Vietnam Path Towards Domestic Carbon Trading and Exchange

Vietnam has recently unveiled plans to establish a domestic carbon trading scheme and carbon exchange by the end of the decade, as outlined in the country’s Law on Environmental Protection. The scheme aims to facilitate the management and trading of carbon credits, with the carbon exchange expected to be operational no later than 2028.

An integral part of Vietnam’s strategy is to link its domestic carbon trading scheme with international carbon markets. This aligns with the provisions of Article 6 of the Paris Agreement, which was a significant outcome of the COP26 conference held in Glasgow. The successful passing of Article 6 at COP26 establishes a foundation for international carbon trading and cooperation.

COP26 concluded with an agreement that begins to clarify the international framework for carbon trading. However, the extent of its effectiveness will depend on future decisions regarding the potential linkage of different carbon trading schemes and the regulation of voluntary offsets.

The United Nations has approved the rules governing carbon trading under the Paris Agreement, including the establishment of a framework for countries to collaborate in reducing emissions and meeting their nationally determined contributions (NDCs). Article 6 of the agreement allows countries to utilise credits from emissions reduction projects to support their climate objectives. It also sets up a central UN mechanism responsible for approving these credits.

Vietnam’s commitment to launching a domestic carbon trading scheme and exchange represents a significant step towards its climate goals. By creating a framework for carbon trading, Vietnam aims to incentivise emission reductions, drive investment in sustainable projects, and contribute to global efforts in combating climate change.

The successful implementation of a domestic carbon trading scheme and exchange will require robust regulations, monitoring mechanisms, and transparent market operations. Vietnam’s plans to link its scheme with international carbon markets demonstrate its commitment to aligning with global climate action and maximising the impact of its emission reduction efforts.

As Vietnam progresses toward the launch of its domestic carbon trading scheme and exchange, it will join a growing number of nations actively exploring market-based mechanisms to address climate challenges. By leveraging carbon trading and cooperation, countries like Vietnam can unlock economic opportunities, accelerate emission reductions, and move closer to achieving their climate targets under the Paris Agreement.

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