Vietnam, with its commitment to achieving net-zero emissions by 2050 as declared at COP26, is gradually building a legal framework and implementing mechanisms related to the carbon market. Domestic regulations, particularly government decrees, play a crucial role in promoting carbon projects in a sustainable and transparent manner.

1. Roadmap for Developing Vietnam's Carbon Market

Phase 1: Establishing the Legal Framework In 2022, the Vietnamese government issued Decree 06/2022/NĐ-CP, marking a significant step in managing greenhouse gas (GHG) emissions and protecting the ozone layer, while laying the foundation for developing the carbon market in Vietnam. This decree includes several key highlights: The decree mandates large-emission businesses to conduct GHG inventories, ensuring stringent monitoring of major emission sources. It specifies five key sectors responsible for emission reductions: Energy, Transportation, Construction, Industry, Agriculture and Waste Management. The decree sets the groundwork for piloting the Emissions Trading System (ETS), an essential market-based tool to incentivize emission reductions. This strategic step is part of Vietnam’s roadmap toward emission reductions and sustainable development, demonstrating the country’s commitment to climate action and its transition to a low-carbon economy.

Phase 2: Piloting the Carbon Market In 2025, Vietnam will launch a pilot carbon credit trading system, marking a significant milestone in its efforts to reduce greenhouse gas emissions and promote sustainable development. During this pilot phase, emission reduction projects such as renewable energy, reforestation, and waste management will be encouraged to participate, laying the groundwork for an efficient operating system.The objectives of the pilot program include: Evaluating the operational capacity of the domestic carbon credit trading system and exploring mechanisms for linking Vietnam's carbon market with international carbon markets under Article 6 of the Paris Agreement. This strategic step aims to prepare Vietnam for integration into the global carbon trading system, contributing to its emission reduction commitments and achieving national climate goals.

Phase 3: Official Implementation of the Carbon Market By 2027, Vietnam's domestic carbon credit trading system is expected to be officially operational, marking a significant milestone in the country's roadmap to reduce greenhouse gas emissions. During this phase, the carbon credit exchange mechanism will be fully developed, facilitating businesses to trade carbon credits not only domestically but also with international partners. This system will promote effective emission reductions through market-based mechanisms and open opportunities for Vietnam to engage more deeply in the global carbon market. The official implementation of the carbon market will support Vietnam’s sustainable development goals and its commitments under the Paris Agreement, further solidifying its role in global climate action.

2. Legal Regulations Related to Carbon Projects in Vietnam

In addition to Decree 06/2022/NĐ-CP, several other key legal documents provide the foundation for promoting carbon projects and developing the carbon market in Vietnam:

- Environmental Protection Law 2020: This law establishes fundamental principles for reducing greenhouse gas emissions and emphasizes the protection and development of carbon-absorbing ecosystems such as forests and wetlands. It also introduces mechanisms to encourage businesses to participate in emission reduction projects and the carbon market.

- National Climate Change Strategy to 2050: Approved in 2022, this strategy sets specific goals for reducing greenhouse gas emissions, increasing the share of renewable energy, and protecting mangrove forests. It also outlines diverse financial mechanisms, including the carbon market, to support emission reduction projects.

- Decision 01/2022/QĐ-TTg: This decision specifies a list of entities required to conduct GHG inventories, including businesses in the energy, industrial production, and agricultural sectors. These entities will play a critical role in the future carbon credit trading system.

3. Steps to Implement Carbon Projects in Vietnam

Step 1: Project Planning

• Identify a suitable project type, such as: Renewable energy (wind and solar power), Forest conservation and reforestation (REDD+), Waste management and energy conversion (waste-to-energy).
• Evaluate the potential for emission reductions and the ability to generate carbon credits.

Step 2: Project Registration and Approval

• Emission reduction projects must comply with international standards (e.g., Gold Standard, Verified Carbon Standard) or domestic standards issued by the government.
• Register the project with regulatory authorities such as the Ministry of Natural Resources and Environment (MONRE).

Step 3: Monitoring and Reporting

• Monitor the amount of emissions reduced and submit periodic reports to the regulatory authority.
• Ensure transparency and accuracy to have the carbon credits recognized in the market.

Step 4: Carbon Credit Trading Approved projects can sell carbon credits on domestic or international markets. The credits can be purchased by businesses needing to offset their emissions or by international organizations.

4. Challenges and Solutions in Developing Carbon Projects in Vietnam

The development of the carbon market in Vietnam faces several challenges, including an incomplete legal framework, limited financial resources, and low public awareness. The lack of detailed regulations on carbon credit trading and international market linkages hinders synchronized implementation, while high investment costs and long payback periods make it difficult for emission reduction projects, particularly in forest protection and agriculture, to secure funding. Additionally, the public and businesses often lack understanding of the value and benefits of the carbon market. To address these issues, Vietnam needs to accelerate the issuance of detailed regulations, especially for the carbon credit trading system, to ensure clarity and efficiency. Mobilizing international financing, such as through partnerships with organizations like the Green Climate Fund (GCF), is crucial to overcoming funding limitations and supporting carbon projects. Furthermore, enhancing awareness through communication efforts and training programs will help businesses and communities better understand the benefits of the carbon market and encourage their active participation, fostering sustainable and synchronized market development.

5. The Future of Carbon Projects in Vietnam

With significant potential in renewable energy, mangrove forests, and waste management, Vietnam is emerging as a leading player in developing carbon projects. Completing the legal framework and integrating into the global carbon market will enable Vietnam to: Achieve its Net Zero commitment by 2050. Attract international investments for emission reduction projects. Promote a green economy and sustainable development. The progress of carbon project development in Vietnam is on the right track, supported by regulations such as Decree 06/2022/NĐ-CP and policies aimed at reducing greenhouse gas emissions. The development of the carbon market will not only help Vietnam meet its climate goals but also bring significant economic benefits, driving a green and sustainable economy in the future.