Navigating Net Zero: APAC Climate Guide - Vietnam

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These changes matter for business. ESG performance remains important for many global investors and trading partners. Reflecting this, Southeast Asian economies continue to develop taxonomies and policies that provide greater investment certainty and incentives. For investors, Vietnam’s shift towards sustainable finance and carbon pricing, and its revised energy policy, is opening opportunities in renewables, green infrastructure and climate-smart agriculture." - Michael Lawson, Mallesons Partner

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Carbon Markets | Green Financing | Energy Transition | Region Focus: Digital Transformation

Investment opportunities and challenges: Our Top 5

The evolving regulatory and corporate landscape

The Vietnamese government has made climate change a central pillar of its development strategy, recognising the country’s acute vulnerability to climate impacts and increasing GHG emissions. This is formalised in the National Strategy for Climate Change Until 2050 and reinforced through policies like carbon pricing and participation in international initiatives such as the Just Energy Transition Partnership (JETP), which mobilises significant international finance to support Vietnam’s green transition.

International standards are shaping governance

The adoption of climate principles and broader ESG standards is shaping corporate governance in Vietnam. As global investors and trade partners demand higher sustainability standards, Vietnamese companies are under growing pressure to align their governance frameworks with international climate and ESG expectations.

A regulatory evolution is driving companies to re-evaluate governance structures and prioritise transparency, ethical business conduct and sustainability reporting.

• The National Green Growth Strategy (2021–2030) aims to reduce GHG emissions, promote sustainable energy and enhance environmental protection.
• Circular No. 96/2020/TT-BTC of the Ministry of Finance requires public companies and companies with listed or publicly offered bonds to disclose ESG-related practices in their annual reports, including disclosures on greenhouse gas emissions, use of recycled materials, water and energy consumption, compliance with environmental protection regulations, employee-related policies, contributions to local communities, and green capital market activities.

Opening to foreign investment

Vietnam’s commitment to climate action and ESG integration is making the country more attractive to international investors, especially those with sustainability mandates. This is seen as reducing long-term investment risks and opening new opportunities in sectors such as renewable energy, green infrastructure and sustainable manufacturing.  

Tax breaks, preferential loans and land use incentives for green projects, as well as the piloting of a domestic carbon market, are designed to channel investment into climate-aligned sectors. The government is also encouraging private sector participation in large-scale infrastructure and energy projects, with frameworks like direct PPAs enabling corporate buyers to source renewable energy directly.

The transition to a green economy is still in its early stages. Regulatory clarity, especially around carbon markets, direct PPAs and ESG disclosure, needs further strengthening to bolster investor confidence. However, the direction of travel is clear, and ongoing reforms are expected to further integrate climate principles into corporate governance and investment decisions.

Key reforms

Sectoral decarbonisation targets

Vietnam’s 'National Strategy for Climate Change Until 2050' (2022) sets specific targets and prioritises clean energy, energy efficiency and novel technologies. It also mobilises financial resources to support climate adaptation.^[1]

Tougher environmental rules and a domestic carbon market

The Law on Environmental Protection (2020), which came into effect on 1 January 2022,  introduced stricter requirements for environmental impact assessments, GHG inventories^[2] and mandates for GHG emitters to develop and implement emission reduction plans. The law also allows for a domestic carbon market. The Extended Producer Responsibility Policy was introduced under this law and its guiding regulations^[3], requiring producers and importers to manage waste throughout a product’s lifecycle.

Making ESG and sustainability reporting mandatory

Circular No. 96/2020/TT-BTC (2021) requires public companies and companies with listed or publicly offered bonds to report on ESG and sustainability.

Sharpening focus on renewables in the power sector

The revised PDP8 covers 2021-2030, with an outlook to 2050.^[4] This places a stronger focus on expanding renewable energy. The adjustments are designed to underpin Vietnam’s ambitious economic objectives, including achieving 8% GDP growth in 2025 and sustaining double-digit growth from 2026 to 2030.

Green credit and bonds

The Law on Environmental Protection (2020) and Decree No. 08/2022/ND-CP of the Government provide the foundation for green credit and bonds, now supplemented by Vietnam’s official Green Taxonomy under Decision No. 21/2025/QD-TTg (effective August 2025), which sets environmental criteria and verification for ‘green’ projects.

• Banks financing green projects may access concessional funding, through state green-finance programmes and the Vietnam Environmental Protection Fund/other preferential credit lines, subject to eligibility.
• Green bond issuers may benefit from preferential service fees but must publish annual reports on use of proceeds and annual environmental impact reports for the financed projects. 

