Low liquidity risk for carbon credit trading

Carbon credit trading activities face the risk of low liquidity on the exchange during the pilot phase due to the majority of businesses prioritising internal emission reduction strategies, and the scarcity of emission quota supply.

- By Nguyen Kim

The Department of Climate Change (DCC) under the Ministry of Agriculture and Environment (MAE), on June 22, held a signing ceremony for six cooperation agreements to organise and operate a domestic carbon exchange.

The DCC on behalf of the MAE will sign agreements with the Vietnam Stock Exchange, the Vietnam Securities Depository and Clearing Corporation, and the Hanoi Stock Exchange. The other three agreements were inked between the same groups as well as BIDV. This was another step towards the launch of the domestic carbon market on June 29.

The agreements mark an important milestone in implementing a domestic carbon exchange, establishing a framework among regulators and market infrastructure operators to ensure a transparent, secure, and efficient market.

More than 100 production facilities will be subject to emission caps during the pilot phase. These include 34 thermal power plants, 51 cement manufacturers and 25 iron and steel producers, which combine Hoa Phat Group, Formosa, Vietnam Electricity, VICEM, and others. Together, they will be allocated a total emission quota of more than 243 million tonnes of CO2 equivalent for 2025 and nearly 268.4 million tonnes for 2026.