Vietnam's government targets official operation of carbon market by 2029

A carbon market is set to officially operate in Vietnam by 2029 as an important step towards reducing greenhouse gas emissions and achieving the goal of net-zero emissions by 2050.

The target is mentioned in Decision No. 232/QD-TTg approving the scheme for the establishment and development of the carbon market in Vietnam, signed by Deputy Prime Minister Tran Hong Ha last Friday.

The overall goal of the scheme is to develop the carbon market in Vietnam, contributing to the achievement of greenhouse gas emission reduction targets committed under the Nationally Determined Contributions (NDC) with low corporate and social costs.

It aims to create new financial flows for greenhouse gas reduction activities, promote the green transition, develop low-emission technologies, foster a low-carbon economy, and proactively respond to climate change, with the ultimate target of reaching net-zero emissions by 2050.

According to the scheme, the carbon market will trade two main types of goods: greenhouse gas emission quotas and carbon credits.

The greenhouse gas emission quotas will be allocated to large emitting sectors and facilities, including those that must report greenhouse gas emissions according to the government's regulations. They can be allocated either for free or through auctions.

Meanwhile, carbon credits are validated for trading on the carbon market. They can be earned from domestic or international programs and projects, including the Clean Development Mechanism (CDM), Joint Crediting Mechanism (JCM), and mechanisms under Article 6 of the Paris Agreement.

To facilitate trading on the carbon market, the government has tasked the Hanoi Stock Exchange (HNX) with establishing and operating a domestic carbon exchange.

The exchange will provide essential services for organizing and managing trades, ensuring transactions are carried out according to the technical standards and regulations set by the Ministry of Natural Resources and Environment.

The exchange will organize the trading of greenhouse gas emission quotas and carbon credits. These quotas and credits will be assigned unique identification codes and recorded in a centralized depository system to ensure transparency and security during transactions.

Market participants will need to have depository accounts to trade these products. All registration activities, code issuance, and monitoring will be centralized to ensure consistency and compliance with management requirements.

In addition to the HNX, the Vietnam Securities Depository and Clearing Corporation (VSD) will provide depository and transaction settlement services. It will manage depository accounts and ensure timely and secure payment for transactions.

Payments for trades on the carbon exchange will be processed automatically through eligible commercial banks, ensuring that the transfer of goods occurs simultaneously with the payment.

The scheme also outlines a clear timeline for the implementation of the carbon market in Vietnam. In the preparation phase by June 2025, the government will finalize legal frameworks and mechanisms for the exchange of greenhouse gas emission quotas and carbon credits, and establish infrastructure needed to support the operation of the carbon market.

From 2025 to 2028, the carbon market will be piloted nationwide. During this phase, the trading of carbon credits will be conducted, and large emitting facilities will engage in quota trading.

The government will also study and issue regulations for trading carbon credits internationally, thereby facilitating integration with global carbon markets.

From 2029, the carbon market will officially operate nationwide. The government will expand the sectors and facilities eligible for greenhouse gas emission quota allocation, and additional types of carbon credits will be included in the trading system.

The regulations for allocating quotas and credits will be adjusted and refined as the market evolves.