#6 Renewable energy: Carbon credit and carbon market in Vietnam

Developing a carbon market and transforming CO2 into commodities is one of the solutions that could help mobilize resources for environmental protection and development. The carbon market in Vietnam has been gradually heating up, especially after the Government issued Decree No. 06/2022/2023 on the mitigation of greenhouse gas emissions and protection of the ozone layer. By 2028, the carbon credit trading platform is expected to be fully operational.

In this Podcast episode of The Lawyers Talk, we would like to provide an overview of carbon credit and the carbon market in Vietnam.


Greeting listeners! Welcome back to The Lawyers Talk channel of BLawyers Vietnam. I am Minh. Today, we will talk about a topic that has recently attracted a lot of interest: carbon credits and the Vietnamese carbon market.

In this episode of the Podcast, I am delighted to welcome Ms. Nguyen Thi Thuy Linh to discuss this topic. Ms. Linh is currently working at BLawyers Vietnam, and she has often researched and posted articles and shared experiences in the field of renewable energy. We have invited Ms. Linh to share her perspective on this new type of credit and the development roadmap for the future.


Thank you for your introduction, Mr. Minh. Hello everyone, my name is Nguyen Thi Thuy Linh, currently working at BLawyers Vietnam. I would like to share some of my opinions related to issues about carbon credits and the carbon market in Vietnam. This is a relatively new issue, but it has attracted lots of interest from organizations and individuals both in Vietnam and globally. Do you have a brief assessment of the type of credit?


From my perspective, one of the answers to mobilizing resources for environmental preservation and development is the creation of carbon credit markets, which convert CO2 into commodities. The market for buying and selling carbon credits in Vietnam is progressively heating up, especially since the Government published Decree No. 06/2022/ND-CP on reducing greenhouse gas emissions and safeguarding the ozone layer.

But, before we get into the details, we should explain to the listeners what carbon credits and carbon markets are.


Oh yes, that’s right. First, let me introduce the definition of carbon credits:

Carbon credit is a commercially marketable certification that represents the right to emit one ton of carbon dioxide (CO2) or the equivalent amount of CO2.

A ton of CO2 equivalent is the mass of greenhouse gases converted into tons based on their global warming coefficient.

Thus, it can be simply understood that carbon credit is the general term for actradable credit or license representing one ton of CO2 or the volume of greenhouse gas equivalent to one ton of CO2. Trading CO2 emissions or carbon trading in the market is conducted through credits.

Next, I would like to introduce the definition of the carbon market:

The carbon market originated from the United Nations’ Kyoto Protocol on Climate Change, adopted in 1997. Under this decree, countries with excess emissions rights sell or purchase from countries that emit more or less than the committed target. Since then, a new type of commodity has appeared in the world, which are certificates for reducing/absorbing greenhouse gas emissions. Because CO2 is the equivalent of all greenhouse gases, transactions are collectively referred to as carbon trading and exchanges that form a carbon market or carbon credit market.

For example: Company A has a limit of 10 tons of CO2 emissions but only emits 7 tons, so it will have 3 credits left, while Company B has a limit of 10 tons of CO2 emissions but emits 13 tons. Thus, company B can buy 3 additional credits from company A to comply with the State’s regulations on environmental protection.

Teo main types of carbon markets exist in the world:

  1. Compulsory carbon market: This is a market in which a country, organization, or enterprise by law must inventory and reduce greenhouse gas emissions and has the right to participate in activities of exchange, trade, and transfer of greenhouse gas emission quotas as well as carbon credits. Emission reductions must comply with mandatory national, regional, and international regulations.
  2. Voluntary carbon market: This is based on bilateral or multilateral cooperation agreements between organizations, companies or countries. Credit purchasers voluntarily engage in transactions to meet environmental, social and corporate governance policies.

The domestic carbon market includes exchanging greenhouse gas emission quotas and carbon credits obtained from domestic and international carbon credit exchange and offsetting mechanisms.


So, in the carbon market, who is the seller and who is the buyer, and what is the exchange mechanism?


Yes, the carbon credit market has buyers, sellers and intermediaries.

  1. The seller can be any organization if the carbon-emitting activity across the entire operation (supply chain, direct sales, distribution chain) has a negative total net CO2 emission. They can be implementers of afforestation and ecosystem protection projects, renewable energy project development enterprises, electric vehicle manufacturing companies, etc.
  2. Buyers are businesses with positive CO2 emissions, which may be companies producing steel, cement, petrochemicals, chemical production, garments, etc. Buyers are forced to buy carbon credits for goods to be eligible for export to markets with regulations on green production standards.
  3. Between the buyers and sellers are consultants, auditors, and intermediary brokers divided into several levels.

