Published on: 2026-07-28
The official launch of Vietnam's domestic carbon exchange on 29 June 2026 marked the first time greenhouse gas emissions allowances were traded through a centralised market infrastructure in the country.
The first product, identified by the trading code VN2025, represents more than 511.47 million tonnes of carbon dioxide equivalent allocated for the 2025–2026 compliance period. It covers 110 facilities, including 34 thermal power plants, 25 iron and steel production facilities, and 51 cement production facilities.
The inaugural trading session recorded the transfer of 1,210 emissions allowances, with a total transaction value of VND 161.66 million. This was equivalent to an average price of approximately VND 133,600 per tonne of carbon dioxide equivalent.
Although the volume traded was very small relative to the total number of allowances allocated, assessing the success or failure of a carbon market solely based on liquidity during its inaugural session could lead to an incomplete conclusion.
Globally, carbon pricing has moved beyond the scope of environmental policy alone to become an increasingly important component of economic and financial infrastructure. According to the World Bank, 87 direct carbon-pricing instruments are currently in operation worldwide, covering more than 29% of global greenhouse gas emissions. In 2025, these instruments generated more than USD 107 billion in public revenue.
According to EBC Financial Group ("EBC"), the central question for Vietnam is no longer whether its market has established a carbon price, but whether that price is sufficiently credible to influence economic behaviour.
Sana Ur Rehman, Senior Market Analyst at EBC Financial Group, commented,: "The establishment of Vietnam's first price for emissions allowances represents an important milestone. However, a carbon price only gains real economic significance when it begins to influence the allocation of capital - shaping corporate technology choices, banks' assessment of credit risk and investors' portfolio decisions. The true test of the pilot phase is therefore not simply whether allowances can be traded, but whether Vietnam can translate emissions data into financially relevant information and develop a carbon price signal that is credible enough to guide long-term investment decisions."
One of the first conditions for the market to function effectively is a clear distinction between greenhouse gas emissions allowances and carbon credits.
Each emissions allowance represents the right to emit one tonne of carbon dioxide equivalent within a regulated compliance system. Allowances are allocated by the relevant authorities to facilities covered by the system and collectively form the emissions budget for each compliance period.
A carbon credit, by contrast, represents one tonne of emissions that has been reduced or removed relative to an established baseline through a project or programme whose results have been measured, reported and verified.
Although both allowances and credits are denominated in tonnes of carbon dioxide equivalent, they are created through different mechanisms and perform different economic functions.
The product currently listed by the Hanoi Stock Exchange (HNX) under the VN2025 trading code is an emissions allowance, rather than a generic carbon credit. Referring to every instrument traded in the market as a "carbon credit" risks obscuring the distinction between an allocated right to emit and a verified emissions-reduction outcome generated by a specific activity.
The current policy framework allows facilities to use carbon credits to offset part of their compliance obligations, up to a maximum equivalent to 30% of their allocated allowances. It also allows facilities to borrow up to 15% of their allowances from the subsequent compliance period.
These flexibility mechanisms are necessary during a period in which businesses are still becoming familiar with the market and may not be able to replace or upgrade production technologies within a short timeframe. However, the relatively high degree of flexibility also makes the quality of eligible carbon credits a particularly important issue.
If a credit cannot demonstrate additionality, the permanence of its emissions-reduction outcome, or protection against double counting, its use could weaken the incentive for companies to reduce emissions directly at their production facilities.
Decree No. 180/2026/ND-CP, which took effect on 1 July 2026, has created an additional legal framework for the development of forest carbon credits. Under the decree, forest emissions-reduction outcomes and forest carbon credits may be transferred through contractual arrangements or traded on the carbon exchange following confirmation by the Ministry of Agriculture and Environment. Once transferred, a credit may not be resold for use by another party.
This provides a positive foundation for the development of domestic carbon-credit supply. At the same time, it creates a need for mechanisms that can track ownership, address reversal risks and ensure that credits are retired once they have been used.
Rehman explained,: "Not every tonne of carbon in the market is the same. An allowance is a right to emit within a compliance system, whereas a carbon credit represents a verified emissions reduction or removal. If the market focuses only on the number of units traded without distinguishing the environmental integrity behind each unit, liquidity may increase while the integrity of the market itself deteriorates."
Low trading volumes during the first sessions are not necessarily unusual for a newly established market.
During the pilot phase, allowances are allocated free of charge on the basis of emissions-intensity benchmarks linked to production volumes. VN2025 may be traded until 24 December 2027, while covered facilities must still complete the verification of their emissions data before determining precisely whether they hold a surplus or face a shortfall of allowances.
The availability of banking, borrowing and carbon-credit offset mechanisms also reduces the need for companies to trade immediately. Initial low liquidity may therefore reflect the design of the compliance period rather than a lack of interest among participating companies. This is an inference based on the current structure of the market.
A more important measure is the quality of price formation.
First, a carbon price can only be credible when the underlying emissions data is credible. If two facilities apply different measurement methods, emissions factors or inventory boundaries, their reported allowance surpluses or deficits will not reflect the same economic basis. The measurement, reporting and verification system, commonly referred to as MRV, is therefore the foundation of the entire market.
