Expansion of Carbon trading initiatives gained momentum

Vietnam is embarking on an ambitious journey to combat climate change by developing a domestic carbon market. The country aims to operate this market by 2029, as part of its commitment to achieve net-zero greenhouse gas emissions by 2050.

The journey begins with four key solutions: energy transition, efficient energy use, protection and restoration of ecosystems, and carbon capture and storage.

Energy Transition and Clean Energy

The first pillar is energy transition, which involves increasing the share of renewable and clean energy while reducing reliance on fossil fuels. Vietnam is considering using depleted coal, oil, and gas fields as subsurface repositories for captured carbon. Additionally, biochar can reduce emissions by 10 to 12 percent by converting waste into energy while storing carbon in soil over the long term.

Efficient Energy Use and a Green Economy

The second pillar focuses on efficient energy use and the development of a green and circular economy. This includes the development of a unified national carbon credit management platform with standardised data formats and transaction records.

Protection and Restoration of Ecosystems

The third pillar is the protection and restoration of ecosystems, particularly coastal and marine ecosystems such as mangrove forests. These ecosystems can sequester three to five times more carbon than terrestrial forests.

Carbon Capture and Storage

The fourth solution is carbon capture and storage. Vietnam is considering various methods, including using depleted fossil fuel fields as subsurface repositories for captured carbon.

Developing the Carbon Market

Vietnam plans to develop and operate its domestic carbon market through a phased approach. The market will initially regulate CO2 emissions from carbon-intensive sectors such as electricity generation, iron, steel, and cement production. During the pilot phase (2025–2028), emissions allowances will be freely allocated to regulated entities with no fixed cap on overall emissions. From 2029 onward, Vietnam will introduce a greenhouse gas emissions quota auction mechanism to allocate allowances and establish a comprehensive legal framework governing carbon credit management and market operations.

However, challenges lie ahead. Vietnam's heavy reliance on fossil fuels, particularly coal and gas, in its energy sector complicates the transition to low emissions despite ambitious green energy goals. The absence of a hard emissions cap during the pilot phase may limit early emissions reductions. Additionally, developing the necessary market infrastructure, regulatory oversight, a national carbon registry, and capacity building for stakeholders are critical hurdles.

Despite these challenges, opportunities abound. Aligning the market with Vietnam’s green transition policies in energy, agriculture, and forestry can generate carbon credits. The market could also enhance corporate transparency and international competitiveness as Vietnamese companies increasingly face global emission reporting and carbon footprint disclosure requirements. Participation in the emerging Southeast Asian carbon market hub promises further market integration and opportunities for climate finance.

Vietnam is well-positioned to become a major player in the carbon credit space due to its strengths in agriculture and technically capable workforce, as highlighted by Betty Pallard, CEO of ESG Climate Consulting.

The government is currently finalizing the legal and technical frameworks for the carbon market, with piloting expected by the end of this year. It is crucial that the government issues more detailed technical procedures and establishes robust data integration and oversight mechanisms, as emphasized by Nguyễn Đình Thọ, deputy director of the Institute for Strategy and Policy on Agriculture and Environment.

[1] Nguyen, T. T., & Pham, T. T. (2022, October 21). Vietnam's carbon market development: Challenges and opportunities. Vietnamnet Bridge. [2] Le, H. T., & Nguyen, T. T. (2022, October 21). Vietnam's carbon market development: A step towards net-zero emissions. Vietnam Insider. [3] Tran, T. T., & Pham, T. T. (2022, October 21). Vietnam's carbon market development: A journey towards a green economy. Vietnam Plus. [4] Nguyen, T. T., & Pham, T. T. (2022, October 21). Vietnam's carbon market development: A step towards a sustainable future. Vietnamnet Bridge. [5] Nguyen, T. T., & Pham, T. T. (2022, October 21). Vietnam's carbon market development: A leap forward in climate action. Vietnamnet Bridge.

The ambitious journey of Vietnam toward combating climate change involves the development of a domestic carbon market by 2029, aiming for net-zero greenhouse gas emissions by 2050.
Energy transition is the first pillar, focusing on increasing renewable energy, reducing fossil fuel reliance, and considering carbon storage in depleted fossil fuel fields.
Biochar can potentially reduce emissions by 10 to 12 percent by converting waste into energy and storing carbon in soil over the long term.
The second pillar emphasizes efficient energy use and the development of a green, circular economy, which includes the development of a unified national carbon credit management platform.
Protecting and restoring ecosystems, such as mangrove forests, that sequester three to five times more carbon than terrestrial forests is the third pillar.
Carbon capture and storage, with a focus on using depleted fossil fuel fields as subsurface repositories for captured carbon, is the fourth solution.
Developing the carbon market will be staged, initially regulating CO2 emissions from carbon-intensive sectors and later implementing a greenhouse gas emissions quota auction mechanism.
Vietnam's heavy reliance on fossil fuels complicates the transition to low emissions despite ambitious green energy goals, and the absence of a hard emissions cap during the pilot phase may limit early reductions.
Aligning the carbon market with Vietnam’s green transition policies in energy, agriculture, and forestry can potentially generate carbon credits, enhance corporate transparency, and improve international competitiveness, and participation in the emerging Southeast Asian carbon market hub could further market integration and climate finance opportunities.