Government Decree No. 29/2026/ND-CP, which took effect on January 19, 2026, has moved Vietnam’s domestic carbon market from the stage of outlining a roadmap to establishing an operational regulatory framework. Unlike earlier policy-oriented instruments such as Decree No. 06/2022/ND-CP or Decree No. 119/2025/ND-CP, this new decree concretizes the “rules of the game” for the pilot phase through the end of 2028 by clearly delineating the powers and responsibilities of each stakeholder, while firmly establishing principles for supervision and systemic risk management.

One notable feature of the operating model is the use of existing securities market technical infrastructure, while explicitly not classifying carbon commodities as securities. Accordingly, market discipline and risk governance are placed at the forefront. This cautious approach may mean that trading activity is not particularly vibrant in the early stages, but it provides an essential foundation for ensuring transparency before the market transitions to full-scale operation from 2029 onward. A three-tier market structure built on national data The core significance of Decree No. 29/2026/ND-CP (Decree 29) lies not merely in the establishment of a trading platform, but in shaping a market structure based on securities market operating principles such as centralized trading, clearing and settlement, and original data management. From its regulatory scope, the decree establishes a closed operational chain covering registration, code issuance, transfer of ownership, execution of transactions, and settlement for two specific types of commodities: emission allowances and carbon credits. Technically, the market operates under a three-tier model with tightly interconnected data flows. Specifically, the National Registry System managed by the Ministry of Agriculture and Environment serves as the record of ownership for underlying assets. Connected to this system is the Hanoi Stock Exchange (HNX), which performs the function of order matching and price discovery, while the Vietnam Securities Depository and Clearing Corporation (VSDC) carries out custody and post-trade settlement operations. This operating mechanism is designed around the principle of closed-loop, same-day data synchronization. Information on commodity codes, once issued by the Ministry of Agriculture and Environment via the National Registry System, is transmitted to the market operators to facilitate trading. Conversely, end-of-day settlement results from VSDC are fed back into the registry. This two-way circulation process ensures that all changes in ownership are accurately and promptly recorded in the source data, fully aligned with actual trading outcomes. Closely tied to this operating model is a clear allocation of management and supervisory responsibilities. The Ministry of Agriculture and Environment is responsible for the accuracy of the commodities and input data, while HNX and VSDC are tasked with organizing trading activities and ensuring settlement safety. In terms of supervision, the Vietnam Stock Exchange (VNX) plays a disciplinary role by issuing regulations and overseeing the activities of market members. This design establishes a risk control mechanism similar to that of the securities market, but tailored to the specific characteristics of the carbon market. Regarding market participants and commodities, Decree 29 inherits the fundamental principles of environmental law as well as Decree No. 06/2022. Accordingly, market members include facilities subject to greenhouse gas inventory requirements and organizations participating in carbon credit exchange and offset mechanisms. Trading units are also standardized, with each emission allowance or carbon credit corresponding to one metric ton of CO₂ equivalent. From an overall market architecture perspective, policy orientation focuses on data standardization and traceability. While liquidity will require time to develop, the integrity of the National Registry System is identified as a prerequisite that must be ensured from the outset, thereby establishing trust and a reliable pricing foundation for the broader economy. Ring-fencing and risk control Beyond the operating architecture, the risk governance provisions in Decree 29 play a critical role in preventing financial risks in a newly formed market. Regulators have adopted the operational discipline of the securities market while imposing even stricter requirements on collateral and settlement to limit contagion risks during the pilot phase. A foundational principle is the ring-fencing mechanism between carbon credit trading and other financial activities. Although investors use a single trading account at a depository member, the technical system is required to separately account for and track these two asset streams. This rule eliminates the possibility of cross-netting or using emission allowances or carbon credits as collateral for conventional securities transactions, thereby confining risks within each specific asset class. In parallel, Decree 29 applies strict settlement risk controls through a 100% pre-funding requirement. Buyers must have sufficient funds and sellers must possess sufficient allowances or credits at the time an order is placed. As a result, high-risk leveraged activities such as margin trading or short selling are prohibited. This policy orientation underscores the priority placed on market stability as enterprises begin to adapt to measurement-recording-valuation (MRV) processes, even though it may constrain liquidity in