Carbon markets, including Emissions Trading Systems (ETS) and voluntary carbon credit mechanisms, are becoming the most important policy tools for internalizing the costs of climate change into production activities. Fundamentally, these markets set an overall emissions cap and allow firms to trade allowances, thereby encouraging investment in low-emission technologies. By assigning a direct price to each ton of CO₂ equivalent, carbon markets create strong economic incentives for businesses to improve energy efficiency and transition toward renewable energy sources. Effective carbon pricing not only helps achieve national emission reduction targets but also generates new investment flows into green projects, accelerating decarbonization in heavy industries.
To ensure the sustainable operation of carbon markets, transparency in Measurement, Reporting, and Verification (MRV) is a fundamental requirement. Emissions data must be verified by independent third parties to ensure the credibility of carbon credits. The development of digital platforms for managing emissions registries is helping reduce fraud risks and enhance market liquidity. Policymakers should also focus on linking domestic markets with international systems to optimize global emission reduction costs. Establishing a comprehensive legal framework for carbon credit ownership is essential for fostering a transparent and equitable market that can effectively contribute to limiting global temperature rise to below 1.5°C, in line with the Paris Agreement (Zechter et al., 2016).
Authors: Hao Phu Dong, Binh Thanh Nguyen*
References:
Zechter, R., Kerr, T., Kossoy, A., Peszko, G., Oppermann, K., Ramstein, C., & Kingsmill, N. (2016). State and trends of carbon pricing. Washington, DC: World Bank, Ecofys, Vivid Economics.