Carbon Offsetting in FDI Enterprises' Net-Zero Commitments: Limits on Credit Use Under New International Practice

In FDI enterprises net-zero commitments, carbon credits were once used as a shortcut: buy cheap credits and declare neutrality. New international practice — SBTi, VCMI and integrity principles — has closed that shortcut: direct emission reduction is the main duty, and credits are left a limited role for residual emissions, at high quality standards. This article sets out those limits, answers the “maximum offset ratio” question honestly by system, and cross-checks Vietnam 30% offset ceiling for the domestic compliance market.

Governing Instruments

The international limit system: the mitigation hierarchy is the root principle

The new practice frames share one root principle — the mitigation hierarchy: an enterprise must reduce emissions directly within its value chain first; carbon credits do not substitute for that duty. Under the SBTi (Science Based Targets initiative) frame, science-pathway reduction targets must be met by direct reduction; credits do not count toward near-term or long-term target progress — their only recognised role is neutralising the residual emissions remaining after deep reduction has been achieved, using durable removal credits. The VCMI (Voluntary Carbon Markets Integrity Initiative) frame governs the claims side: enterprises use credits to make climate-contribution claims under tiered conditions, instead of declaring products/services “neutralised” with ordinary avoidance credits.

So what is the “maximum offset ratio”?

The honest answer: no universal percentage applies to every voluntary net-zero commitment. SBTi sets no % cap on credit purchases — it sets qualitative conditions: credits do not count toward reduction targets, and a net-zero claim completes only when residual emissions (usually understood as the small remainder after deep reductions of around 90% or more on the sector pathway) are neutralised by durable removals. Some frames and large buyers set their own internal caps (for example offsetting at most 10% of base emissions), but those are system-specific standards, not law. An FDI enterprise should present in its reporting the exact system it follows: state any self-set cap, the role of credits (contribution or neutralisation), and credit quality under integrity labels (such as the ICVCM Core Carbon Principles) instead of a sourceless generic percentage.

Application Analysis

Which credit types remain accepted?

Acceptance is narrowing toward quality: (1) credits with a corresponding adjustment are preferred for offset claims, avoiding double counting with the host country NDC; (2) removal credits (afforestation, carbon capture, technological removals) are preferred over avoidance/reduction credits for neutralising residual emissions; (3) credits carrying an integrity label from the ICVCM or equivalent, publicly registered and retired in the claiming enterprise name; (4) high-quality avoidance credits retain a place in contribution claims under VCMI — financing global reductions without claiming to have “erased” one own emissions. The common thread: claims-language discipline is an emerging legal requirement — anti-greenwashing rules in the EU and many export markets penalise carbon-neutral claims built on substandard avoidance credits.

Does Vietnam have its own offset ceiling?

Yes — but at the domestic compliance layer, to be distinguished from voluntary commitments: under Decree 06/2022/ND-CP as amended by Decree 119/2025/ND-CP, facilities allocated emission allowances in Vietnam may use carbon credits to offset at most 30% of their allocated allowances in a compliance period. This 30% ceiling is a legal limit for a state obligation, not a cap on an enterprise voluntary net-zero claim — but it sends a clear policy signal: the Vietnamese regulator also makes direct reduction primary and offsetting secondary. For an FDI enterprise with both an allocated factory in Vietnam and a group net-zero commitment, the two systems must be accounted separately: credits used for domestic compliance cannot simultaneously be claimed in the group net-zero statement for the same purpose.

Recommended Actions

Build the sector direct-reduction pathway before discussing credits; credits are the last layer of the mitigation hierarchy.
Choose the commitment system (SBTi/VCMI) and state the credit role clearly: contribution or residual neutralisation — no vague offset language.
Buy only integrity-standard credits, preferring correspondingly-adjusted and durable removals for neutralisation; retire credits in the enterprise name.
Account separately for credits used toward Vietnam allowance compliance (30% ceiling under Decree 119/2025) versus group commitments.
Review every public claim against the anti-greenwashing discipline of destination export markets (especially the EU).

Frequently Asked Questions

How is FDI enterprises’ use of carbon credits to offset net-zero commitments limited under new international practice?

By the mitigation hierarchy: credits do not replace the duty to reduce emissions directly. Under SBTi, credits do not count toward science-based reduction target progress and may only neutralise residual emissions after deep reduction, using durable removal credits. VCMI governs credit-use claims in tiered climate-contribution terms instead of arbitrary neutrality claims. Credit quality must meet integrity standards and credits must be retired in the enterprise name.

What is the maximum offset ratio by credits versus the direct emission-reduction pathway?

There is no universal percentage for voluntary commitments: SBTi sets no % cap but qualitative conditions — credits do not count toward reduction targets, and only the small residual after deep reduction may be neutralised by removals. Some frames and buyers set their own internal caps. In Vietnam, the domestic compliance layer has a clear legal ceiling: allocated facilities may offset with credits at most 30% of allocated allowances under Decree 119/2025/ND-CP.

Which carbon credit types are accepted in ESG reporting and net-zero commitments?

Preferred types: credits with a corresponding adjustment (avoiding double counting with the host-country NDC); durable removal credits for neutralising residual emissions; credits carrying an integrity label such as the ICVCM Core Carbon Principles, publicly registered and retired in the enterprise name. Avoidance credits retain a place in VCMI contribution claims, but are increasingly not accepted for product/service “carbon neutral” claims.

Does Vietnam regulate a ceiling on enterprises’ use of offset credits?

Yes, at the compliance layer: under Decree 06/2022/ND-CP as amended by Decree 119/2025/ND-CP, facilities allocated emission allowances in Vietnam may use carbon credits to offset at most 30% of their allocated allowances in a compliance period. This is a legal ceiling for a state obligation, distinct from voluntary net-zero commitments, which follow the discipline of the international system the enterprise chooses (SBTi, VCMI). The two layers must be accounted separately.