On 1 April 2026, the Government of Viet Nam issued Decree No. 112/2026/NĐ-CP, effective from 19 May 2026, establishing the country’s first comprehensive legal framework for the international transfer of greenhouse gas (GHG) emission mitigation outcomes and carbon credits. The Decree marks a transition from preparatory regulation to the implementation of cross-border carbon market participation and creates opportunities to attract climate finance and promote investment in emissions reduction. However, it also places some limitations on the transfer of carbon credits abroad with respect to the implementation of the country’s Nationally Determined Contribution (NDC) targets. It does not go as far as stipulating an NDC first policy though.

From Legal Gaps to Operational Framework

Prior to the issuance of Decree 112, Viet Nam had laid the groundwork for a domestic carbon market through the Law on Environmental Protection (2020) and subsequent implementing regulations, including Decree 06/2022/NĐ-CP and its amendment under Decree 119/2025/NĐ-CP. However, critical gaps remained, concerning the international transfer of mitigation outcomes, the absence of a defined authorisation process under Article 6, and the lack of an integrated system linking project-level activities with national emissions accounting.

Decree 112 directly addresses these gaps by establishing procedures for international transfers, clarifying institutional responsibilities, and embedding carbon transactions within a national regulatory and accounting framework. It provides the legal infrastructure necessary for Viet Nam to engage in international carbon markets in a structured and credible manner.

Institutional Design and Market Architecture

A central feature of the Decree is the designation of the Ministry of Agriculture and Environment as the national focal authority responsible for approving international transfers and issuing Letters of Authorisation (LOA) under Article 6.2. The Decree establishes three principal channels for international cooperation: (i) cooperative approaches under Article 6.2, (ii) the mechanism under Article 6.4, and (iii) participation in programmes based on independent carbon standards. This broad scope allows room for both compliance and voluntary market engagement, while ensuring that all transactions remain subject to domestic regulatory oversight.

Transparency and accountability are reinforced through the requirement that all international transfers be recorded in a national registry system, linking project-level activities to national emissions accounting and supporting compliance with international reporting obligations.

Corresponding Adjustment, and Transfer Ratios

The Decree introduces the principle of corresponding adjustment in line with Article 6 of the Paris Agreement, requiring Viet Nam to adjust its national emissions balance when mitigation outcomes are transferred internationally, thereby preventing double counting and linking project-level transactions with NDC targets.

Mitigation outcomes generated from measures covered under both conditional and unconditional NDCs may be eligible for international transfer, subject to authorisation and corresponding adjustment requirements under the Decree. However, such transfers are only permitted with corresponding adjustments applied to ensure that the transferred reductions are not counted toward Viet Nam’s NDC achievements.

For transfers involving corresponding adjustments, the maximum transfer rate of mitigation outcomes and carbon credits is capped at 90% of credits for programme and projects under List No. 01 of Annex I issued with this Decree (List of priority greenhouse gas emission reduction measures and activities eligible for international transfer with corresponding adjustment) and 50% for mitigation measures under List No. 02  (List of greenhouse gas emission reduction measures and activities encouraged for international transfer with corresponding adjustment).

Policy Direction and Regulatory Approach

Taken together, the provisions of Decree 112 indicate that Viet Nam is pursuing a regulated approach to international carbon market participation. While the Decree enables international transfer of mitigation outcomes under Article 6 mechanisms, it also incorporates approval procedures, corresponding adjustment requirements, and transfer limits to ensure consistency with national climate objectives and NDC implementation.

Emerging Market and Environmental Implications

The Decree has immediate practical implications for project developers and international partners. The formalisation of the LOA process creates a pathway for carbon credits generated in Viet Nam to access compliance markets that require corresponding adjustment, including potential use in international aviation offsetting schemes or other compliance systems, subject to their respective eligibility rules. This has the potential to enhance the value and bankability of carbon projects, while also introducing additional requirements for regulatory alignment and due diligence.

Beyond its market function, the Decree is also expected to generate positive environmental outcomes in both the short and long term. By enabling emission reductions to be monetised through international carbon markets, it creates direct economic incentives for enterprises and local authorities to invest in clean technologies, energy efficiency, and low-emission production models.

At the same time, the Decree strengthens environmental governance through requirements on measurement, reporting, and verification (MRV), as well as the transparent recording of transactions in a national registry. These mechanisms are expected to improve the accuracy of Viet Nam’s greenhouse gas inventory and provide a more robust data foundation for future climate policy. In this respect, the Decree contributes not only to market development but also to the institutional consolidation of Viet Nam’s climate governance system.

Conclusion

Decree No. 112/2026/NĐ-CP represents a significant milestone in Viet Nam’s climate governance. It establishes the operational rules for participation in international carbon markets while embedding carbon transactions within a framework of regulatory oversight and national climate accounting.

The resulting system is neither fully liberalised nor restrictive. Rather, it defines a regulated market environment in which participation is enabled but conditional on alignment with national priorities and international standards. This balanced approach positions Viet Nam to engage more effectively in global carbon markets while maintaining coherence with its long-term transition towards a low-carbon economy.

REFERENCE:

1. Decree No. 112/2026/ND-CP on International Transfer of Emission Mitigation Outcomes and Carbon Credits
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