Vietnam pushes launch of official carbon market to 2029

Vietnam plans to officially begin the operation of its national carbon credit exchange in 2029, a year later than previously scheduled, according to a government decision ahead of the country's Lunar New Year holidays that began last week.

Under Decision 232/QD-Ttg on the carbon market, signed by Deputy Prime Minister Tran Hong Ha, the official launch of the national carbon market in 2029 will follow trial runs conducted from June 2025 to the end of 2028.

From now until June 2025, the government will finalize the legal framework for allowance exchange, carbon credits and offsetting system, along with other preparatory work for the pilot implementation of carbon trading.

These new timelines differ from Government's Decree No. 06/2022/ND-CP on greenhouse gas emission reduction and ozone layer protection released in January 2022, which aimed to initiate a pilot run of a carbon trading platform in 2025 and officially launch it in 2028.

Goods traded in the carbon market will be Vietnamese government-set emission quotas and carbon credits generated from domestic and international projects including the Clean Development Mechanism (CDM), Joint Crediting Mechanism (JCM) and Article 6 bilateral agreements, according to the decision.

After the official launch in 2029, the Vietnamese government will review the market and consider connecting its domestic carbon market with regional and global markets, the decision said.

Along with the delay in the official launch of the carbon market, Vietnam also intends to adjust the timelines for assignment of emission quotas to selected industries.

According to a draft amendment for the decree No. 06/2022/ND-CP and associated documents released by the Ministry of Natural Resources and Environment (MONRE) in December 2024, Vietnam will assign emission quotas to power, iron and steel, and cement industries, facilitating these industries to tackle the EU's carbon border adjustment mechanism (CBAM), and fine-tune rules around Article 6 implementations.

The Ministry of Industry and Trade will propose the annual quotas for each thermal power plant and iron and steel production facility for 2025 and 2026. Meanwhile, the Ministry of Construction will propose the annual quotas for each cement production facility for 2025 and 2026.

Their proposals must be submitted to the MONRE by June 30, 2025, for a review. Power plants and industrial facilities are expected to receive their quotas for 2025 and 2026 by Dec. 31, 2025, according to the December 2024 amendment. This timeline is one year later than the target outlined in the amendment released in April 2024.

The power plants and industrial facilities are expected to receive their quotas for 2027 and 2028 by Oct. 31, 2027, and for 2029 and 2030 by Oct. 31, 2029.

Separately, in the April 2024 amendment, the environment ministry proposed adding cow and pig farms with more than 1,000 cows and more than 3,000 pigs per year, respectively, to the list of the facilities subject to emission reporting. However, this proposal was abolished in the December 2024 amendment.

Approximately more than 100 facilities are expected to receive quotas in the pilot phase, accounting for about 40% of the total emissions from facilities regulated under this decree, MONRE said in a draft letter to be sent to the prime minister to justify the amendments.

In another move, the MONRE's Department of Climate Change in December 2024 announced that the greenhouse gas emission factor of Vietnam's power grid in 2023 is 0.6592 tCO2/MWh, lower than 0.6766 tCO2/MWh in 2022, 0.7221 tCO2/MWh in 2021, and 0.8041 tCO2/MWh in 2020. The greenhouse gas emission factor of Vietnam's power grid is the basis for calculating GHG emissions according to scope 2 of the relevant facilities.