the short term. At the settlement stage, system safety continues to be emphasized, as Article 15 establishes the principle of delivery versus payment (DvP), with transactions completed on a same-day basis (T+0). Unlike the central counterparty (CCP) model or the multi-day settlement cycles of the equity market, this real-time settlement mechanism significantly reduces counterparty and overnight risks, while simultaneously imposing high requirements for seamless connectivity between trading infrastructure and the settlement bank. To ensure the finality of the real-time settlement system, the post-trade error-handling provisions set out in Articles 16 and 17 prioritize the rejection of ineligible transactions rather than the application of ex-post correction mechanisms. Accordingly, transactions affected by technical failures, incorrect account information, or insufficient collateral will be denied execution. This approach reinforces financial discipline, ensuring that every successful transaction accurately reflects the actual capacity of the participating parties. At the same time, the new legal framework strengthens market discipline through strict sanctions against price manipulation, the dissemination of misleading information, or attempts to profit from system incidents. Taken together, these measures demonstrate that the objective of Decree 29 is to build a transparent operating platform with standardized and accurate data, laying the groundwork for sustainable development while containing systemic risks from the outset. Building infrastructure and an operational roadmap While the provisions on market design and risk governance reflect a comprehensive market-building mindset, the sections on infrastructure and roadmap in Decree 29 focus on addressing concrete operational issues related to service providers and costs. In terms of technical infrastructure, the decree remains consistent with the policy of leveraging the existing securities market system. Under this model, HNX acts as the market operator, VSDC performs custody and settlement functions, while VNX and the State Securities Commission are responsible for supervision. A critical link in the chain is the securities companies, which serve as intermediaries providing account-opening services and order execution. This agency-based mechanism allows the market to inherit standardized risk management processes, but also requires financial institutions to enhance their operational capacity regarding carbon credit commodities and MRV (measurement, reporting, and verification) processes to ensure smooth trading operations. With respect to financial infrastructure, the criteria for selecting settlement banks are strictly regulated under the supervision of the State Securities Commission. During the pilot phase through the end of 2028, the market will operate with a single settlement bank to standardize connectivity and control risks. Expansion of the banking network will be considered from 2029 onward based on actual demand. This centralized model requires robust business continuity and disaster recovery arrangements to be put in place to prevent operational disruptions as trading volumes increase. Regarding the financial mechanism, regulators have signaled a supportive stance by stipulating that VSDC, VNX, and HNX will not charge transaction or custody service fees throughout the pilot period. This means that enterprises’ cost focus during this stage will shift toward compliance activities, including MRV processes and emissions data management. From January 1, 2029, a service pricing mechanism will officially be introduced to ensure the long-term financial sustainability of the market operators. Accordingly, the development roadmap is divided into two phases with a clear emphasis on stability. The pilot phase through 2028 focuses on risk containment via stringent margin and settlement requirements. From 2029 onward, market elements will be gradually expanded through consideration of additional settlement banks and the introduction of service fees, marking the transition from a foundation-building phase to full market-based operation. Conclusion With effect on January 19, 2026, Decree 29 is regarded as the legal framework that shapes a complete operating regime for Vietnam’s carbon trading exchange. The decree not only establishes a three-tier market structure anchored in the national data axis, but also enforces trading discipline and outlines a cautious pilot roadmap to standardize processes before scaling up. However, the emergence of a substantive market requires the convergence of standardized commodities, investor confidence, and smooth capital flows. While the current design places strong emphasis on system safety through asset segregation and settlement controls, effective implementation will depend on the pace of MRV infrastructure development and the quality of national registry data. More importantly, the business community must shift its mindset to view carbon credits as a variable that directly affects competitiveness, rather than merely a compliance obligation. If the pilot phase succeeds in establishing transparent price benchmarks, 2029 will mark a critical transition from a risk-control regime to a fully functioning market. At that point, carbon credit price signals will serve as an essential reference for investment decisions and green growth strategies across the economy. (*) Institute of International and Comparative Law, University of Economics and Law, VNU-HCMC (**) University of Economics and Law, VNU-HCMC