With its substantial forest coverage, Vietnam has the potential to generate major income from selling carbon credits.

Vietnam is considered to boast major potential in creating
carbon credits. According to the Department of Forestry and Forest Protection at
the Ministry of Agriculture and Environment (MAE), if the forest carbon credit market
is operated smoothly, Vietnam could earn hundreds of millions of dollars each year
from selling greenhouse gas emission reduction rights. “With a forested area of
over 14.8 million ha, forest protection and development is not only an ecological
conservation task but also a basis for mobilizing financial resources from domestic
and foreign partners,” Mr. Tran Quang Bao, Department Director, told a consultation
workshop on a draft decree regulating forest carbon sequestration and storage services
held in mid-August in Hanoi.

New legal framework

According to MAE, Vietnam’s forests have the potential to generate significant
revenues from the sale of carbon credits, developing attractive eco-tourism areas,
and sustainably exploiting forest products. In 2022, the government issued Decree
No. 107/2022/ND-CP on piloting the transfer of emission reduction results and financial
management of greenhouse gas emission reduction payment agreements in the country’s
north-central region, which was implemented from the date of signing and is
being piloted until December 31, 2026.

After nearly three years of the pilot, results confirm that this represents
a new source of funding for investment in long-term forest protection and development.

However, in the implementation process, there are still some difficulties and
issues regarding the use of funds from the transfer of emission reduction results
by forest owners that are organizations, as well as in determining beneficiaries.
In particular, there are no specific regulations on payment levels and costs for
activities related to essential tasks such as measuring, reporting, and evaluating
emission reduction results, as well as checking and monitoring forest carbon. “Vietnam
still lacks specific regulations on forest carbon absorption and storage, carbon
credit pricing, and transparent and effective trading mechanisms in the market,”
Mr. Bao said.

In addition, a number of international partners are actively cooperating with
MAE to discuss and sign carbon credit exchange agreements. Several localities have
been approved by the Prime Minister to pilot the development of projects for forest
carbon absorption and storage services, but so far they have not been implemented
due to the absence of a nationwide legal framework for the exchange and transfer
of emission reduction results and forest carbon credits.

MAE therefore drafted a decree on forest carbon sequestration and storage services,
the draft of which establishes a legal framework for forest carbon sequestration
and storage services, and clearly defines principles, conditions, subjects, pricing
procedures, and the granting and trading of carbon credits. Suppliers include forest
owners, Commune People’s Committees, and organizations assigned to manage forests,
while users are emission facilities and domestic and foreign organizations or individuals.

According to experts, the most notable change is the introduction of the first
standardized pricing process. While the previous decree it will replace only allowed
the ministry to issue pricing methods and Provincial People’s Committees to develop
price lists, the latest version adds a roadmap: proposing starting prices, checking
documents, approving, publicizing for at least 30 days, negotiating, signing contracts,
or listing on the exchange. The processing time for each stage is clearly defined,
ranging from five to 45 working days. Project publicizing must also clearly state
the location, area, starting price, participation conditions, and negotiation timeframe.

Experts believe that the issuance of the decree will overcome the current
“spontaneous” approach to implementing forest carbon projects, creating a unified
legal framework for localities and businesses to confidently participate. In particular,
a transparent benefit-sharing mechanism between the State, businesses, and communities
will be key to ensuring consensus.

“The draft decree is designed to provide maximum support to forest owners,
especially in simplifying procedures and facilitating participation in the carbon
market,” said Mr. Bao. “Once issued, it will ‘untie’ carbon credit owners, allowing
them to be more proactive in exchanging, transferring, or offsetting credits, not
only domestically but also with international partners.”

Mr. Pham Hong Luong, Deputy Director of the Department of Forestry and Forest
Protection, added that many businesses are currently pursuing sustainable development
strategies through the application of ESG (environmental, social, and governance)
criteria. “Recognizing this trend, the draft provides specific regulations, clarifying
the role and participation mechanism of businesses in providing forest carbon sequestration
and storage services,” he explained. “This not only meets the growing demand of
businesses to contribute to reducing greenhouse gas emissions but also creates conditions
for businesses to be recognized for their positive contributions to climate commitments.”

Boosting links

In parallel with the draft decree on forest carbon, Decree No. 119/2025/ND-CP,
which took effect in August, also created a legal foundation for the domestic carbon
market. Under the associated roadmap, Vietnam will pilot a carbon trading floor
from 2025 to 2028 before officially putting it into full operation in 2029.

Experts told the workshop that connections between forest carbon credits and
the trading floor will create stable “output”, helping businesses have tools to
offset emissions while expanding revenue sources for forest owners.

Globally, the price of credits in Emissions Trading Systems (ETS) ranges from
$0.5 per tCO₂e in Massachusetts, US, to nearly $100 in the UK. If operated transparently,
Vietnam’s forest carbon credits would become a significant financial resource,
easing reliance on the State budget or international aid. “Revenue from carbon credit
exchange and transfer will become an economic incentive for people to protect forests,”
Mr. Bao believes. “This payment not only helps forest owners reinvest in forest
protection and development but also opens up new livelihood opportunities for local
communities.”

Experience from the Emission Reductions Payment Agreement (ERPA) in Vietnam’s
north-central region reveals the huge financial potential of the sector. In 2020,
the Ministry of Agriculture and Rural Development (now MAE) signed an agreement
with the World Bank (WB) to transfer more than 10.3 million tons of CO₂, bringing
in $51.5 million, which has been disbursed to six provinces in the north-central
region. Some 86.9 per cent of total funds were paid directly to forest owners and
communities, of which households and individuals received about 16.9 per cent and
communities 11.5 per cent. This method of allocation not only helps improve people’s
lives but also raises awareness about forest protection, which demonstrates that
forest carbon credits can fully become a sustainable source of income if there is
a transparent legal corridor.

MAE is urgently completing the draft decree on forest carbon sequestration
and storage services to submit to the government in September after completing the
final round of consultations. “This is a combination of conservation and development:
both protecting the forests – the ‘green lungs’ of the country – and opening a new
door to climate finance, linking economic benefits with environmental responsibility,”
Mr. Bao said. “Vietnam will then move closer to its goal of net-zero emissions by
2050.”

VET-An Chi