John Robert Cotton, senior programme manager Southeast Asia Energy Transition Partnership

As Vietnam moves towards piloting Emissions Trading System (ETS) from 2025, followed by full implementation in 2029 and eventual integration with international carbon markets in 2030, continued training and capacity-building efforts will be essential. Several strategies can be pursued to sustain its impact.

One of the most significant initiatives supporting this transition has been the ETS Training and Simulation Programme, implemented through the Southeast Asia Energy Transition Partnership (ETP) under the United Nations Office for Project Services (UNOPS). This has enhanced the capacity of key stakeholders, raising awareness and providing practical experience in emissions trading mechanisms.

At the forefront of Vietnam’s efforts to develop its carbon market is the Department of Climate Change under the Ministry of Agriculture and Environment. Responsible for designing climate change policies and overseeing carbon market development, the department plays a pivotal role in shaping the country’s climate action strategy.

The UNOPS and ETP are providing technical support and capacity-building initiatives to help Vietnam develop its carbon market and achieve its climate goals. This partnership is strengthening institutional readiness and aligning Vietnam’s framework with best practices.

An ETS operates on a cap-and-trade principle, where a limit is set on total emissions allowed from specific sectors or industries. Companies receive or purchase emission allowances, which they can trade with others depending on their emission levels. This market-based approach provides a financial incentive for industries to reduce their emissions in the most cost-effective way.

By setting a progressively declining cap, an ETS ensures a gradual reduction in emissions over time, supporting national climate goals. To date, more than 30 ETSs have been implemented worldwide, covering major economies such as the European Union, China, and South Korea. Vietnam is following a phased approach to developing its ETS, beginning with a pilot phase from 2025 to 2028, leading to full implementation in 2029 and international market integration by 2030.

The ETS Training and Simulation Programme in Vietnam has exceeded expectations in terms of reach and impact. Initially planned for four training sessions, the high demand and success of the early sessions led to an expansion to six sessions in Hanoi and Ho Chi Minh City in 2024. In total, 657 participants from various sectors engaged in the initiative. Over 80 per cent of attendees rated the training as highly beneficial, particularly valuing the interactive components and hands-on CarbonSim simulation exercises.

Through this training, participants gained essential skills and knowledge in understanding ETS principles, carbon pricing mechanisms, and emissions trading strategies. They also developed expertise in mastering key regulatory requirements for compliance with Vietnam’s forthcoming carbon market and learned how to participate in carbon trading, including cap setting, allowance allocation, and market transactions.

Furthermore, the training provided participants with strategic decision-making skills to optimise emissions reduction costs while ensuring regulatory compliance.

The programme played a crucial role in strengthening ETS readiness across various agencies, organisations, and businesses in Vietnam. Before the training, knowledge gaps existed among many stakeholders, particularly regarding market mechanisms and regulatory frameworks. Surveys conducted before and after training showed significant improvements in participants’ understanding.

Confidence in explaining carbon pricing increased considerably, and awareness of trading mechanisms, including auctions and over-the-counter markets, also improved significantly. The perception of ETS as essential for Vietnam’s climate goals grew stronger among participants.

A highlight of the training was the use of the CarbonSim tool, which allowed participants to engage in a realistic trading environment. These simulations effectively modelled core components such as cap setting, allowance allocation, trading mechanisms, and compliance requirements. The training helped stakeholders improve their understanding of the carbon market and ETS in both theoretical and practical aspects.

The programme successfully met its objectives of enhancing ETS literacy, strengthening institutional capacity, and preparing stakeholders for the upcoming carbon market. Increased recognition as a cost-effective emissions reduction tool was evident, and stronger confidence among stakeholders to navigate its compliance frameworks and trading strategies was observed.

Developing a network of trained professionals who can serve as future trainers will be instrumental in expanding the programme’s reach. Leveraging international partnerships and collaborating with established ETS markets will ensure that Vietnam remains aligned with global best practices. Encouraging government agencies to integrate such training into broader climate policy initiatives will further ensure long-term sustainability.

To mark this milestone, a series of events will showcase the strong bonds between both nations in trade, education, and sustainability. Key activities include two gala concerts, the German Festival in Hanoi and Ho Chi Minh City, the Career Truck showcasing opportunities for Vietnamese talent in Germany, and a Climate Talks panel on the future of the Mekong Delta.