Regarding the exchange mechanism, each factory and manufacturing company emits a certain amount of CO2 into the air. If it exceeds the prescribed level, they must buy more carbon credits, whereas, if businesses generate actual emissions lower than its limit, that enterprise can sell the unused credits to another enterprise. It is expected that from 2028, carbon credits will be traded on the carbon credit exchange. This is good news, right?


In my opinion, yes, it is. The Carbon Credit Exchange will be the center for processing transactions on buying and selling carbon credits and greenhouse gas emission quotas, and auctioning, borrowing, remitting, and transferring greenhouse gas emission quotas. This will help competent authorities control the trading and exchange of carbon credits.

I also want to note that to be able to trade carbon credits, individuals and organizations must carry out procedures for carbon credit confirmation at the Ministry of Natural Resources and Environment by submitting an application via the online public service system. The Ministry of Natural Resources and Environment then will verify the contents of the dossier and issue a carbon credit confirmation within no more than 15 working days from the date of receipt of a complete and valid dossier.

In addition, the carbon market in Vietnam is gradually developing and receiving a lot of attention. According to my search for information, Quang Nam Province is the first locality in the country approved by the Government to establish a pilot project on forest carbon credit trading in the 2022–2026 period, including Nam Tra My District. Some estimates say that Vietnam can sell 57 million forest carbon credits to international organizations, which, if calculated at a minimum price of five US dollars, can earn hundreds of millions of US dollars.


Yes, that is true, forest owners will get benefits when participating in the carbon market. because these forest owners can convert the forest area under management into the amount of CO2 absorption (carbon dioxide, a gas that causes the greenhouse effect). The normal transaction price of the international market at present is 5 USD/ton CO2.

With practical experience from renewable energy projects such as solar power and wind power, how do you evaluate the relationship between carbon credits and these renewable energy projects?


Well, how interesting this question is! Because carbon credits will be considered one of the benefits that renewable energy projects aim to achieve.

The Power Plan VIII approved in May 2023 prioritizes the development of renewable energy and a target to control greenhouse emissions from electricity production. This is an important step for energy enterprises and manufacturing enterprises to participate in the carbon credit market.
Manufacturing enterprises can invest in rooftop solar power systems themselves, meeting local use goals, reducing dependence on fossil energy, or reducing carbon emissions. If the business is not ready, the market has financial institutions specializing in rooftop solar power investment and reselling it to roof leasing enterprises at a price 20-25% cheaper than the purchase price from EVN. In return, investors gain the right to exploit carbon credits for trading in the international market.

Therefore, carbon credits will be a source of financial benefit that renewable energy project investors can aim for in the near future. In addition, related to carbon credits, another issue of concern is the carbon tax. Ms. Linh, please tell us more about this issue.


Yes, regarding the carbon tax, according to my research, carbon is an environmental tax on the carbon of fuels, because carbon atoms when burned produce CO2, which is one of the factors that causes global warming and affects global climate change. The carbon tax aims to price emissions, preventing excessive energy extraction, use, and consumption by limiting and minimizing the profitability of such activities.

Authorities can set carbon taxes based on the amount of emissions an entity produces or on carbon-intensive goods and services, such as a carbon tax on gasoline.

However, there are currently no regulations on carbon tax in Vietnam. I would like to share some information about some countries applying carbon taxes, as follows:

  1. In Australia, a carbon tax was imposed from 01 July 2012, and has been maintained at a tax rate of 26 USD/ton CO2.
  2. A carbon tax was imposed by Japan on all fuels, except for the agriculture-forestry, air transport, railway, and maritime sectors, with a tax rate of only 3 USD/ton of CO2 equivalent, and the tax is used by the Japanese government to invest in developing low-carbon technologies.
  3. In France, the carbon tax took effect on 01 April 2014, with a tax rate of 8 USD/ton CO2, increasing to 27 USD/ton in 2016. On July 22, 2015, France officially passed the Energy Law Towards Green Growth, adding carbon tax rates of 62 USD/ton for 2020 and 110 USD/ton for 2030.

I also know that the European Union Parliament recently voted to pass the Carbon Border Adjustment Mechanism (CBAM), which will impose taxes on all goods imported from countries without pricing mechanisms carbon.

Importers must report the emissions contained in their imported goods without paying a fee adjustment during the transition period from 2023 to the end of 2025. What about in Vietnam, Ms. Linh?


Yes, the information you just mentioned shows that countries around the world are also focusing on carbon markets and imposing taxes on goods and services that emit a lot of carbon. According to Decree No. 06/2022/ND-CP, the Government of Vietnam has also outlined the development roadmap and timing for implementing the domestic carbon market.

