Reducing risks for businesses in carbon market

On April 23 in Hanoi, the Department of Climate Change (Ministry of Agriculture and Environment), in coordination with the United Nations Development Program (UNDP), organized a workshop titled “Strengthening Capacity for Participation in Vietnam’s Carbon Market”. The event was attended by representatives from local departments, agencies, and businesses subject to greenhouse gas emission quota allocation in the northern region.

The event is part of a series of capacity-building workshops for regulatory agencies and businesses, aimed at advancing the roadmap for operating the domestic carbon market.

Enhancing awareness of technical regulations

According to Mr. Nguyen Tuan Quang, Deputy Director General of the Department of Climate Change, during the pilot phase of the carbon market, 110 facilities have been allocated emission quotas across three sectors: steel, thermal power, and cement. The workshop provided comprehensive information on the legal framework, operational mechanisms, and technical requirements related to the national registry system and the carbon credit exchange. Through this, emitting facilities and relevant stakeholders can improve their understanding and gradually ensure full compliance with current legal regulations.

Emphasizing that this is a preparatory step for businesses, Mr. Vu Thai Truong, Head of the Climate Change, Energy and Environment Programme at UNDP Viet Nam, shared that Vietnam has been progressively improving its legal framework and building the necessary technical infrastructure for the carbon market. A key factor in the market’s successful operation is businesses' readiness to participate.

During the pilot phase (2025–2027), negotiated transactions are identified as the core operating mechanism of Vietnam’s carbon market. This mechanism differs significantly from the automatic order-matching system commonly used in stock markets, as it allows counterparties to negotiate directly before submitting transaction details to the system.

Businesses will take a proactive role in identifying partners and agreeing on key contract terms, including price, quota or carbon credit volume, and delivery timing. Once an agreement is reached, the transaction will be submitted to the exchange through securities companies (trading members) for confirmation and settlement. Notably, there are no limits on the number or volume of transactions, creating favorable conditions for participants to manage their quotas.

Emissions inventory data determines allocated quotas

During the discussion session, many businesses raised practical concerns regarding greenhouse gas inventories, quota allocation methods, and annual reporting requirements. Addressing these issues, Mr. Luong Quang Huy, Head of the Greenhouse Gas Emission Management and Ozone Layer Protection Division, stated that to ensure the quality of carbon credits and emission quotas, authorities have established a strict legal framework, centered on the 2020 Law on Environmental Protection and Decree No. 119/2025/ND-CP (amending Decree No. 06/2022/ND-CP).

A significant change introduced in Decree 119/2025/ND-CP is the shift from a pre-inspection to a post-inspection mechanism, aimed at reducing administrative burdens for businesses. Specifically, facilities listed for greenhouse gas inventory (but not yet allocated quotas) will submit periodic inventory reports to provincial People’s Committees before March 31, 2027, without prior appraisal. However, for the 110 facilities allocated quotas, independent verification remains mandatory, as it serves as a basis for quota allocation and participation in the carbon market. Businesses should note that the deadline for submitting the latest inventory report to the Ministry of Agriculture and Environment is before December 1, 2027.

Regarding technical methods, authorities advise businesses to focus on accurately identifying direct emissions (Scope 1) - the primary basis for quota calculation - and indirect emissions (Scope 2) from electricity consumption. In particular, for the steel and cement sectors, during the pilot phase, quotas are mainly determined by the largest emission sources: crude steel production and clinker production.

Some businesses questioned whether internal quota transfers among affiliated entities are allowed. Mr. Nguyen Thanh Cong, Deputy Head of the Carbon Market Division (Department of Climate Change), clarified that all transactions must be conducted through the exchange.

Entities with separate tax identification numbers and full legal status must complete all quota ownership transfers through the exchange. When facilities operate under a parent company’s tax code, even though there is only one account representing all facilities, quota transfers between them must still be conducted through the exchange.

According to experts, businesses should consider compliance with inventory regulations as an essential step to seize opportunities in the domestic carbon market and overcome international green trade barriers. Currently, more detailed regulations on greenhouse gas inventories and carbon market operations are being incorporated into the draft amendments to the Law on Environmental Protection and related legal documents. Authorities affirm their commitment to accompanying businesses, listening to feedback, and ensuring fairness while facilitating compliance and advancing the national goal of achieving net-zero emissions.