Carbon credits are becoming an increasingly important tool in corporate greenhouse gas emission reduction strategies and sustainable development initiatives. Beyond generating economic value from emission reduction activities, carbon credits also create opportunities for businesses to participate in domestic and international carbon markets. So, what are carbon credits, and how are they generated and traded? Stavian Industrial Metal provides an overview of how carbon credits work, their benefits, and the key regulations businesses need to understand.
1. What Are Carbon Credits?
A carbon credit is a unit representing one metric ton of carbon dioxide (CO₂), or an equivalent amount of another greenhouse gas, that has been reduced, avoided, or removed from the atmosphere through an eligible activity or project.
Each carbon credit is equivalent to one metric ton of carbon dioxide equivalent (CO₂e). CO₂e is a standardized unit used to express the global warming impact of different greenhouse gases in terms of an equivalent amount of CO₂, enabling consistent measurement and comparison of emission reductions.
Carbon credits may be issued to projects that meet the applicable methodologies and requirements for measurement, reporting, validation, and verification. Once properly issued, these credits can be transferred, bought, sold, or used to offset emissions within the scope permitted by the relevant framework.
Differences Between Carbon Credits and Greenhouse Gas Emission Allowances
Carbon credits and greenhouse gas emission allowances are two types of instruments that can be traded in carbon markets, but they differ fundamentally in nature. Carbon credits are generated from verified emission reductions or removals achieved by eligible projects, while emission allowances represent the amount of greenhouse gases a facility is permitted to emit under a regulatory framework.
For example, a company allocated an emissions allowance of 10,000 metric tons of CO₂e but emitting only 9,000 metric tons of CO₂e may have unused allowances remaining. These allowances may be sold or transferred if regulatory requirements are met. This represents surplus emission allowances, rather than carbon credits generated from an independent emission reduction project.
In terms of application, emission allowances primarily serve compliance obligations under mandatory emissions trading systems, while carbon credits may be used for offsetting purposes, subject to the conditions of the relevant mechanism. Therefore, businesses should clearly identify the type of instrument, ownership rights, and permitted uses before trading to avoid confusion between these two mechanisms.
2. How Carbon Credits Work and Who Can Buy or Sell Them
The carbon credit market operates through a mechanism that assigns tradable value to greenhouse gas emission reductions. Eligible projects may be issued carbon credits, which can subsequently be transferred to organizations seeking to use or invest in them, depending on the regulations governing each market.
Essentially, the market consists of two main groups of participants: sellers who own valid carbon credits and buyers who wish to use or hold them. Trading activities must ensure legal compliance, traceability, and the prevention of double counting or double use of the same emission reductions.
Carbon credit transactions take place through appropriate market mechanisms, including compliance carbon markets and voluntary carbon markets. Each market has its own requirements regarding participation, credit quality, and permitted uses. Businesses should clearly define their needs before selecting a suitable trading approach.
2.1. Who Can Sell Carbon Credits?
Carbon credit sellers are typically organizations that own credits issued through eligible greenhouse gas emission reduction programs or projects. These projects may involve renewable energy, energy efficiency, forestry, waste management, methane recovery, or the application of emission reduction technologies in industrial production.
In the energy sector, carbon credits may be developed from projects that meet approved emission reduction methodologies through changes in energy sources or improvements in energy efficiency. In forestry, forest conservation, restoration, and development projects may qualify under appropriate mechanisms. Similarly, methane collection and treatment from waste represent another potential pathway for developing emission reduction projects.
To commercialize carbon credits, project developers must complete the required registration process, select appropriate calculation methodologies, monitor results, and obtain verification under the applicable mechanism. Ownership, transfer rights, and the permitted uses of credits must be clearly established before any transaction. Implementing an emission reduction project does not automatically guarantee the issuance of carbon credits unless all relevant requirements are fulfilled.
2.2. Who Needs to Buy Carbon Credits?
Carbon credit buyers may include companies subject to emissions regulations, organizations implementing climate strategies, or investors participating in carbon markets. Their purchasing objectives vary depending on legal obligations, emission reduction targets, and the nature of their operations.