Overhauling the legal rules for electricity

The Electricity Law (2024), which came into effect on 1 February 2025, marks a major legal reform in Vietnam’s energy sector, replacing the 2004 framework. The law and its guiding regulations introduce key changes such as increased incentives for renewables, updated power planning principles, revised licensing and investment rules, and foster a more competitive power market. Transitional measures ensure that existing projects, contracts and licences remain governed by the previous regime, with pending applications also being processed under the old rules.

Introducing a national Green Taxonomy

Decision No. 21/2025/QD-TTg of the Prime Minister's ‘Regulation on Environmental Criteria and Verification of Investment Projects under the Green Taxonomy’ was issued on 4 July 2025 to set up Vietnam’s official Green Taxonomy. This is the official framework for classifying investment projects as ‘green’, effective since 22 August 2025.

Giving practical ESG reporting guidance

The State Securities Commission has worked with international partners to develop guidance aligned with international standards (for example, the Global Reporting Initiative and Task Force on Climate-Related Financial Disclosures).

• Sustainability Reporting Handbook for Vietnamese Companies (2013)
• Greenhouse Gas Emissions Reporting Guidebook (2023)
• ESG Implementation and Disclosure Handbook (2024)

There is also the ESG Legal Mapping Handbook (2024), issued by USAID and the Ministry of Planning and Investment of Vietnam.

Carbon market regulations on the cards

Various regulations have been issued to facilitate the implementation of Vietnam’s carbon credits trading market, including Decision No. 232/QD-TTg (2025) of the Prime Minister, Decree No. 119/2025/ND-CP, Decree No. 29/2026/ND-CP and Decree No. 112/2026/ND-CP of the Government on carbon market operations. Detailed rules are being issued to enable the full operation of the carbon exchange from 2029.[5]

Want to know more about the coming carbon market? Read the next section Carbon Markets for details

Vietnam is actively developing a domestic carbon market. Following the roadmap for a fully operational carbon market by 2029 under Decision No. 232/QD-TTg, the regulatory framework has been progressively developed through a series of key instruments.

At its core, Decree No. 119/2025/ND-CP, issued on 9 June 2025 (as amended by Decree No. 83/2026/NDCP), provides the mechanism for allocating greenhouse gas emission allowances (Emission Allowances) through 2030 and for implementing the pilot ETS from mid-2025 until the end of 2028.
Building on this, Decree No. 29/2026/ND-CP, issued on 19 January 2026, establishes the legal framework for Vietnam’s domestic carbon exchange, while Circular No. 11/2026/TT-BNNMT, issued on 13 February 2026, governs the national registry for Emission Allowances and carbon credits. The Government also issued Decree No. 112/2026/ND-CP on 1 April 2026, providing the framework for the international transfer of greenhouse gas emission reduction results and carbon credits.

How will the market work?

Trading under the pilot ETS

How are Emission Allowances allocated?

In the 2025–2026 period, thermal power plants, iron/steel and cement facilities covered by the ETS pilot receive mostly free allocated Emission Allowances based on government-approved greenhouse gas inventories and allocation principles, with individual allocations for the period issued by the Ministry of Agriculture and Environment (MAE). Allocations for the remainder of the pilot scheme will be announced on an annual basis.

How are they used by emitters?

Emitters in the scheme must surrender a specified quantity of Emission Allowances for each allocation period (Return Obligation).^[6] Emitters may, subject to applicable caps and statutory requirements, trade, borrow or transfer Emission Allowances and/or use eligible Carbon Credits to fulfil this Return Obligation.^[7]

Failure to complete the Return Obligation will subject the relevant facility to administrative penalties under the environmental regulations and any shortfall in surrendered Emission Allowances will be deducted from the entity’s allocation for the subsequent period.^[8]

How can entities earn carbon credits?

Entities seeking to register an emission mitigation project for Carbon Credit issuance under the domestic carbon offset mechanism must select an approved methodology and submit their application to the relevant sectoral ministry.^[9] After the mitigation project is registered, Carbon Credits are issued based on an application for issuance of Carbon Credits submitted directly, online or by post to the competent authority.^[10]

Upon issuance, the MAE will announce it via the National Registry System for Emission Allowances and Carbon Credits (National Registry) and deliver the relevant information on the Carbon Credit to the operator of the relevant carbon trading exchange so it can be updated to the account of the relevant entities.^[11]

Who oversees the carbon market?

