plans and operating budgets from 2029 onward.

Conclusion

The launch of the Carbon Exchange marks an important shift from administrative measures for emissions management toward a market-based mechanism. The pilot phase is not only a period for regulators to refine the operating mechanism, but also an opportunity for enterprises to become familiar with emission quota trading, build compliance capacity, and prepare for the future expansion of the carbon market.

For enterprises, this is a time to proactively prepare across legal compliance, corporate governance, and trading capability. Specifically, enterprises should review their greenhouse gas inventory obligations, determine their allocated quotas, and complete the required registration, coding, and deposit procedures for quotas; determine their legal status and the appropriate model for market participation; review their charters, internal regulations, and existing contracts to strengthen the legal basis for trading activities; and establish internal procedures for account management, trade approval, cash-flow management, risk control, and separate accounting for carbon trading activities. At the same time, enterprises should continue to invest in emission-reduction solutions, improve energy efficiency, and proactively monitor the development of the legal framework in order to timely adjust their production, investment, and business strategies.

Early and comprehensive preparation will not only help enterprises meet compliance requirements as the carbon market expands, but will also create competitive advantages, optimize emission-related costs, strengthen ESG governance capacity, and enable enterprises to capture new business opportunities arising from the carbon market, particularly as sustainability and emission-reduction standards become increasingly important requirements in global investment, trade, and supply chains.