After many years of preparation, Vietnam officially launched its domestic carbon exchange on June 29, marking the country’s first formal carbon pricing mechanism and transforming emissions allowances and verified emission reductions into tradable assets. The exchange allows trading of greenhouse gas emissions allowances and carbon credits.
Though the market will remain in a pilot phase through the end of 2028, many businesses view early participation as more than a compliance requirement. They see it as an opportunity to build competitiveness in a low-carbon economy that is rapidly taking shape.
New rulebook for businesses
In the initial phase, the government allocated more than 511 million metric tons of CO2 equivalent emissions allowances to three major emitting industries - thermal power, steel, and cement - for the 2025-2026 period. A total of 92 companies, covering 110 facilities, received the first allocation of emissions allowances, creating the initial supply for Vietnam’s carbon market. Under the regulations, companies that exceed their emissions limits must purchase allowances from businesses with surplus allocations or buy carbon credits to offset emissions, with offsets capped at 30 per cent of the allowances allocated to each facility.
As one of the first companies to complete a transaction immediately after the exchange opened, AES Vietnam described the milestone as extending well beyond a routine commercial trade. According to Mr. Olivier Marquette, President of AES Vietnam, the carbon market establishes a price signal for emissions. Once carbon carries a price, companies can make informed economic decisions about whether to invest in emission reduction technologies or purchase carbon credits to offset remaining emissions. Rather than relying solely on administrative mandates, the market mechanism allows businesses to pursue the most cost-effective option.
For AES Vietnam, participating from the first day also provides valuable operational experience. Although the group has participated in carbon markets across Europe and other countries for many years, it still needs to become familiar with Vietnam’s trading mechanisms, transaction procedures, and market infrastructure.
Under the current roadmap, Vietnam’s carbon market will remain in a pilot phase through 2028 before full-scale operations begin in 2029. During this pilot period, participating companies will not be charged exchange service fees, giving both regulators and market participants time to refine the system and gain practical experience.
The important thing is not simply completing a transaction, but understanding how the market works. We wanted to participate from Day 1 to gain practical experience and prepare for the market’s next stage of development after 2029.
Mr. Marquette said the financial impact is likely to remain limited during the early years because trading volumes will be relatively small. Over the longer term, however, carbon is expected to become a meaningful production cost.
Beyond carbon trading
While many businesses still view the carbon market primarily as a compliance tool, experts argue that the greatest value of carbon credits lies in their ability to unlock access to green finance.
Dr. Nguyen Phuong Nam, Founder and CEO of climate innovation consultancy Klinova, said many businesses continue to regard carbon credits as a new source of revenue. “However, revenue from carbon credits should be viewed as supplementary financing that companies can reinvest in further emission reductions, rather than as the primary objective,” he advised.
Green transformation requires substantial capital. To attract international green funds and sustainable finance, Dr. Nam believes companies must develop high-quality projects, adopt transparent business models, and demonstrate measurable emission reductions. In this context, generating carbon credits does more than create an additional revenue stream. It also provides evidence that a company is implementing internationally-recognized emission reduction projects.
He explained that projects seeking carbon credits must undergo rigorous measurement, reporting, and verification (MRV) processes. These requirements significantly reduce risk for financial institutions assessing potential investments. “The ability to generate and trade carbon credits also serves as an indirect demonstration of a company’s capacity for green transformation,” he said. “That gives investors greater confidence and increases their willingness to finance green projects.”
Ms. Nguyen Thuy Vi, Project Manager at Green Carbon Japan, said the company’s goal is not to maximize the volume of credits issued at any cost, but to ensure that every credit meets high standards of transparency and quality. “We always prioritize producing clean, transparent carbon credits that meet international standards,” she said. “That is why every stage, from emissions accounting to validation and verification, is conducted under strict procedures.”
The initial allocation of emissions allowances is relatively large, she continued, but still represents only a portion of businesses’ long-term needs. More importantly, the system encourages companies to invest in emission reduction measures, while carbon credits serve as a complementary tool to balance emissions and meet regulatory obligations.
Green Carbon Japan expects domestic demand to grow rapidly over the years to come as more companies receive emissions caps and seek carbon credits to comply with regulations. Alongside exporting credits, the company also hopes the domestic market will develop sufficient liquidity to become an important outlet for carbon credits generated in Vietnam.
Toward international integration
The launch of the carbon exchange is intended not only to facilitate domestic trading but also to lay the foundation for Vietnam’s gradual integration with global carbon markets. To achieve that goal, Ms. Vi said Vietnam’s regulatory framework must closely align with international standards.
In the long term, businesses need to view the carbon market as part of a broader strategy to strengthen their competitive advantage, rather than simply as a platform for trading carbon credits.
Beyond serving domestic demand, Vietnam needs to prepare for eventual connections with established markets such as Japan and the EU, where carbon trading systems and credit quality standards are already well developed. Each market has its own rules governing credit quality, trading mechanisms, compliance costs, and penalties for exceeding emissions limits - experience that Vietnam can draw on as it refines its own system.
Green Carbon Japan has already launched 15 projects across multiple localities to build a sufficiently large portfolio of carbon credits for international markets. The projects target not only the Vietnam-Japan Joint Crediting Mechanism (JCM) but also opportunities under Article 6.2 of the Paris Agreement.
The company believes Vietnam’s domestic carbon market should be viewed as a starting point for local businesses to gain practical experience while creating conditions that encourage international companies to participate. To support that ambition, Vietnam will need to establish mechanisms for recognizing and converting carbon credits between domestic and international markets, along with transparent regulations governing cross-border carbon trading. “Once these frameworks are in place, I believe Vietnam’s carbon market will have tremendous potential, not only in agriculture but across many sectors of the economy,” Ms. Vi said.
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