Accordingly, the roadmap is divided into 2 phases:

(i) Phase 1 – Period from now until the end of 2027:

Focus on formulating regulations on carbon credit management, exchange of greenhouse gas emission quotas and carbon credits; formulate regulations for operating the carbon credit exchange;

Pilot the carbon credit exchange and offsetting mechanism in potential areas and guide the implementation of the carbon credit exchange and offsetting mechanism domestically and internationally;

Establish and organize the pilot operation of carbon credit exchanges from 2025;

Implement activities to strengthen capacity and raise awareness of carbon market development.

(ii) Phase 2 – Period from 2028:

Organize the operation of an official carbon credit exchange in 2028;

Prescribe carbon credit connected and exchange between domestic, regional and global carbon markets.


As Ms. Linh mentioned about the carbon credit exchange, under the principle of operating the carbon credit exchange, carbon is a commodity. So which agency will monitor this transaction process and what conditions must the parties involved in the transaction meet?


A very interesting question, Mr. Minh. The trading of carbon credits will need the coordination of many agencies and agencies in supervising the transaction process. At present, there are no specific regulations on the trading mechanism and conditions for carbon credit trading. But if the exchange of carbon credits is like a commodity, agencies such as the Ministry of Natural Resources and Environment, the Ministry of Finance, the Ministry of Industry and Trade, and the General Department of Taxation may coordinate with each other to manage and supervise the exchange of this transaction.


So which agency in Vietnam will operate and manage the carbon credit exchange?


Currently, the Ministry of Natural Resources and Environment has the role of assuming the prime responsibility for and coordinating with relevant ministries in piloting and officially operating carbon credit trading platforms for management, monitoring, and supervision of this market; and regulating activities to connect domestic carbon credit exchanges with regional and world markets. It is expected that in 2028, the new carbon credit exchange will officially operate.

Therefore, at present, it has not yet been determined which agency will operate and manage the carbon credit exchange.

In my opinion, in the period from 2023 to before 2028, the Ministry of Natural Resources and Environment will coordinate with relevant agencies to develop regulations related to the operation and management of the carbon credit exchanges.


I know that in Vietnam there have been transactions where the sellers are businesses in Vietnam selling carbon credits to parties abroad. So what mechanism are their transactions following? What are the opinions of agencies in Vietnam about these transactions?


According to my research, Vietnam and Japan are currently implementing joint carbon credits. Projects implemented in Vietnam will receive financing from two sources, including the Japanese Ministry of Environment (receives up to 5% of funding/project) and Japan’s Ministry of Economy, Trade and Industry (receives up to 100% of funding). However, carbon credits obtained from projects will have to be reallocated to the Japanese Government, depending on the amount of financial contribution, as well as the agreement between the parties. There have been 14 registered projects, and 8 of them have been granted more than 4,000 carbon credits, helping Vietnam earn nearly 40 million USD.

Therefore, up to now, provinces and cities owning large forest areas that want to participate in the carbon credit transfer must do so through the Ministry of Agriculture and Rural Development or the Government.

If there is a partner who wants to buy forest carbon credits from two or more provinces, the Ministry of Agriculture and Rural Development will directly sign. If it is a province, the provincial president can sign; and if it is bought from the forest owner, the forest owner can sign it directly. The proceeds from the sale will be transferred to the Vietnam Forest Protection and Development Fund for distribution.

In terms of legal regulations, there are still no regulations on the carbon credit trading mechanism with the international market. It is expected that regulations will be developed before operating the Carbon Credit Exchange in 2028.

In fact, many foreign energy companies, financial and banking institutions, and transportation and service companies want to buy carbon credits in Vietnam. However, they have expressed concern that because Vietnam does not have a clear legal corridor, they do not know what to do. When entering Vietnam, businesses need a coordinating agency from the Government to guide them because the carbon market has many fields such as forestry, energy, livestock, veterinary medicine, etc. Vietnam still does not have a carbon rights registration system or list of carbon establishments and projects for businesses to refer to.


Through our discussion here at BLawyers Vietnam, we hope that listeners will understand more about carbon credits and carbon markets in Vietnam so that they have a basis to research and learn more about this field before conducting carbon credit trading in the future.

Thank you, Ms. Linh, for discussing with me some very interesting questions in this podcast.


Thank you, Mr. Minh, for the discussion in this podcast. I hope that my sharing of this information will help listeners better understand carbon credits and carbon markets in Vietnam as well as the future prospects of this special commodity.


Yes, thank you very much, Ms. Linh.

The Lawyers Talk Podcast about the topic of carbon credits will stop here, and thank you for your interest in listening, goodbye, and see you again in the next podcast.

If you have any questions or concerns, please leave a comment below.

For more information about BLawyers Vietnam, please see our website below The Lawyers Talk Podcast screen.

Goodbye and see you again.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 09 October 2023


Thanh Nguyen

Please see further information at link

Ls Linhnguyen
Linh Nguyen

Please see further information at link

Featured Guest

Minh Ngo
Minh Ngo

Please see further information at link