Once a facility receives an emission quota allocation, its first financial question is usually how much of the emissions it cannot cut internally can be covered with purchased carbon credits. Decree No. 119/2025/ND-CP, amending Decree 06/2022/ND-CP on greenhouse gas emission reduction and ozone layer protection, answers with a hard number: no more than thirty percent of the allocated quota. The cap turns offsetting into a supplement to abatement at source, not an exit that lets a facility buy its way out of the whole obligation.
Where offsetting sits in the quota lifecycle of Article 19
Article 19 of Decree 06/2022/ND-CP, as amended by Decree 119/2025, gathers the full lifecycle of a quota into one article: exchange on the carbon exchange, borrowing, surrender, transfer and offsetting. The central duty is surrender: for each allocation period, a facility must surrender quotas at least equal to its inventoried direct emissions for that period, minus the carbon credits it has offset, performing the surrender itself on the National Registry System before 31 December of the year following the allocation period. One quota unit represents the right to emit one tonne of CO2 or CO2 equivalent, and credits are counted in the same tonne unit, so the subtraction across actual emissions, quotas and credits is a direct subtraction on a single scale.
The 30 percent cap and why the denominator matters
Section 8 of Article 19 provides that a facility may use carbon credits to offset no more than thirty percent of the greenhouse gas emission quota allocated to it. Two details in that sentence drive planning. First, the denominator is the allocated quota, not total inventoried emissions: a facility emitting far above its allocation cannot take thirty percent of the larger emissions figure as its cap. Second, the cap is calculated per allocation period, so credit purchasing strategy must be built period by period alongside production forecasts and emission factors. The governance consequence is plain: at least seventy percent of the duty must be met with quotas held, meaning the allocation itself, quotas bought on the exchange, and quotas borrowed or carried over under the other sections of Article 19, and with real emission reductions that lower the inventoried figure.
Which credits qualify for offsetting
Not every instrument marketed as a carbon credit will be accepted by the system. Under section 8 of Article 19, offsetting credits must come from projects under the carbon credit exchange and offsetting mechanisms in Article 20 of Decree 06/2022 and points a and b of clause 1 of Article 20a, namely domestic mechanisms and international cooperation mechanisms to which Vietnam is a party. In parallel, the provisions on exchangeable assets define carbon credits as those issued for greenhouse gas mitigation results from 1 January 2021 of programmes and projects under those mechanisms. A credit buyer therefore has to diligence three layers: which mechanism the project sits under, whether the credits are registered and traceable in the system, and whether the mitigation results fall inside the accepted time window. Voluntary credits from abroad that never pass through these mechanisms do not automatically count toward a domestic surrender duty.
The procedure is built into the surrender operation
Offsetting is not a separate licensing step. Section 8 of Article 19 states that a facility using carbon credits for offsetting performs the act itself on the National Registry System during surrender. The operating sequence is accordingly: complete the period’s greenhouse gas inventory to fix direct emissions; determine the quota volume to surrender after the planned offset; buy or receive eligible credits through the carbon exchange and have them recorded in the system; then execute the offset and the surrender on the National Registry System before the deadline of 31 December of the year following the allocation period. Article 19 also opens two flexibility valves for the period through 2030: borrowing up to fifteen percent of the facility’s own next-period allocation to secure the current surrender, on condition that the borrowed volume is not used for exchange; and carrying unused quotas, after surrender is completed, into the next period.
Falling short: penalties plus a deduction from the next period
Article 19 provides that a facility failing to fully perform its surrender duty is sanctioned under the law on administrative penalties in environmental protection, and the unsurrendered shortfall is deducted from the facility’s allocation for the next period. The duty therefore does not evaporate at the deadline; it converts into a quota debt weighing on the following period, on top of an independent penalty exposure. In addition, thirty days after the surrender deadline, the Ministry of Agriculture and Environment cancels quotas from earlier periods that were neither transferred nor surrendered in the system and updates the data for the exchange operator. A facility heading for a shortfall should act early inside the surrender window: topping up with exchange purchases while liquidity is good is far cheaper than carrying a deduction into the next period alongside a fine.
Facilities subject to quota allocation that need a period-by-period offsetting strategy can discuss it with FLAT Law Firm through the contact page.
Frequently Asked Questions
What percentage of its quota can a company offset with carbon credits at most?
Under section 8 of Article 19 of Decree 06/2022/ND-CP (as amended by Decree 119/2025/ND-CP), a facility may use carbon credits to offset no more than 30% of the greenhouse gas emission quota allocated to that facility. The denominator is the allocated quota, not total inventoried emissions, and the cap is calculated for each allocation period.
Which carbon credits can be used for offsetting under Decree 119/2025?
Credits must originate from projects under the carbon credit exchange and offsetting mechanisms in Article 20 of Decree 06/2022/ND-CP and points a and b of clause 1 of Article 20a of that decree, and must be credits issued for greenhouse gas mitigation results from 1 January 2021. Credits outside these mechanisms are not automatically accepted toward a domestic quota surrender duty.
How is the carbon credit offsetting procedure carried out?
Offsetting is not a separate approval: under section 8 of Article 19, the facility itself performs the use of carbon credits for offsetting on the National Registry System during surrender. The operating steps are to finalise the period’s direct emission inventory, determine the volume to surrender after offsetting, buy or receive eligible credits through the carbon exchange, then execute the offset and surrender on the system before 31 December of the year following the allocation period.
What happens if a company cannot offset its emissions sufficiently?
The question the text answers is failure to surrender enough quotas after using offsetting within the 30% cap. Under Article 19 of Decree 06/2022 (as amended by Decree 119/2025), a facility that does not fully perform its surrender duty is sanctioned under the law on administrative penalties in environmental protection, and the unsurrendered shortfall is deducted from its allocation for the next period.
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