The Vietnam Economic News held an interview with Dang Thi Hong Hanh, Co-founder and Director of the Energy and Environment Consultancy Joint Stock Company (VNEEC), to discuss the objectives of the pilot phase, the level of enterprise readiness, and the measures needed to ensure that the carbon market serves as a driver for strengthening the competitiveness of Vietnamese enterprises, rather than merely a compliance obligation.

 Pilot carbon market: Operating and refining in parallel

- Vietnam officially commenced pilot operation of its carbon market on 29 June. In your view, what is the overarching objective of this pilot phase? What elements will be tested in preparation for full market operation from 2029?

Dang Thi Hong Hanh: As its name suggests, this is first and foremost a pilot phase, designed to allow Viet Nam to test the overall policy design and operational capacity of the carbon market under real-world conditions. For regulatory authorities, this phase provides an opportunity to assess the suitability of the allowance allocation method, the national registry system, trading, depository and settlement mechanisms, market oversight, and, in particular, the coordination among environmental and financial regulators and the entities operating the trading platform.

For enterprises, this is the first time that greenhouse gas emissions truly carry a “price.” Enterprises will not only conduct GHG inventories and comply with allocated allowances, but also learn how to make decisions based on market signals: whether to invest in emission reduction measures, trade allowances, use eligible carbon credits for offsetting, or combine multiple solutions to optimize costs.

The launch of the carbon market has also reinforced the understanding among enterprises and the public that the net-zero emissions target is no longer merely a long-term commitment, but is being translated into concrete policy instruments and market-based mechanisms.

In my view, the most important value of the pilot phase does not lie simply in “opening the trading platform,” but in creating a controlled learning environment for both public authorities and enterprises. If operated effectively, the carbon market will become an instrument that enables Vietnam to achieve its emission reduction targets at a lower cost to society as a whole, while minimizing impacts on the competitiveness of the economy.

Are Industry and Trade enterprises ready?

- Among the 92 enterprises participating in the initial phase, close to half operate in the thermal power and steel sectors, which fall under the management of the Ministry of Industry and Trade. How do you assess the readiness of this group of enterprises?

Dang Thi Hong Hanh: Large-emitting enterprises in the thermal power and steel sectors are included in the coverage of the Emissions Trading System (ETS), given that these emission-intensive sectors account for around 30% of national GHG emissions and thus play a critical role in achieving Vietnam’s emission reduction targets. Over the past two to three years, more and moreenterprises have gradually become familiar with the new obligation to conduct greenhouse gas inventories and report GHG emissions. However, this is not a conventional environmental report.

Many emission parameters are not measured directly, but calculated based on activity data, fuel and raw material consumption, technology, and production outputs. Enterprises therefore need to collect data inputs from multiple departments, establish internal procedures, develop new technical capacities, and allocate the necessary financial resources for implementation.

The fact that 92 enterprises have completed GHG inventories and reported emissions data for the 2022 - 2024 period provides an important foundation for allowance allocation and market participation. However, readiness levels remain uneven. Many enterprises have so far only reached the stage of “preparing reports required for compliance purposes,” while participation in the carbon market demands more advanced capacities: understanding their own emissions profile and conducting accurate GHG inventories, identifying key sources of emission reductions, assessing abatement costs, managing allowances as an asset, and developing an appropriate trading strategy.

In other words, the basic requirements are now in place. However, to participate in the market proactively, enterprises need to shift from an administrative compliance mindset to one of carbon asset management and cost optimization.

Enterprises need to shift from compliance to carbon management

- Following the launch of the market, what should enterprises continue to do during the 2026 - 2027 period? In your view, what should be the measure of success for the pilot phase?

Dang Thi Hong Hanh: The allocation of allowances and the launch of the carbon trading platform are only the starting point. The more important phase is the process through which enterprises manage their allowances throughout the compliance period until fulfilling their obligation to surrender allowances.

During 2026 - 2027, enterprises need to undertake several tasks in parallel. First, they should continue to improve the quality of their GHG inventories, standardize and digitalize activity data, and establish a continuous and reliable system for data archiving and updating.

Second, they should assess the emission reduction potential and abatement costs of production processes and activities, in order to determine whether to invest in technology, improve operations, or use market-based instruments to meet compliance obligations.

Third, to ensure effective transactions, enterprises should establish internal governance mechanisms for allowances and carbon credits: who is responsible, when transactions should be made, what price thresholds are acceptable, and which risks need to be managed.

Fourth, they should actively participate in the trading platform to accumulate market experience, rather than waiting until the end of the compliance period to address their compliance obligations.

The measure of success should also be viewed from both sides. For governmental authorities, success could mean that the system operates safely, data are consistent, enterprises comply with their obligations, the market has adequate liquidity, and carbon prices begin to send signals for investment in emission reduction. For enterprises, the core measure of success is timely compliance at the lowest possible cost, while turning carbon requirements into a driver for technological improvement, better governance, and stronger competitiveness.

- After nearly 18 months of piloting, what outcomes is Vietnam expected to achieve before the carbon market enters full operation from 2029?

Dang Thi Hong Hanh: Following the pilot phase, it is expected that Vietnam will gather sufficient practical evidence to refine and improve the market design for full operation.

This includes ensuring that the registry, trading, depository and settlement systems operate stably; data on allowances and carbon credits are managed in a consistent and transparent manner; the coordination mechanism among related governmental authorities and market operators workssmoothly in reality; enterprises properly fulfil their compliance obligations; and regulations on market supervision, information disclosure, violation handling and risk management are further established and refined based on practical experience.

Another important objective is to strengthen the ability of Vietnamese enterprises to integrate into international markets.

At present, the European Union’s Carbon Border Adjustment Mechanism (CBAM) and future similar policies are making carbon emissions a factor of competitiveness in international trade. Exporters in six sectors, including iron and steel and cement, are required to demonstrate the emissions embedded in their products, ensure data transparency, and, in many cases, bear carbon costs if the producing country does not have an appropriate carbon pricing mechanism in place.

If well designed, the domestic carbon market will not only serve domestic compliance purposes, but also help Viet Nam respond more proactively to global carbon policies, while keeping carbon market revenues within the country for reinvestment in low-emission and green economy transition.

At the same time, compliance with domestic requirements on GHG inventory, reporting and verification will also help enterprises improve their knowledge, data capacity and practical understanding of carbon emissions across their production chains. Enterprises that prepare early in terms of data, technology and carbon management will have a clearer advantage in international supply chains.

- Thank you very much!

Since 2018, VNEEC has participated in background studies on carbon pricing under the World Bank-funded Partnership for Market Readiness (PMR), contributing to the recommendation that Viet Nam adopt an ETS. After the ETS was legally institutionalized under the 2020 Law on Environmental Protection, VNEEC continued to support the Ministry of Agriculture and Environment and the Ministry of Finance through technical advisory, policy analysis and capacity-building activities, with support from the Southeast Asia Energy Transition Partnership, hosted by UNOPS (ETP-UNOPS).

On the inauguration day of the carbon market, VNEEC also supported enterprises in assessing market conditions and making decisions on the first transactions on the carbon trading platform operated by Hanoi Stock Exchange.