Vietnam’s Carbon Market: Compliance Lessons from the EU ETS

Vietnam’s carbon market has opened with limited initial trading, but covered facilities already face important reporting, allowance, and compliance decisions. Drawing on lessons from the EU ETS, this article explains how businesses can prepare for the 2027 surrender deadline, assess carbon investments, purchase eligible credits, and manage EU CBAM exposure.

What is the current status of Vietnam’s carbon market?

Vietnam’s domestic carbon trading platform was opened on 29 June 2026, with its first session trading over 1,200 tonnes of carbon dioxide equivalent (CO₂e) at prices of VND130,000 to VND136,000 (US$4.95 to US$5.17). By late August, VN2025—the greenhouse gas emission allowance code—had recorded no additional trading volume or value on the Hanoi Stock Exchange.

While thin early trading is a feature of many exchange markets around the world, there is still a real limiting effect on what businesses can plan for, especially when considering that transactions are conducted with negotiated trading, with buyers and sellers agreeing transaction terms rather than relying on the continuous order matching common in stock markets. Another influencing factor is that the initial allocation period covers only 110 facilities across 92 companies in the thermal power, iron and steel, and cement industries, limiting the pool of potential traders.

The market introduces some new cautions for businesses: facilities that exceed their allocation are required to make up the difference with additional allowances or eligible credits, a cost that can reach customers through prices. The list of facilities required to inventory emissions is reviewed every two years and updated by the Prime Minister, so a growing plant can come into scope. And the EU’s carbon border levy reaches Vietnamese exporters whether or not they hold allowances at home.

The EU Emissions Trading System (EU ETS) has run since 2005 and has worked through problems Vietnam is facing now. Therefore, the experience of Europe’s market provides Vietnamese businesses with a series of precautionary actions to consider:

• Budget for changes in allocation;
• Ensure emissions data is comprehensive and usable;
• Consider investments beyond the current allowance price; and
• Check credit eligibility before purchases.

What should businesses do now?

Businesses covered by Vietnam’s carbon market should:

• Forecast emissions against their allocated allowances;
• Prepare verified emissions data ahead of the December 2027 deadlines;
• Budget for potential allowance shortfalls and future auctioning;
• Confirm that carbon credits are eligible before purchasing them;
• Assess investments using several future carbon-price scenarios; and
• Manage EU CBAM reporting separately from domestic carbon compliance.

How should businesses budget for changes in Vietnam’s carbon allowance allocation?

The two systems distribute allowances differently, although they calculate free allocations on a broadly similar basis:

In both systems, efficiency alone does not determine whether a facility has enough allowances. For an expansion in Vietnam, forecast total emissions and the expected allocation together, then budget for any shortfall. Similarly, free allocation is not permanent in either system: auctioning became the EU’s default method from 2013, and Vietnam’s statutory roadmap points towards an auction mechanism from 2029. Businesses should therefore prepare budget projections with this change in mind.

What emissions data must covered facilities prepare before the 2027 deadline?

Under Articles 11 and 19 of Decree 6/2022, as amended by Decree 119/2025, covered facilities must submit their first verified inventory reports before 1 December 2027 and surrender allowances for the 2025–2026 period before 31 December 2027, with trading in VN2025 ending on 24 December 2027. Facilities should complete verification in time for the reporting deadline and secure any additional allowances needed before trading closes.

EU industrial operators must monitor emissions and submit an independently verified report every year. Vietnam’s own verification duty begins with the 2027 deadline above, so businesses should build record-keeping into routine operations now, retaining fuel invoices, meter readings, production records, and emissions factors that a verifier can trace. More relevant experience from the EU comes from its opening caps, which were set on estimates as reliable emissions data did not yet exist; once verified figures from that pilot were available, the cap for the following phase was reduced on the basis of actual emissions. Vietnam has not said it will do the same, but the figures a facility reports now are the evidence any later allocation decision may draw from, making accurate reporting a commercial matter as well as a procedural one.

How should businesses evaluate emissions-reduction investments?

The EU ETS’s first phase was also a three-year pilot in which almost all allowances were issued free. Caps were set on estimates, but the allowances issued exceeded actual emissions, resulting in prices falling to zero by 2007. Because phase 1 allowances could not be carried into phase 2, a surplus held at the end of the pilot period simply expired. Here Vietnam differs: unused allowances may be carried into the next allocation period once surrender obligations have been met, under rules applying through 2030. The transfer must be entered in the registry, and allowances not moved within 30 days of the surrender deadline are cancelled. Even then, a surplus is only worth what others will pay for it; treat surplus allowances as compliance headroom until trading establishes a dependable price and a counterparty.

The more dependable case for an efficiency investment is reducing energy costs rather than the carbon price. INSEE Vietnam reports that waste-heat recovery supplies 25 percent of its plant’s electricity needs, a saving that holds regardless of allowance costs. Though such investments don’t affect the surrender obligation, as it covers direct emissions.

The best approach to evaluating investments is to estimate each project’s return using low, medium, and high carbon-cost assumptions over the equipment’s life—including changes in free allocation—and prioritise projects that remain attractive at all price points.

How can carbon credits be used to meet Vietnam’s compliance obligations?

Carbon credits represent the removal or avoidance of one metric ton of greenhouse gas. Vietnam permits these credits to meet part of a facility’s environmental compliance obligations, with this being capped at 30 percent of allocated allowance as per Article 19(8) of the amended decree. The eligibility of these credits is specific to each system and, in the case of the EU, have been shown to tighten over time. The EU allowed some 1.4 billion tonnes of international credits in its 2008-2012 phase yet permits none for 2021-2030. As credits sold on a voluntary market are not automatically eligible in Vietnam, businesses should consider the possibility that a credit will be rejected rather than making assumptions.

As an example, consider a facility with 100,000 allocated allowances, each authorising one tonne, and direct emissions of 140,000 tonnes CO₂e. Its shortfall would be 40,000 allowances, while its credit ceiling—being 30 percent of allocation—is 30,000. So, credits cannot close the gap, and at least 10,000 allowances must be obtained. Whether to use the full 30,000 would depend on how credit prices compare with allowance prices, and on how many eligible credits can be sourced.

Before buying credits:

• Confirm that Vietnam recognises the credit programme and reduction year;
• Check ownership, registry records, and eligibility for compliance; and
• Specify in the contract what happens if credits arrive late or the regulator rejects them.

How does the EU CBAM affect Vietnamese exporters?

The EU’s Carbon Border Adjustment Mechanism (CBAM) has applied in full since 1 January 2026, covering cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. The legal obligation sits with the EU importer, not the Vietnamese supplier, but it reaches exporters through their customers: importers may declare either default emissions values or actual emissions confirmed by a verifier accredited in the EU, and default values ignore a particular factory’s efficiency. A supplier that has cut its emissions benefits only if it can provide verified actual data.

A domestic carbon position does not help. An importer can claim a reduction where a carbon price has actually been paid in the exporting country, but free Vietnamese allowances are not such a payment, voluntary credit purchases do not automatically qualify, and buying allowances or credits does not change a product’s embedded emissions.

Exporters should keep the 2026 records the calculation requires, agree with customers how verification will be arranged and paid for, and put any price change arising from verified emissions or revised requirements into the contract.

What should covered facilities and exporters do next?

Vietnam’s limited early trading does not reduce the need for preparation. Covered facilities should establish reliable emissions records, model allowance requirements, assess the eligibility of carbon credits, and incorporate future carbon costs into investment decisions. Exporters supplying the EU should separately strengthen product-level emissions data and coordinate CBAM verification and contractual responsibilities with their customers.