The MAE is the lead regulator of Vietnam’s carbon market infrastructure. The MAE…

• chairs and coordinates the development, management and operation of the National Registry, which:
  • records, updates and provides data on Emission Allowances and Carbon Credits
  • processes key compliance transactions such as borrowing, surrender/return, transfer and offsetting.
• sets the core market-organisation requirements and technical standards for the domestic Carbon Trading Exchange, working jointly with the Ministry of Finance and other agencies to ensure the trading platform aligns with national ETS rules and environmental policy objectives.
• co-develops, with the Ministry of Finance, the regulatory and technical framework for organising and supervising carbon market trading. The Ministry of Finance’s role focuses on the financial-market side of the carbon exchange - rules for market operation, service provision, fees, settlement/clearing architecture and broader integration with Vietnam’s securities and fiscal systems.

The sustainable finance market in Vietnam has steadily grown since its first green bond was issued in 2023. Green and sustainable financing is expanding as institutions recognise the need to transform the credit and banking systems in Vietnam to improve access to green capital sources.

The State Bank of Vietnam (SBV) has committed to issuing guidance on green credit and environmental risk management to ‘create a unified legal basis for credit institutions to implement, following data that only 4.5% of total outstanding bank credit in mid-2024 was ‘green’.

Collaboration with international organisations

The government is committed to aligning Vietnam’s regulations and guidelines with international frameworks.

• ‘How to Issue Green Bonds, Social Bonds and Sustainability Bonds’ published by State Securities Commission of Vietnam, collaborating with the Climate Bonds Initiative, the International Finance Corporation (IFC) and the Swiss State Secretariat for Economic Affairs (SECO) in 2011.
• ‘Environmental and Social Risk Management System (ESMS) Handbook in Credit Granting Activities’ launched on 21 May 2025 by SBV, developed in partnership with IFC.

This forms part of IFC’s long-term investment in Vietnam’s green transition, which has included support for Vietnam’s first blue bond issued by Southeast Asia Joint Stock Commercial Bank (SeABank) and its first local currency sustainability-linked bonds. SBV has also entered a partnership with the European Investment Bank under the Bank’s ‘Greening Financial Systems’ programme, to receive technical assistance to strengthen climate risk management, expand green finance, attract investment and adopt global best practices in sustainable finance policies.

Green Taxonomy

Vietnam’s long-awaited Green Taxonomy came into effect in August 2025^[13]. This will be the official framework for classifying investment projects as ‘green’. Project developers may seek verification of green status, increasing transparency for lenders and opening access to credible green capital.

The Green Taxonomy will give credit institutions the confidence in green classification criteria that was lacking in the absence of a robust legal framework. Its development was led and coordinated from 2024 by the Ministry of Natural Resources and Environment (now part of the MAE), together with other relevant government ministries and agencies.

Eligibility for 'Green Classification'

Challenges ahead

Vietnam has taken great strides to promote sustainable finance, but implementation challenges remain.

Compared to other economies in ASEAN, Vietnam’s sustainable finance market is relatively underdeveloped. This is despite its ranking as sixth among countries most vulnerable to climate change. The application of environmental and social risk management is still uneven among credit institutions, especially the group of small-medium sized banks. Further guidance to assist these credit institutions to understand environmental risk management in the context of their operations will be important to mobilise the green capital necessary to support Vietnam’s transition.

There is also a reluctance in the business community to secure green loans due to unfavourable terms and the difficulty in recovering capital and ensuring profitability.

Scaling Vietnam’s sustainable finance market will need sustained efforts, including continuing to:

• Develop and strengthen a unified and comprehensive regulatory framework and the Green Taxonomy.
• Consistently enforce regulations to boost market and investor confidence in the region.
• Build technical expertise and encourage knowledge sharing and coordination among stakeholders such as government agencies, financial institutions and private sectors.
• Address market challenges by increasing investor awareness, lowering costs of issuance, enhancing data transparency and reporting, and encouraging public and private partnerships.

By addressing issues and obstacles, there are enormous opportunities to tap as Vietnam unlocks its sustainable finance potential and drives meaningful change.

Vietnam stands at a pivotal juncture in its energy transition, driven by robust economic growth, rapid industrialisation and an accelerating digital transformation.

Almost half of Vietnam’s electricity generation came from renewable sources in 2022, yet decarbonising Vietnam’s energy sector is no easy task. Coal remains the largest source of electricity (44.8%) and energy consumption per capita has increased approximately 771% between 2002 and 2023.^[14]

The country’s energy regulatory landscape is undergoing a fundamental reshape with PDP8 and the Electricity Law, which set out a comprehensive framework for decarbonising the power sector, ensuring energy security and supporting the nation’s ambitious net zero commitments.