In compliance carbon markets, facilities allocated emission allowances may use eligible carbon credits to offset part of their emissions obligations where permitted by law. Meanwhile, in voluntary carbon markets, businesses may purchase and retire credits to support climate objectives or offset emissions in accordance with applicable standards.
Beyond compliance requirements, many businesses are interested in carbon credit trading to proactively manage emission-related cost risks, support ESG strategies, and improve transparency in their sustainability activities. However, purchasing carbon credits does not automatically exempt businesses from all emission reduction obligations. The validity and permitted use of credits must be assessed separately under each applicable mechanism.
3. Why Are Carbon Credits Becoming Increasingly Important for Businesses?
Carbon credits contribute to the development of financial mechanisms that encourage greenhouse gas emission reductions. When eligible emission reductions are converted into tradable credits, environmental projects gain additional opportunities to generate revenue that can support investment and operating costs.
For businesses, the value of carbon credits extends beyond buying and selling transactions. They are also closely associated with emissions management, environmental risk management, sustainable development strategies, and the ability to adapt to carbon-related policies across global supply chains.
As major markets place increasing emphasis on emissions associated with production activities, businesses that can transparently manage carbon data and establish clear emission reduction roadmaps will be better positioned to meet the requirements of partners, customers, and regulatory authorities.
3.1. Benefits of Carbon Credits for Sellers
For project developers, one of the key benefits of selling carbon credits is the potential to generate additional revenue from verified emission reductions. This revenue can improve project financial performance and provide further incentives to invest in technologies, equipment, and environmentally friendly solutions.
The ability to commercialize carbon credits can also enhance opportunities to attract financing for emission reduction initiatives. For example, a company implementing an energy efficiency project may consider potential carbon credit revenue as an additional factor in its investment assessment, alongside savings in operating costs. This can help encourage technological innovation and improve resource efficiency.
However, carbon credit revenue is not inherently stable. Selling prices depend on factors such as credit quality, issuance standards, project origin, transaction timing, and market demand. Businesses should therefore assess financial performance throughout the entire project lifecycle, including documentation, monitoring, validation, verification, and ongoing operational costs.
3.2. Benefits of Carbon Credits for Buyers
For buyers, carbon credits can serve as a tool to support emissions compliance obligations or climate strategies, depending on the applicable mechanism. Selecting valid carbon credits enables businesses to take a more proactive approach to offset planning and the management of carbon-related costs.
Beyond compliance, businesses may incorporate carbon credits into their broader sustainable development strategies. Purchasing and using appropriate carbon credits can demonstrate a company’s commitment to climate objectives while supporting carbon footprint management programs and raising awareness of environmental responsibility across business operations.
Nevertheless, carbon credits should not be considered a complete substitute for direct emission reduction measures. Businesses must continue prioritizing energy optimization, technological improvements, and reductions in greenhouse gas emissions from production activities. Claims regarding carbon neutrality or offsetting outcomes must also be transparent, supported by eligible credits, and aligned with applicable disclosure requirements.
4. The Carbon Credit Generation Process and Key Requirements
To generate carbon credits eligible for trading, businesses must not only implement emission reduction activities but also demonstrate the results through appropriate measurement and verification methodologies. This is an essential requirement to ensure that carbon credits represent genuine climate benefits.
The carbon credit development process generally involves defining the project scope, establishing a baseline, selecting an appropriate methodology, monitoring results, and conducting independent verification. Each program may impose specific requirements regarding documentation, timelines, calculation methods, and issuance procedures.
For businesses entering the market for the first time, conducting a feasibility assessment at an early stage can help minimize the risk of incurring costs on projects that do not qualify for carbon credit issuance. This assessment also helps determine which emission reduction outcomes may be recognized and commercialized.
4.1. Basic Steps in Developing a Carbon Credit Project
The development of a carbon credit project generally begins with identifying emission sources and assessing emission reduction potential. Businesses need to understand the volume of greenhouse gases generated by their current activities, how proposed solutions could improve emissions performance, and whether the project meets the requirements of the relevant carbon credit mechanism.
