Vietnam’s commitment to “Net Zero by 2050” has transitioned from strategic planning to strict regulatory enforcement. With the enactment of Decree 119/2025/ND-CP (effective from August 1, 2025), which replaces the former Decree 06/2022/ND-CP, the legal framework for the domestic carbon market has been officially finalized.
This new Decree solidifies the rules for the “Cap-and-Trade” system and sets the definitive timeline for the pilot trading phase. For enterprises in energy, manufacturing, and construction, carbon emissions have legally transformed from an environmental metric into a financial asset (or liability).
The following analysis outlines the legal landscape and compliance roadmap for the 2025–2028 period under the new regulation.
1. The New Legal Framework: Decree 119/2025/ND-CP
Decree 119/2025/ND-CP serves as the primary legal instrument governing the reduction of Greenhouse Gas (GHG) emissions and the protection of the ozone layer. It refines the market mechanisms previously outlined, offering clearer guidance on quota allocation and trading protocols.
Core Mechanism: Cap-and-Trade
- The Cap (Allocated Quota): The State (via the Ministry of Natural Resources and Environment – MONRE) allocates a specific GHG emission quota to major emitters for a compliance period.
- The Trade:
- Enterprises emitting below their quota can sell the surplus as carbon credits or allowances.
- Enterprises emitting above their quota must purchase credits to offset the excess.
- New Enforcement: Decree 119/2025 introduces stricter administrative penalties for exceeding quotas without offsetting, effective immediately from the pilot phase.
2. The Implementation Roadmap (Updated)
Decree 119/2025/ND-CP confirms the operational timeline, pushing for immediate pilot implementation.
Phase 1: Pilot Operation (Late 2025 – 2027)
This “Sandbox” period is officially activated upon the Decree’s effect (August 1, 2025).
- Regulatory Focus: Testing the trading infrastructure, clearing, and settlement systems managed by the Stock Exchange and the Vietnam Securities Depository.
- Participants: Mandatory participation for large emitters listed in the “List of Establishments Required to Conduct GHG Inventory” (updated annually by the Prime Minister). Voluntary participation is encouraged for other entities.
- Objective: To calibrate the allocation of quotas and ensure the integrity of the MRV (Measurement, Reporting, Verification) system before full-scale launch.
Phase 2: Official Operation (From 2028)
- Full Launch: The official Domestic Carbon Trade Exchange will go live.
- International Linkage: Mechanisms to connect with international carbon markets (under Article 6 of the Paris Agreement) will be operationalized, allowing for the cross-border trading of high-quality credits (such as JCM).
3. Allowable Commodities on the Exchange
Decree 119/2025/ND-CP clearly defines the assets tradable on the domestic market:
- GHG Emission Quotas (Allowances): The right to emit a specific volume of CO2e allocated by the Government.
- Carbon Credits: Generated from domestic projects (e.g., renewable energy, afforestation, methane recovery, energy efficiency).
- Standardization: To be traded, credits must be certified under the Vietnam National Standard (TCVN) or international standards recognized by MONRE (e.g., Gold Standard, VCS).
- Crucial Update: The new Decree provides specific guidelines on the conversion of international credits for domestic use.
4. Strategic Implications for Enterprises
The enforcement of Decree 119/2025/ND-CP creates immediate compliance obligations:
A. Mandatory Inventory & Reporting
- Strict Deadlines: Facilities must submit their inventory reports according to the strict timelines set in the Decree. Failure to report accurate data is now subject to higher penalties.
- MRV Compliance: Enterprises must establish internal MRV systems to track emissions in real-time.
B. Financial Planning for “Carbon Liability”
- Budgeting: High emitters must budget for the purchase of credits if they forecast exceeding their cap.
- Asset Management: Companies with surplus quotas or green projects should view their carbon credits as liquid assets to be managed by the treasury or finance department, not just the EHS department.
C. CBAM & International Trade
- Participation in the domestic market under Decree 119/2025 helps exporters provide evidence of “carbon pricing” paid in Vietnam. This is critical for deducting levies under the EU’s Carbon Border Adjustment Mechanism (CBAM), thereby maintaining export competitiveness.
5. Conclusion
The pilot period (2025–2027) under Decree 119/2025/ND-CP is not a drill; it is the commencement of a regulated market.
- For High Emitters: The cost of carbon is now a line item on the balance sheet.
- For Green Investors: The legal pathway to monetize emission reductions is now open and protected by law.
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Nguyen Hien Mai