Second, the degree of allowance scarcity must be sufficiently clear and predictable. Because Vietnam currently uses free allocation based on product-level emissions-intensity benchmarks, the total allocation of more than 511 million tonnes alone cannot determine whether the market is structurally long or short in allowances.
The price signal will depend on the benchmarks applied to individual industries, actual production volumes, verified emissions and the schedule under which standards are tightened in subsequent compliance periods. If allowances are allocated too generously, companies will have limited incentives to invest in lower-emissions technologies. Conversely, if benchmarks are tightened too rapidly or changed without sufficient predictability, compliance costs could create a significant shock for capital- and energy-intensive industries.
The purpose of the pilot phase should therefore not be to produce the highest possible carbon price. It should be to develop a sufficiently credible and predictable price trajectory that companies can incorporate into long-term investment planning.
Third, the market must maintain an operational discipline comparable to that of a financial market. Vietnam has established an initial foundation by connecting and testing its national registry, the trading system operated by the Hanoi Stock Exchange, the custody and settlement system operated by the Vietnam Securities Depository and Clearing Corporation, and the designated settlement bank. The use of existing securities-market infrastructure also enables custody, ownership transfer, settlement and transaction monitoring to be implemented through centralised systems.
However, as the market grows, its disclosure framework, position-monitoring mechanisms, systems for detecting unusual transactions and safeguards against market manipulation will need to continue evolving. Liquidity only creates economic value when it is grounded in genuine compliance demand, rather than speculative activity in a market that still lacks sufficient underlying data.
The launch of Vietnam's carbon market coincides with the entry of the European Union's Carbon Border Adjustment Mechanism, or CBAM, into its definitive phase on 1 January 2026. The mechanism currently applies to several carbon-intensive product categories, including cement, iron and steel—two industries that are also among the first sectors to receive emissions allowances in Vietnam.
The European Commission announced a CBAM certificate price of EUR 75.28 per tonne of carbon dioxide for the second quarter of 2026. By comparison, the average price of the first allowance transaction in Vietnam was approximately VND 133,600 per tonne of carbon dioxide equivalent. These two price levels should not be compared mechanically because they belong to markets with different coverage, allocation mechanisms, levels of maturity and compliance structures.
The more important point is that the existence of a carbon exchange in Vietnam does not mean Vietnamese exporters will automatically be entitled to reduce their CBAM obligations. Under EU rules, a company may request a reduction in the number of CBAM certificates it must surrender only when it can demonstrate that a carbon price has been effectively paid in the country of production. The supporting documentation must identify the carbon price associated with the embedded emissions in the relevant goods, account for rebates or other forms of support that reduce the effective cost, and include evidence of payment and independent certification.
Businesses should therefore not assume that freely allocated allowances or the mere existence of a quoted price on the domestic exchange will automatically create a deductible carbon cost under CBAM. The value recognised in practice will depend on whether companies can establish an auditable data chain - from facility-level emissions and the allocation of emissions to specific products, through to the carbon costs effectively paid and the documentary evidence accepted by the importing authorities.
CBAM does not ask whether Vietnam has a carbon exchange, rather, how much carbon is embedded in each tonne of goods and how much carbon cost has actually been paid.
"One of Vietnam's strategic priorities during the pilot phase should therefore be to improve the interoperability of its emissions data and calculation methodologies with those used in its major export markets. If emissions have been reduced but cannot be demonstrated at the product level, companies may not receive full recognition for their green investments through either export prices or border-carbon obligations." - Rehman highlighted.
From EBC's perspective, Vietnam's carbon market will realise its full economic value only when emissions risk becomes part of corporate finance, credit assessment and investment decision-making.
For companies, the priority should be to understand their emissions exposure before turning to the market. This means assessing current emissions, allocated allowances, potential shortfalls and the financial impact of different carbon-price scenarios, while comparing the cost of purchasing allowances or credits with investments in energy efficiency, cleaner fuels, renewable energy and lower-emissions technologies. The guiding principle should be to reduce emissions where economically viable and use trading mechanisms to manage the remaining balance, rather than treating carbon credits as a substitute for operational transformation.
The impact will also extend beyond the first 110 regulated facilities. Businesses may face indirect carbon costs through electricity, steel and cement prices, international customer requirements, financing conditions and supply-chain standards before they become directly subject to the compliance system.
For banks and investors, verified emissions data can increasingly inform credit-risk assessment, company valuation and capital allocation. Businesses with high emissions intensity, persistent allowance deficits or heavy reliance on offsets may face greater cost and cash-flow pressures as benchmarks tighten. By contrast, companies that can demonstrate credible reductions in carbon intensity may be better positioned to access transition finance, green bonds and long-term institutional capital.
Vietnam has already taken the important first step of establishing the legal and market infrastructure for carbon trading. The next phase will determine whether the exchange develops into a credible financial mechanism capable of influencing investment, rewarding genuine emissions reductions and strengthening the competitiveness of Vietnamese businesses. When regulators, companies, banks and investors begin making decisions based on the same reliable carbon data, the market will move beyond compliance and become part of the country's broader architecture for green growth.