Once feasibility has been established, the business selects an appropriate methodology, develops a monitoring plan, and implements the project. Emission reductions must be quantified using suitable data and undergo the required validation or verification process before carbon credits can be issued.
The basic process includes the following steps:
- Assess the current situation: Identify emission sources, project boundaries, and input data.
- Establish the baseline: Develop a baseline emissions scenario against which project results can be measured.
- Select an appropriate methodology: Determine calculation methods and applicable requirements.
- Registration and validation: Prepare and complete project documentation in accordance with the requirements of the carbon credit program.
- Implementation and monitoring: Collect and record actual data throughout project implementation.
- Verification and issuance: Assess eligible emission reductions and register the corresponding carbon credits in the relevant registry system.
- Trading or utilization: Transfer, hold, or retire carbon credits according to their intended purpose.
The process outlined above is a general framework. Actual implementation timelines and issuance requirements depend on the project type, applicable standards, and requirements established by the carbon credit program administrator. Businesses should pay particular attention to data management systems and monitoring records to demonstrate emission reduction results throughout project implementation.
4.2. The Role of Greenhouse Gas Inventories and ISO Standards
A greenhouse gas (GHG) inventory involves identifying and quantifying greenhouse gas emissions, removals, or absorption within a defined assessment boundary. It provides the foundation for businesses to understand their emissions profile, identify significant emission sources, and establish measurable emission reduction targets.
In emissions management, the ISO 14064 series of standards can serve as a technical framework for quantification, reporting, and verification. Specifically, ISO 14064-1:2018 establishes principles and requirements for quantifying and reporting greenhouse gas emissions and removals at the organizational level. ISO 14064-2:2019 applies to quantifying, monitoring, and reporting greenhouse gas emission reductions or enhanced removals at the project level.
In addition, ISO 14064-3:2019 addresses requirements for validating and verifying greenhouse gas statements. However, businesses must distinguish between greenhouse gas inventories, emissions report verification, and carbon credit issuance. Preparing reports in accordance with ISO standards does not automatically result in the issuance of carbon credits. Projects must still satisfy the specific requirements of the applicable carbon credit program.
The Carbon Credit Market in Vietnam and Its Development Roadmap
The Vietnamese carbon market is being developed to support greenhouse gas emission reduction objectives, encourage businesses to invest in low-carbon technologies, and promote sustainable economic growth. It is also one of the policy instruments supporting Vietnam’s commitment to achieving net-zero emissions by 2050.
The legal framework governing Vietnam’s domestic carbon market is established under the 2020 Law on Environmental Protection and related implementing regulations. In particular, Decree No. 06/2022/ND-CP, Decree No. 119/2025/ND-CP, and Decree No. 29/2026/ND-CP are important legal documents concerning emissions management mechanisms and the organization of carbon trading activities.
The establishment of a carbon market provides additional incentives for businesses to manage emissions and invest in sustainable production technologies. However, the rights to trade and use different carbon market instruments are subject to specific conditions rather than being applied uniformly to all organizations that generate emissions.
Roadmap for Establishing the Carbon Credit Exchange
The domestic carbon exchange is an infrastructure platform designed to facilitate the trading of eligible greenhouse gas emission allowances and carbon credits. A centralized trading mechanism is being developed to support ownership management, improve transparency, and enable eligible participants to access the market.
The market development roadmap was revised when Decree No. 119/2025/ND-CP amended and supplemented Decree No. 06/2022/ND-CP. Accordingly, the period through the end of 2028 focuses on establishing the National Registry System, developing and piloting the domestic carbon exchange, and implementing domestic carbon credit trading and offsetting mechanisms. From 2029 onward, the market will continue to be developed through the introduction of greenhouse gas emission allowance auctions and additional regulations governing related trading activities.
Notably, Decree No. 29/2026/ND-CP, dated January 19, 2026, provides regulations on the organization of Vietnam’s domestic carbon exchange, including registration, code issuance, custody, trading, settlement, and ownership transfers for eligible instruments. During the pilot period ending December 31, 2028, operating entities are required not to charge fees for services provided on the exchange. Service fees are scheduled to take effect from January 1, 2029.
Who Is Eligible to Participate in the Carbon Market?