Peter Kompalla, chief representative for Vietnam, Cambodia, Myanmar, and Laos Delegation of German Industry and Commerce

These initiatives reflect not only cultural and educational ties but also the economic potential for further investment and collaboration.

Today, Germany stands as Vietnam’s largest European trade partner, while Vietnam has become a thriving hub for German businesses in ASEAN. Trade remains a cornerstone of German-Vietnamese economic relations: according to preliminary 2024 data from Destatis, trade between the two countries grew by 9.6 per cent, reaching €18.8 billion ($20.4 billion).

German exports to Vietnam increased by 5.6 per cent (€3.7 billion or $4 billion), while imports surged by 10.7 per cent (€15.1 billion or $16.4 billion). This underscores Vietnam’s role as a key supplier and manufacturing hub for German firms.

Vietnam has become a key hub in global supply chains, with particularly interesting developments in manufacturing, renewable energy, and digital services. German businesses benefit from its strategic ASEAN location, free trade agreements, and highly motivated workforce. With tax incentives, improved infrastructure, and streamlined regulations, Vietnam continues to attract more foreign investment, solidifying its role as a prime destination for German enterprises.

As German companies further optimise and diversify their supply chains, Vietnam stands out as a business partner. Its strong economic growth, expanding industries, and commitment to sustainability make it increasingly attractive.

Forecasts for 2025 are reinforcing its position as one of Asia’s fastest-growing economies. A young, skilled workforce further enhances Vietnam’s appeal, offering businesses a dynamic and cost-effective labour market.

Vietnam’s digital transformation is driving investment, with its digital economy set to contribute 25 per cent of GDP soon. Government efforts in digital infrastructure, e-commerce, and cashless payments support this growth, with e-commerce projected to hit $63 billion by 2030.

High-tech manufacturing, including semiconductors and automotive production, is expanding alongside major infrastructure projects like metro systems, the North-South high-speed railway, and Long Thanh International Airport.

Meanwhile, Vietnam’s sustainability drive, from solar to offshore wind, aligns with German environmental, social, and governance priorities. With strong economic fundamentals and a thriving digital sector, Vietnam remains a prime destination for German investors.

Germany is also driving digitalisation and Industry 4.0 in Vietnam, with Bosch Rexroth, Beckhoff, SEW Eurodrive, Trumpf, and Würth leading in automation and the Internet of Things. Companies like Baumer and Fibro see Vietnam’s potential in precision engineering, supporting its transformation into a high-tech manufacturing hub.

This knowledge exchange will be highlighted at our symposium in May on Vietnamese factory automation and German efforts, where industry leaders will discuss the future of smart production.

Sustainability remains a key pillar of German investment, with firms embracing initiatives in renewable energy, waste management, and sustainable agriculture. PNE AG’s Hon Trau nearshore wind power project in the south-central province of Binh Dinh exemplifies Germany’s commitment to Vietnam’s green transition, supporting the country’s Power Development Plan VIII.

Equally important is workforce development, where German enterprises actively collaborate with Vietnamese vocational institutions to bridge skill gaps. The Career Truck’s journey across Vietnam, complemented by the flagship Career Day events in Hanoi and Ho Chi Minh City, will serve as a dynamic platform to showcase education and employment pathways. This initiative underscores Germany’s continued commitment to enhancing Vietnam’s skilled labour force and fostering long-term career opportunities.

Ho Chi Minh City and Hanoi serve as economic hubs, attracting German investments in finance, IT, and consulting. Meanwhile, the southern provinces of Binh Duong and Dong Nai have become manufacturing strongholds, hosting major German companies in the automotive, chemicals, and also electronics industries.

Beyond these traditional sectors, areas such as logistics, pharmaceuticals, and IT services are experiencing rapid growth, further drawing German investment into Vietnam’s evolving market.

As the official representative of the German industry in Vietnam, we continue to support businesses in market entry, expansion, and networking through trade fairs and business delegations. The next 50 years promise deeper collaboration, enhanced sustainability efforts, and continued economic success for both nations.

By leveraging this momentum, German and Vietnamese businesses can drive mutual prosperity and innovation well into the future.