As Vietnam moves toward operating its domestic carbon market, large emitters are increasingly required to conduct greenhouse gas (GHG) inventories and comply with emission allowance obligations. However, confusion remains around carbon credits, allowances, trading rules, and GHG reporting requirements. Below are six common misconceptions.
Misconceptions About Carbon Credits and Emission Allowances
1. “Carbon credits and emission allowances are the same thing”
Hiểu lầm: Many people confuse these two concepts because both use the same unit of measurement: one tonne of carbon dioxide equivalent (tCO₂e).
Fact: These two types of carbon-market instruments are fundamentally different and are used for different purposes:
- Emission allowances: represent the amount of greenhouse gas emissions that an organization is permitted to emit within a specified period. During the pilot phase of Vietnam’s carbon market (2025–2026), allowances under the code VN2025 were allocated to 110 facilities pursuant to Decision No. 699/QĐ-BNNMT dated 27 February 2026.
- Carbon credits: are certifications of emission reductions generated from mitigation activities, such as renewable energy projects. To be traded on the exchange, carbon credits must be issued under Vietnam’s domestic crediting mechanism or under Article 6.2 and Article 6.4 of the Paris Agreement.
Conclusion: Emission allowances are mandatory compliance instruments and are allocated only to the 110 designated facilities, whereas carbon credits may be generated voluntarily by entities implementing emission-reduction activities and may only be used to offset a limited portion of emission allowance obligations – up to 30%, in accordance with Decree No. 119/2025/NĐ-CP.
Misconceptions About the Regulations on Allowance Trading and Surrender
2. “Companies must surrender their emission allowances to the State before they can sell any surplus allowances”
Misconception: Companies are only entitled to trade emission allowances after they have fulfilled their surrender obligations. Companies may still hold this misconception because they are concerned that, after trading allowances on the exchange, they may no longer have enough allowances to surrender at the end of the compliance period.
Fact: Pursuant to Decree No. 06/2022/NĐ-CP (as amended by Decree No. 119/2025/NĐ-CP), emission allowances are tradable assets. At the end of the compliance period, companies are responsible for surrendering a sufficient number of allowances corresponding to their actual emissions.
In practice, companies are entitled to trade, buy, and sell the allowances held in their accounts immediately after the allowances are allocated, without having to wait until the surrender deadline. Notably, the trading infrastructure has been operational since 29th June 2026, and seven allowance transactions have already been successfully completed (at an average price of VND 134,000 per allowance, equivalent to USD 5.1). This provides clear evidence that companies are permitted to trade allowances before the surrender deadline.
3. “Proactively reducing production to sell allowances for profit without consequences”
Misconception: Some companies mistakenly believe that they can proactively reduce production to earn profits from allowance trading without any consequences because they do not fully understand the issue of allowance allocation.
Fact: From a legal perspective, there is currently no regulation strictly prohibiting a company from reducing its production, resulting in surplus allowances for sale. However, stopping production usually has a much greater financial impact than the potential profit that allowance trading may bring.
There is also one very important point: the current allowance allocation method is calculated by the Government based on historical data on production output over the three most recent years. If a facility intentionally (or passively) reduces production this year, in the next allocation period, the amount of allowances allocated to that facility will also be reduced correspondingly to the reduction in production output. When production recovers, the company will face a shortage and will have to use the very same “profit” earned previously to purchase additional allowances.
4. “The economy is generally difficult, so where would there be allowance-intensive demand, and who would sell or buy?”
Misconception: Because the economy is difficult, all facilities are short of allowances, resulting in there being no allowances available for trading.
Fact: In reality, the total amount of allowances is audited at the national level and applied to major emitting facilities (thermal power, cement, and iron and steel). Although the economic situation is difficult, not all sectors or all companies reduce their production output. Even within the same sector, there is always differentiation: some companies expand their scale and produce beyond capacity (leading to intensive use of allowances), while other companies reduce their production. Therefore, market liquidity and the demand for buying and selling always exist.
Misconceptions about greenhouse gas inventory obligations under Decision No. 42/2026/QĐ-TTg
5. “Facilities removed from Decision No. 42/2026/QĐ-TTg are exempt from conducting GHG inventories and surrendering allowances”
Misconception: Facilities that have been allocated allowances but are removed from the list under Decision No. 42/2026/QĐ-TTg no longer have obligations to conduct GHG inventories and surrender allowances.
Fact: This is a very dangerous misconception. Even if a facility is not listed in Decision No. 42/2026/QĐ-TTg (the Decision updating the list of emitting facilities), if the facility has already been allocated allowances under Decision No. 699/QĐ-BNNMT, it is still required to fully fulfil its obligations.
According to Article 2 of Decision No. 699/QĐ-BNNMT and Article 19 of Decree No. 119/2025/NĐ-CP, a facility that has been allocated allowances must surrender an amount of allowances at least equal to the results of its direct GHG inventory. Therefore, the GHG inventory results are the basis for the surrender of allowances, and facilities that have already been allocated allowances still need to conduct GHG inventories and have their GHG inventory reports verified.
6. Facilities newly added to Decision No. 42/2026/QĐ-TTg only need to conduct a GHG inventory for 2026
Misconception: Facilities newly added to Decision No. 42/2026/QĐ-TTg only need to conduct a GHG inventory for 2026. This misconception arises because Decision No. 42/2026/QĐ-TTg was issued in 2026, and these facilities had not previously received information, so they assume that they do not need to conduct a GHG inventory for 2025.
Fact: In practice, Decree No. 119/2025/NĐ-CP clearly stipulates that facility-level GHG inventory reports must be submitted every two years and must include the GHG inventory results for the two most recent years. Therefore, by the upcoming reporting deadline of 31 March 2027, facilities newly added to Decision No. 42/2026/QĐ-TTg must still fulfil their obligations to conduct GHG inventories and report GHG inventory results for both 2025 and 2026.
For more than 1,000 companies newly added to Decision No. 42/2026/QĐ-TTg, having to conduct a GHG inventory for the first time for two consecutive years (2025 and 2026) and submit it before the reporting deadline of 31 March 2027 represents a major data management challenge.
To help emitting facilities overcome this barrier, ESGreen provides EcoTrack – a comprehensive GHG emissions management software system. EcoTrack supports the automation of calculation steps, data digitalization, and the generation of reports in the standard formats required by regulatory authorities, helping companies establish a solid technical framework from the very beginning.
At present, ESGreen is implementing pilot programs to accompany companies during this important transition period.
Contact the ESGreen team today to receive detailed technical consultation, discuss trial arrangements, and develop the most suitable GHG inventory roadmap for your facility.
Phone: 0856 357 968
Email: contact@esgreen.vn
Address: 8th Floor, Diamond Flower Building, 48 Le Van Luong Street, Yen Hoa Ward, Hanoi, Vietnam
Website: https://esgreen.vn/