Participants in the carbon market include facilities allocated emission allowances, agencies or organizations involved in carbon credit trading, and entities providing transaction-related services in accordance with applicable laws. Participation requirements vary depending on the type of instrument and the role of each participant.
For the 2025–2026 allowance allocation period, the identified groups of facilities include thermal power plants, iron and steel production facilities, and cement manufacturing facilities that fall within the greenhouse gas inventory requirements and meet the relevant allocation conditions. These entities are responsible for managing emissions, fulfilling allowance-related obligations, and complying with applicable regulations.
In addition to facilities allocated emission allowances, organizations developing emission reduction projects and other entities eligible to trade carbon credits may participate in the market under the relevant mechanisms. However, being subject to greenhouse gas inventory requirements does not automatically mean that a business will receive emission allowances or be entitled to trade all types of carbon credits. Rights and obligations must be determined based on applicable lists, eligibility conditions, and current regulations.
Carbon Credit Services by Stavian Industrial Metal
As emission reduction requirements, data transparency, and carbon-related costs increasingly influence industrial operations, Stavian Industrial Metal offers carbon credit services to help businesses manage and optimize carbon-related costs.
Stavian Industrial Metal’s solutions focus on carbon credit advisory, trading, and portfolio management, aiming to help customers control cost risks and manage the impacts of mechanisms such as the Carbon Border Adjustment Mechanism (CBAM) and equivalent carbon policies in export markets.
These services also form part of Stavian Industrial Metal’s broader sustainable development strategy, supporting the expansion of its green industrial materials ecosystem and improvements in emissions management across the industrial metals value chain.
Carbon Credit Advisory, Trading, and Portfolio Management Solutions
Stavian Industrial Metal provides solutions to help customers manage and optimize costs arising from carbon taxes and carbon pricing mechanisms in export markets. Through carbon credit advisory, trading, and portfolio management services, Stavian Industrial Metal aims to help businesses manage risks associated with CBAM certificate price fluctuations and strengthen their ability to respond proactively to changes in carbon policies.
In portfolio management, identifying credit requirements, planning transactions, and monitoring factors affecting carbon costs must be aligned with each company’s business objectives and operating conditions. An appropriate portfolio management strategy can help customers evaluate cost scenarios, manage transaction risks, and develop long-term financial plans.
In addition, Stavian Industrial Metal offers carbon credit buying and selling solutions to help businesses access trading options suited to their needs. These activities are designed to complement emission reduction roadmaps and sustainable development objectives. The scope of each solution depends on customer requirements and applicable legal regulations and does not replace the responsibilities of authorized entities for the verification, recognition, or issuance of carbon credits.
Integrating Carbon Credit Solutions with Green Metal Supply Chains
Alongside its carbon credit services, Stavian Industrial Metal identifies green industrial materials as one of its long-term development priorities. The company focuses on promoting an ecosystem of sustainable products, including green steel, green aluminum, and materials that support the transition toward low-carbon industrial production.
For businesses operating in the industrial sector, combining carbon cost management with the selection of materials that have lower emissions intensity provides a more comprehensive approach. Within this strategy, reducing emissions at the source remains the priority, while carbon credits serve as a supplementary tool when their use is permitted under the applicable framework.
Within Stavian Industrial Metal’s product ecosystem, green steel and green aluminum are material categories aligned with the development of lower-emission supply chains. In addition, green hot briquetted iron (green HBI) and direct reduced iron (DRI) are important raw materials used in steelmaking processes involving direct reduction technologies.
By integrating industrial material solutions with carbon management and its ESG strategy, Stavian Industrial Metal aims to support customers in strengthening their ability to adapt to sustainability requirements in domestic and international markets.
Conclusion
Carbon credits are an important instrument connecting greenhouse gas emission reductions with financial mechanisms and carbon trading activities. To use them effectively, businesses must understand the nature of carbon credits, the applicable legal framework, trading requirements, and their permitted uses in different markets. With its commitment to developing green metals and providing carbon credit services, Stavian Industrial Metal aims to support businesses in managing carbon-related costs and advancing sustainable development.
