FOREST CARBON CREDITS IN VIETNAM: OPPORTUNITIES, CHALLENGES, AND KEY LEGAL ISSUES BUSINESSES SHOULD KNOW

In the context of Vietnam’s commitment to achieving net-zero emissions by 2050, the carbon market is gradually becoming an important tool for promoting greenhouse gas emission reductions and green economic development. One area receiving particular attention is forest carbon sequestration and storage services.

To establish a legal framework for the development and operation of the forest carbon market, the Government has promulgated Decree No. 180/2026/ND-CP on Forest Carbon Sequestration and Storage Services. Effective from 15 July 2026, the Decree is expected to create new opportunities for forest owners, businesses, and investors to participate in Vietnam’s carbon credit market.

1. What Are Forest Carbon Sequestration and Storage Services?

Forests have the ability to absorb carbon dioxide (CO₂) from the atmosphere through photosynthesis and store carbon within forest biomass. This carbon sequestration and storage capacity generates environmental value that can be quantified as greenhouse gas emission reductions or forest carbon credits.

Under Decree No. 180/2026/ND-CP, forest carbon sequestration and storage services refer to the provision of greenhouse gas emission reduction outcomes and forest carbon credits to organizations and individuals seeking to offset or mitigate their emissions.

2. How Are Forest Carbon Projects Developed?

The Decree permits the development of forest carbon projects through various forestry activities, including:

• Reducing deforestation and forest degradation;
• Conserving and enhancing forest carbon stocks;
• Sustainable forest management under REDD+ mechanisms;
• Afforestation and assisted natural regeneration;
• Forest enrichment and restoration;
• Increasing productivity and extending the rotation cycle of planted forests; and
• Agroforestry systems and dispersed tree planting.

Emission reductions or additional carbon sequestration achieved through these activities shall be measured in accordance with domestic or international forest carbon standards and converted into tons of CO₂ or CO₂ equivalent (tCO₂e) for the issuance of carbon credits.

3. Who May Participate in the Forest Carbon Market?
The Decree classifies participants into two principal categories: service providers and service users.

Service Providers include:

• Forest owners;
• Commune-level People’s Committees assigned to manage forests; and
• Other organizations assigned to manage forests in accordance with law.

Service Users include:

First, greenhouse gas-emitting facilities that are allocated emission quotas and require emission reduction outcomes or forest carbon credits to offset emissions exceeding their allocated quotas.

Second, domestic and foreign organizations and individuals seeking to use forest carbon credits, including those not subject to emission quota allocation.

To participate as a service user, an enterprise must legally operate in Vietnam, comply with contractual obligations or carbon exchange rules, and fulfill all applicable financial obligations prescribed by law.

4. Forest Carbon Project Development and Carbon Credit Issuance Process

The process for generating forest carbon credits generally consists of three stages.

Step 1: Project Development

Forest owners may independently develop projects or cooperate with specialized organizations and enterprises to develop projects under domestic or international forest carbon standards.

Step 2: Project Registration

The registration dossier includes an application form and a project document prepared in accordance with prescribed templates.

Approval authority is allocated as follows:

• The Ministry of Agriculture and Environment approves inter-provincial projects; and
• Provincial People’s Committees approve projects implemented within a single province.

Step 3: Issuance of Forest Carbon Credits

After project approval and verification of emission reduction results, the competent authority will certify the volume of emission reductions and issue the corresponding forest carbon credits.

This certification serves as the legal basis for trading or transferring carbon credits to interested organizations and individuals.

5. Trading and Payment Mechanisms
The Decree permits forest carbon credit transactions through two mechanisms.

Direct Payment: Service providers and service users may transact directly through contracts or through carbon exchanges.

Indirect Payment: Payments may be made through an entrusted mechanism administered by the Forest Protection and Development Fund.

Regarding pricing, transfer prices may be determined through negotiation or market mechanisms:

• Domestic transactions must be settled in Vietnamese Dong (VND); and
• International transfers may be settled in foreign currencies in accordance with applicable laws.

6. Management and Use of Revenue from Forest Carbon Credits

Revenue generated from forest carbon sequestration and storage services is managed according to the applicable payment mechanism.

For direct transactions, after fulfilling all financial obligations to the State, service providers are entitled to determine the use of their revenue.

For entrusted payment mechanisms, funds are managed through:

• The Vietnam Forest Protection and Development Fund; and
• Provincial Forest Protection and Development Funds.

The Vietnam Forest Protection and Development Fund receives and coordinates financial resources for programs managed by the Ministry of Agriculture and Environment, while provincial funds directly distribute payments to beneficiaries at the local level.

7. Key Implications for Businesses

Decree No. 180/2026/ND-CP not only creates additional financial resources for forest protection and development but also opens a new market for carbon credits in Vietnam.

For forest owners and forestry investors, the Decree provides an opportunity to convert the environmental value of forests into a legitimate and sustainable source of income.

For greenhouse gas-emitting enterprises, forest carbon credits will become an important tool for implementing emission reduction strategies and meeting ESG, Net Zero, and broader sustainability commitments.

As Vietnam’s carbon market becomes fully operational, forest carbon projects are expected to become a significant source of carbon credits, contributing to green economic growth and sustainable forest conservation.

8. Midland & Partners’ Legal Advisory Services for Forest Carbon Projects and Carbon Markets
As Vietnam progressively develops its carbon market and strengthens its legal framework on greenhouse gas emission reductions, the development of forest carbon projects requires not only technical and environmental expertise but also strict compliance with regulations governing forestry, investment, land use, environmental protection, carbon credit transactions, and emission reduction transfers.

Midland & Partners is one of Vietnam’s law firms with extensive experience in investment, environmental law, ESG, climate change, and sustainable development.

We provide comprehensive legal advisory services to forest owners, businesses, investors, and domestic and international organizations participating in forest carbon project development in Vietnam.

Our services include:

• Legal feasibility assessments for forest carbon projects;
• Review of land use rights and forest resource rights;
• Structuring cooperation arrangements between forest owners and investors;
• Advising on forest carbon project registration;
• Assisting with the negotiation and drafting of emission reduction transfer agreements and carbon credit transaction documents;
• Advising on greenhouse gas compliance obligations, ESG requirements, and Net Zero roadmaps; and
• Assisting in the resolution of disputes arising during project implementation.

With extensive experience advising foreign investors, multinational corporations, international organizations, and sustainable development projects in Vietnam, Midland & Partners is committed to supporting clients in developing efficient, transparent, and legally compliant forest carbon projects.

Contact Information:

Midland & Partners Law Firm
Email: hoaison@midland-partners.vn
Website: www.midland-partners.vn
Hotline: +84 904 882 558

By Le Linh Ngoc, Paralegal, Midland & Partners