Overview

Description

Vietnam's national ETS is established under the "Law on Environmental Protection" and "Decree 06/2022/ND-CP", which provide the national framework for GHG mitigation, carbon markets, and monitoring, reporting, and verification. The design and institutional arrangements for the ETS were operationalized by "Decree 119/2025/ND-CP", which entered into force in August 2025. The Ministry of Agriculture and Environment (MAE) serves as the competent authority for allowance allocation, MRV oversight, and ETS administration. The ETS operates in a pilot phase covering 2025 to 2028, divided into two two-year periods. During the pilot, 110 facilities across three sectors are covered: 34 thermal power plants, 25 iron and steel facilities, and 51 cement producers. No numerical emissions threshold applies; facilities are covered if they appear on the approved list of major GHG-emitting facilities under Decree 06/2022 and Decree 119/2025. The system applies an intensity-based approach and allowances are allocated using sector-specific output-based benchmarks, and compliance obligations are determined ex post based on verified emissions. All allowances during the pilot phase are allocated for free. In February 2026, Decision 263/QD-TTg approved aggregate allowance budgets for the first pilot period. The allowance budgets are 243.1 MtCO?e for 2025 and 268.4 MtCO?e for 2026. Installation-level allocation will be finalized by MAE based on these budgets. From 2029, the ETS is expected to introduce auctioning, expand sectoral coverage, and pursue linkages under Article 6 cooperation.

Recent Developments

In August 2025, Decree 119/2025/ND-CP entered into force, operationalizing the Vietnam Pilot ETS design, clarifying allocation and compliance rules, and introducing flexibility provisions including banking, borrowing, and offset use. In January 2026, Decree 29/2026/ND-CP designated the Vietnam Stock Exchange as the authority responsible for carbon trading platform operations and strengthened provisions on market manipulation. In February 2026, Decision 263/QD-TTg approved aggregate GHG emission allowance budgets for the first pilot period. The domestic carbon trading platform is expected to become operational by the end of 2026.

Coverage

The Vietnam Pilot ETS covers thermal power plants, iron and steel production facilities, and cement producers.

Pricing and Allocation Approaches

Free allocation (Output-based benchmarking)

Compliance Approaches

Other

Relation to Other Compliance CPIs

The Vietnam ETS is not formally linked with any other system.

Covered Sectors

Electricity and heat

Industry