Vietnam to Allow 30% Offset Use in ETS Pilot starting 2025

Vietnam will pilot its national emissions trading scheme from 2025 to 2027, allowing covered entities to use carbon offsets for up to 30% of their compliance obligations, according to a government decree released Monday.

Decree 119/2025/ND-CP, effective Aug. 1, amends earlier climate regulation Decree 06/2022/ND-CP and outlines key parameters for the pilot phase.

The pilot will initially cover the thermal power, cement and steel sectors, representing around 40% of the country’s total greenhouse gas emissions from approximately 150 facilities. Additional sectors are expected to be phased in between 2027 and 2030, with annual reviews to update the scope of coverage.

Allowance allocation will be based on emissions intensity and distributed freely during the pilot period. Auctioning of allowances is scheduled to begin from 2029. Allocation will be conducted on a biennial basis, with deadlines set for Dec. 31, 2025 (2025–2026 period), June 30, 2027 (2027–2028), and June 30, 2029 (2029–2030).

To support the pilot rollout, provincial authorities are required to complete greenhouse gas inventories by June 30. The government also aims to trial a centralized carbon exchange platform — managed by the Ministry of Natural Resources and Environment — before the end of 2027, with full operations planned from 2029.

As previously reported by OPIS, Vietnam’s carbon market pilot was initially scheduled to run from June 2025 through the end of 2028, with full-scale trading expected to begin in 2029 on the Hanoi Stock Exchange. However, no trading has occurred so far.

The decree also clarifies for the first time that entities may use eligible offsets from domestic programs and international units that comply with Articles 6.2 or 6.4 of the Paris Agreement. The system permits borrowing of up to 15% of future-period allowances and allows banking of surplus allowances through 2030.

Vietnam has so far signed three bilateral agreements for cooperation under Article 6.2 with Japan, Singapore and South Korea, according to the UN database.

–Reporting by Lujia Wang, lwang@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com