On 19/1, the Government issued Decree 29, establishing a domestic carbon exchange. This new regulation allows for the trading of two types of instruments: greenhouse gas quotas and carbon credits.
Entities required to participate in quota trading include greenhouse gas emitting facilities that conduct annual inventories, such as thermal power plants, steel mills, and cement factories.
The trading mechanism mirrors that of a stock market but incorporates specific features. Businesses engaging in carbon trading must open dedicated accounts with securities companies, distinct from their other financial trading accounts. The Hanoi Stock Exchange (HNX) will publish daily trading results.
A key distinction from derivatives or spot securities markets is the immediate settlement of payments and credit transfers for each transaction, bypassing a central clearing mechanism (CCP).
A quota represents the amount of CO2-equivalent greenhouse gas a facility is permitted to emit within one year by the regulatory authority. Should a business exceed its allocated emissions, it must purchase the surplus from other entities on the exchange.
A carbon credit is a tradable license or certificate, granting its holder the right to emit one ton of CO2 or another specified greenhouse gas.
Securities companies operating within this system are responsible for verifying clients' cash and asset balances (quotas, credits) before order placement. Monthly, these firms must provide businesses with cash and custody account statements.
Banks chosen for transaction settlement must possess a minimum charter capital of VND 10,000 billion and demonstrate profitability over the two most recent years. These banks are tasked with meticulously managing businesses' deposit account balances for quota and credit transaction settlements, using information supplied by securities companies to ensure accurate settlement.
Vietnam will operate its domestic carbon credit exchange on a pilot basis until 2028, offering fee-free services during this period. Service fees will be introduced from 2029, upon the exchange's official launch.
Thuy Truong