Vietnam’s Energy Transition: Policy and Legislative Foundations

Revised PDP8 and its key features

The cornerstone of Vietnam’s energy transition strategy is PDP8, most recently amended in April 2025.[15] PDP8 was revised for alignment with the recently enacted Electricity Law. It sets out a bold vision for 2021–2030, with a long-term outlook to 2050, reflecting a significant shift away from coal and towards renewables, new energy technologies and grid modernisation. This is essential to support Vietnam’s rapidly growing economy and the energy-intensive digital sector.

Capacity expansion

• Total installed capacity target of 183–236 GW by 2030 (up from 150 GW in the original PDP8) and up to 775-837 GW by 2050, to meet projected annual GDP growth of 10% (2026–2030) and 7.5% (2031–2050)

Renewable energy acceleration

• Renewables (excluding hydropower) expected to account for 28–36% of electricity generation by 2030, rising to 74–75% by 2050
• Large-scale deployment of wind (onshore, nearshore, and offshore), solar (including rooftop and floating) and biomass prioritised
• Offshore wind capacity targets of up to 6-17 GW by 2035 and 114-139 GW by 2050

Grid modernisation and storage

• Calls for major investments in grid infrastructure, smart grid technologies and energy storage
• Battery storage targets dramatically increased to 10–16 GW by 2030 and up to 96 GW by 2050, alongside pumped hydro and flexible generation sources

Phasing down fossil fuels

• Coal-fired power capped at ~31 GW by 2030
• Clear roadmap for conversion to biomass or ammonia and eventual decommissioning by 2050
• Gas and LNG play a transitional role -focus on domestic gas with a gradual shift to hydrogen as technology matures

Nuclear power reintroduction

• Reintroduced under revised plan, with Ninh Thuan 1 and 2 plants (4–6.4 GW) scheduled to commence operations between 2030 and 2035
• Further expansion envisaged by 2050 (up to 11-14 GW) to provide reliable baseload supply

The new Electricity Law and its key features

The legal and regulatory backbone for Vietnam’s energy transition is provided by the new Electricity Law, effective from February 2025. It replaces the 2004 law and introduces a modernised, market-oriented framework that supports the objectives of PDP8. The Electricity Law and its implementing regulations bring incentives for renewable energy including enabling direct power purchase agreements (known as DPPAs)[16] and, for offshore wind, sea area and land use or lease fees benefits and power offtake guarantees[17].

Comprehensive support for renewable energy and new energy

• Introduces the definitions of renewable energy and new energy with broad categories[18]; explicitly supports offshore wind, green hydrogen and green ammonia[19]; and encourages integration with energy storage systems[20]

Prioritises large-scale renewable clusters and industrial centres[21]

• Provides incentives such as land and sea lease reductions, and minimum long-term contracted offtake for offshore wind and new energy projects[22]

Investment facilitation

• Enables direct PPAs, allowing large energy users to contract directly with renewable generators via private and dedicated grids[23]

Tariff and PPA framework

• Introduces a more flexible PPA framework that empowers producers and EVN to negotiate project-specific terms, and modifies tariff-determination mechanisms to recognise energy storage costs and broader tariff adjustments[24]

Grid and system operation

• Attracts all economic sectors to participate in investment in power-generation facilities and power grids, electricity generation, distribution, wholesale and retail activities (non-State economic sectors are permitted to operate the power grids they invest in and build)[25]

Wholesale energy market

• Requires grid-connected generators over 30MW (and some smaller ones) must participate in Vietnam’s wholesale energy market (VWEM, operational since 2019) while renewable energy (with exceptions) and BOT projects with effective contracts are generally exempt
• PPAs must specify that the contracted output - between 60% and 100% of total generation - is sold at the contract price, with any remaining output sold on the VWEM according to market rules and relevant regulations[26]

Vietnam’s digital economy is expanding rapidly, with the growth of data centres, cloud computing and digital services. The energy demand from data centres is particularly acute, given their 24/7 operation and high-power density.

According to government and industry estimates, the digital sector’s electricity consumption is expected to grow at double-digit rates, outpacing overall demand growth. Foreign capital is needed to supplement the domestic response to the increasing demand for data centre services and to overcome existing power stability issues for sustained growth.

Sources: e-Conomy SEA 2024 | Bain & Company,
Vietnam Data Center Market Size & Share Analysis - Industry Research Report - Growth Trends,
New AWS research shows strong AI adoption momentum in Vietnam - Press Center

How national policy is providing the backbone for digital infrastructure projects

Ambitious national programs, coupled with far-reaching legislative reforms, are reshaping Vietnam’s investment landscape as the country accelerates its digital transformation agenda.

