By Francesca Nardini, UNDP Deputy Resident Representative in Viet Nam

As published in the Viet Nam Investment Review on 7 September, 2026.

Viet Nam stands at an important moment in its development journey. Decades of robust, export-led growth have established the country as a dynamic manufacturing hub in Southeast Asia.  As Viet Nam pursues its ambition of becoming a high-income country by 2045 while achieving net-zero emissions by 2050, how its industries use energy will be critical to achieving both goals.

This transformation brings both challenges and opportunities. Viet Nam’s economic development model remains reliant on a carbon-intensive energy structure. Key sectors such as heavy manufacturing, steel, cement, chemicals and textiles face a dual challenge: sustaining growth while responding to a global market that increasingly rewards low-carbon production.

In 2025, the industrial sector accounted for approximately 35.15% of Viet Nam’s GDP and generated over 80% of total national export value. At the same time, industrial facilities consume more than half of the nation's grid electricity and remain a primary driver of national greenhouse gas (GHG) emissions, contributing over 60% by current estimates.

For Viet Nam’s industries, decarbonization is therefore no longer simply an environmental responsibility. It is a becoming a condition for competitiveness. 

Energy Transition as a Competitiveness Strategy

For industrial enterprises, the energy transition begins with a straightforward question: How can the same factory produce more value while using less energy and generating fewer emissions?

The answer will differ across sectors and enterprises, but there are many opportunities already available. These include advancing industrial energy efficiency, electrifying processes where feasible, scaling waste heat recovery, optimizing production workflows, increasing renewable energy integration, transitioning to cleaner fuels, deploying rooftop solar backed by Battery Energy Storage Systems (BESS), and leveraging digital technologies for real-time energy management and carbon accounting.

These measures are not only about reducing emissions. They can reduce operating costs, improve productivity, reduce exposure to energy-price volatility and strengthen operational resilience. 

For export-oriented manufacturers, the business case is becoming even stronger. International buyers and investors are paying greater attention to the carbon footprint of products and supply chains. Environmental performance is increasingly becoming part of the conditions for accessing global markets and remaining competitive within them. 

The European Union’s Carbon Border Adjustment Mechanism (CBAM) is one example of this shift. As carbon considerations become embedded in international trade, Vietnamese exporters will increasingly need to understand and manage the emissions associated with what they produce, not simply report them after the fact.

This makes the energy transition an investment in the future competitiveness of Vietnamese industry. 

Connecting Industrial Decarbonization to the Carbon Market

Viet Nam’s emerging carbon market can reinforce this transition by putting an economic value on emissions. 

Over recent years, the Government has progressively developed the regulatory framework for GHG emissions reduction and carbon-market development. Decree No. 06/2022/ND-CP established the foundational framework, followed by Decision No. 232/QD-TTg in 2025 on the establishment and development of Viet Nam’s carbon market. In February 2026, Decision No. 263/QD-TTg, further established the total pilot GHG emissions allowance cap and sectoral scope for the domestic emissions trading system (ETS). 

Together, these steps mark an important shift from building the policy architecture towards putting a functional carbon market into practice.

For businesses, this means carbon will increasingly have a financial dimension. Companies that reduce emissions through energy efficiency, renewable energy, process improvements and other measures can strengthen their ability to manage future carbon-related costs and compliance requirements. 

The pilot EST covers 110 enterprises, with a total emissions allowance cap of 243.1 million tonnes of CO₂ equivalent in 2025, increasing to 268.4 million tonnes in 2026. The provision allowing up to 30% offset coverage provides additional compliance flexibility while creating incentives for investment in emissions-reduction projects.

The significance goes beyond compliance. By assigning an economic value to carbon, the carbon market can encourage companies to treat energy and emissions management as part of mainstream business strategy. 

This is where the energy transition and carbon market become closely connected. Every kilowatt-hour of energy saved through efficiency, every production process electrified, and every tonne of emissions avoided can contribute not only to climate goals but also to a company’s future competitiveness.

The Path Forward

As Viet Nam advances its carbon market through the pilot phase, businesses should prepare before carbon costs become a routine part of doing business. Four priorities are particularly important:

First, digital energy and carbon accounting. Automated monitoring and management systems can help businesses track fuel consumption, electricity use, production data and associated emissions. High-quality, traceable data will be essential for emissions reporting, benchmarking and verification, while also enabling businesses to identify opportunities to improve efficiency.

Second, on-site low-emission energy solutions. Technically and economically viable solutions such as solar PV hybridization, battery energy storage, heat pumps, waste-heat recovery, and biomass or other lower-carbon fuels can help reduce both energy costs and emissions intensity.

Third, institutional readiness. Enterprises will need the capacity to understand carbon-market mechanisms, identify emissions-reduction opportunities, evaluate offsets and other compliance instruments, and manage reporting and compliance obligations through relevant national systems and exchanges.

Fourth, integrating energy transition into investment planning. Energy transition and carbon management should increasingly become part of long-term business strategy rather than being treated as separate environmental initiatives. Investment decisions should consider their combined impact on energy costs, emissions, operational resilience, regulatory exposure and access to international markets.

Importantly, this transition is also about people. New technologies and business models will require new skills and capabilities. Investing in workers and ensuring that enterprises of different sizes can participate in the transition will be essential.

Viet Nam has already established important foundations for its carbon market and its net-zero transition. The next challenge is turning these foundations into investment, innovation and action across the economy.

Government has an important role to play in providing clear rules, reliable data systems and predictable market signals. Financial institutions can help channel capital towards viable transition investments. Development partners can support technology transfer, capacity building and market development. And businesses must increasingly take ownership of their energy and carbon strategies.

For Vietnamese industry, the choice is not between economic growth and climate action. The opportunity is to make the two reinforce each other.

The industrial energy transition and Viet Nam’s emerging carbon market should therefore be viewed as interconnected elements of the country’s next phase of economic development. The companies that prepare early can do more than reduce emissions: they can reduce costs, strengthen resilience and position themselves for the low-carbon global economy.

Ultimately, the goal is simple: to help Viet Nam’s industries produce more value with less energy, less carbon and greater resilience. 

This is not only a climate imperative. It is an opportunity to shape the next chapter of Viet Nam’s industrial competitiveness.