On 9 June 2025, the Vietnamese government took a decisive step towards a low-carbon future by issuing Decree 119/2025/ND-CP. This legislation revises and broadens the provisions of the earlier Decree 06/2022/ND-CP and further details the groundwork for greenhouse gas (GHG) reduction, ozone layer protection, and most notably, the launch of Viet Nam’s first domestic carbon market.

Decree 119/2025/ND-CP, effective from 1 August 2025, aims to enforce Viet Nam’s climate commitments, including the Net-Zero 2050 objective and updated obligations under the Paris Agreement. Building on Decree 06/2022/ND-CP, the revised decree reinforces the establishment of an emissions trading scheme by the end of 2025, further clarifying provisions for trading emissions allowances and carbon credits. Moreover, it contributes to articulating the responsibilities of key stakeholders such as high-emission enterprises, carbon credit developers, and market intermediaries.

The decree covers 2,166 high-emission facilities across industrial sectors such as energy, steel, cement, chemicals, and waste management—representing approximately 70% of Viet Nam’s national emissions.Carbon credit developers are explicitly included under the regulatory framework. These are entities responsible for originating and managing emissions-reduction or removal projects, establishing baselines, monitoring outcomes, and generating certified credits for use within the carbon market. For example, a renewable energy company constructing a solar farm to replace coal-based electricity could register the project, undergo verification, and obtain carbon credits by an accredited body, which may subsequently be sold to high-emission facilities to support their compliance obligations. Alongside traders, brokers, and verification bodies, carbon credits developers are therefore recognised as key actors within the system.

The Emissions Trading Scheme (ETS) Framework

At the heart of Decree 119 is the introduction of an Emissions Trading System (ETS) based on a cap-and-trade model. Under the system, major polluters must possess allowances corresponding to their CO₂ emissions. The ETS implementation process is divided into two main stages:

• 2025–2026: Free allocation of allowances primarily for the power, steel, and cement sectors.
• From 2027: Introduction of allowance auctions and extension of coverage to textiles, electronics, and transport sectors.

Companies are afforded flexibility, as they may bank unused allowances or borrow up to 15% from future allocations. The attribution of emission certificates follows the provisions outlined in Annex 1, with allowances allocated based on sectoral benchmarks – in other words, the average performance of each sector determines the number of allowances an enterprise is entitled to. This means that more efficient enterprises (emitting less than the benchmark) may receive surplus allowances, while less efficient ones face a shortfall and need to purchase additional allowances or use carbon credits.

Meanwhile, the carbon credit mechanism enables the generation of credits from domestic projects (such as solar farms and reforestation) or from international credits compliant with Article 6 of the Paris Agreement. These credits can then be used by businesses for carbon offsetting, allowing them to compensate up to 30% of their emissions.
Supporting infrastructure includes a National Carbon Registry to ensure transparent tracking and prevention of double-counting, alongside a Domestic Carbon Exchange scheduled to commence pilot trading by late 2025.

Compliance Timelines and Penalties

Key deadlines under the decree are:

• By 31 December 2025: Initial allocation of emissions allowances.
• By 31 March 2026: Submission of mandatory GHG reports by regulated bodies.

Penalties for non-compliance include reduced future allowances and fines for submission of false data.

Opportunities and Challenges

The decree offers substantial opportunities. Forestry and agricultural projects alone could generate more than 57 million carbon credits per annum, valued at between $300 million and $1 billion. Companies under the ETS that achieve emission reductions beyond their allocated cap may generate revenue by selling surplus allowances or eligible credits to other firms that exceed their limits. Furthermore, providers of monitoring, reporting, and verification (MRV) technologies are expected to experience increased demand.

Nonetheless, challenges persist, particularly regarding transparency in emissions data and equitable credit ownership, especially in community-based forestry projects.

The Road Ahead

Decree 119 positions Viet Nam to take a leading role in Southeast Asia’s green transition. By aligning with international initiatives such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), the decree is intended to attract climate finance, stimulate renewable energy development, and prepare for the full launch of the domestic carbon market in 2029. It frames decarbonisation not only an environmental necessity but also as an economic opportunity for Viet Nam’s industrial development. The Ministry of Agriculture and Environment is expected to issue sector-specific guidelines by the first quarter of 2026 to facilitate implementation and ensure compliance.