National Digital Transformation Program

Vietnam’s National Digital Transformation Program[27], launched in 2020, sets out to build a digital government, digital economy and digital society by 2025.

The program focuses on three core pillars:

• expanding broadband and nationwide 5G infrastructure
• digitising public services and government operations, and
• promoting the adoption of digital platforms and technologies across businesses and industries.

By prioritising digital infrastructure, innovation and connectivity, the program improves Vietnam’s prospects of attracting much-needed investments, while simultaneously addressing structural challenges such as the digital divide, data governance and cybersecurity.

Strategic policy direction toward 2030

Resolution No. 57-NQ/TW of the Politburo and Resolution No. 71/NQ-CP of the Government reinforce this policy direction. These resolutions set ambitious national targets toward 2030, including:

• positioning Vietnam among the top three countries in Southeast Asia in terms of digital competitiveness and AI research and development
• expanding 5G coverage to reach 99% of the population, and
• ensuring that the digital economy contributes at least 30% of national GDP.

Modernised legal framework for digital technologies opens access and sets standards

Crucially, these strategic commitments are now underpinned by a modernised legal framework. The new Law on Telecommunications (2023) and the Law on the Digital Technology Industry (2025) mark a significant evolution in Vietnam’s regulatory approach.

Together, these laws provide formal legal recognition for data centres, data centre services, AI, digital assets and other strategic digital technologies. They open full market access to foreign investment in data centre services, while introducing clearer and more robust standards governing data centre operations, cybersecurity, data governance and environmental sustainability.

Investment incentives and implementation facilitation

The new legislative framework is complemented by enhanced investment incentives and streamlined implementation mechanisms.

• Projects in cutting-edge sectors such as semiconductors, AI data centres and key digital technology products may benefit from attractive tax incentives, including corporate income tax (CIT) rates as low as 5% for qualifying large-scale projects (compared to the standard rate of 20% for most businesses).[28] These sectors, regardless of project scale, may also enjoy priority customs procedures, enabling faster clearance and simplified documentation.
• Digital technology projects that do not qualify for the above incentives based on sector or scale, including projects located within DTPs, may still benefit from preferential CIT rate of 17% and/or relevant CIT exemption and reduction, depending on the applicable conditions.
• In addition, a broad range of strategic technology sectors and products - such as digital infrastructure development, cloud computing, large-scale data centres, AI assistants and analytics tools, industry-specific AI applications and digital assets - are now within the scope of ‘special investment procedures’. This special procedure allows eligible investors to commence construction approximately 6 to 12 months earlier by bypassing certain standard licensing and approval requirements.[29]

How Vietnam’s new energy laws are directly tackling the digital challenge

Ensuring adequate supply

The significant increase in planned generation and grid capacity is designed to meet the needs of energy-intensive sectors, including data centres, manufacturing and urbanisation.

Enabling green power procurement

The introduction of direct Corporate PPAs and the focus on renewable energy clusters allow data centre operators and digital infrastructure providers to source clean electricity, supporting both corporate sustainability goals and Vietnam’s decarbonisation targets. Decree 57/2025/ND-CP clears the regulatory pathway for large electricity consumers to enter direct Corporate PPAs with renewable energy generators under two mechanisms:

1. Direct purchase through dedicated private lines between the renewable generator and the consumer, and
2. Direct purchase via the national grid, where power is sold and delivered through the national transmission and distribution system.

Under the Information and Communication Infrastructure Master Plan for the Period 2021–2030, with a Vision to 2050, approved by Decision No. 36/QD-TTg in January 2024, Vietnam aims to establish large-scale data centres built to green standards and aligned with regional energy planning.

New data centres are required to meet international green benchmarks and priority will be given to locations with stable electricity supply and in close proximity to renewable energy sources. Each new data centre project will also need to undertake environmental impact assessments and submit them for appraisal by a council of experts.

Grid reliability and resilience

Investments in smart grids, storage and flexible generation are critical to ensuring the reliability and quality of supply required by digital infrastructure, which is highly sensitive to power interruptions and voltage fluctuations.

Location and industrial ecosystems

The establishment of renewable energy industrial and service centres, as mandated by PDP8, is expected to attract data centre investments to regions with abundant clean energy, further supporting the digital economy.

Although these instruments provide for ambitious goals and roadmaps forwards, regulatory certainty will prove key in materialising the objectives of PDP8 and the Electricity Law.

Want to know more about the development of data centres across APAC? See our resource page and our APAC Regulatory Guide to Data Centres, including Vietnam.