Money flows first to forests, then to communities, then to growth
Two of Southeast Asia's most forested nations are writing the rules that will determine whether forest carbon markets can be trusted. Vietnam and Indonesia have each released new regulatory frameworks in 2026 that govern how forests generate tradable carbon credits, with both countries prioritizing transparency, community benefit, and the prevention of double-counting. Their parallel efforts reflect a broader reckoning in global climate finance: that the promise of nature-based carbon markets can only be redeemed through rigorous governance, not good intentions alone.
- Global carbon markets have long been plagued by fraud and double-counting, and both Vietnam and Indonesia are racing to prove their forest credits are worth trusting.
- Indonesia's new 'nesting' framework directly attacks the double-counting problem by forcing project-level carbon accounting to align with national and provincial targets, closing a loophole that has undermined schemes elsewhere.
- Vietnam's Decree 180 creates the first comprehensive rulebook for forest carbon services, directing revenues toward forest protection and community livelihoods before anything else — a deliberate signal about whose interests the market must serve.
- Vietnam's domestic carbon exchange has already slipped a year behind schedule, yet the country has secured over $70 million in forest carbon funding from the Green Climate Fund, suggesting international confidence is outpacing domestic readiness.
- Both nations are now positioned to compete for high-integrity carbon investment, but the real test begins when the exchanges open and the regulations meet the complexity of actual markets.
Vietnam and Indonesia are moving in parallel to establish the governance frameworks that will determine how their forests participate in global carbon markets — and whether those markets can be trusted at all.
Vietnam published its first comprehensive forest carbon rulebook on May 21, with Decree No. 180/2026/ND-CP taking effect July 1. Built around openness, transparency, and accountability, the decree sets a clear order of priorities for how carbon revenue flows: forest protection and development come first, then support for communities whose livelihoods depend on those forests, and finally the expansion of carbon projects and tracking infrastructure. Payments are calculated in Vietnamese dong per tonne of CO₂ equivalent, and money can move through direct contracts or via the Vietnam Forest Protection and Development Fund. The framework is explicitly tied to Vietnam's Paris Agreement commitment to reach net-zero by 2050.
Indonesia moved earlier. In April, its Ministry of Forestry released Regulation No. 6/2026, replacing a 2023 predecessor and introducing what experts are calling a breakthrough: a 'nesting' framework designed to eliminate double-counting. By requiring project-level carbon accounting to align with national and provincial targets, the regulation creates a hierarchy that prevents the same emissions reduction from being claimed by multiple parties. It also sets binding timelines for project review and clarifies which business actors may participate in carbon trading.
Both countries are building credibility in a market that has grown deeply skeptical of carbon credits. Vietnam's domestic exchange has slipped to a late-2026 launch, but the country has already secured approval for more than $70 million in forest carbon funding from the UN-backed Green Climate Fund — a sign of international confidence even as the regulatory infrastructure is still being assembled. What remains to be seen is whether these frameworks, carefully constructed on paper, can hold up when the exchanges open and the real pressures of the market begin.
Vietnam and Indonesia are moving in parallel to establish the rules that will govern how their forests generate and trade carbon credits—a shift that reflects both countries' determination to participate in global carbon markets and their commitment to climate targets that require dramatic emissions reductions by mid-century.
Vietnam published its first comprehensive rulebook for forest carbon projects on May 21, a decree that takes effect July 1 and will shape how the country's domestic carbon exchange operates when it launches later this year. The regulation, known as Decree No. 180/2026/ND-CP, establishes three core principles: openness, transparency, and accountability. It also sets a clear priority for how money flows once carbon credits are sold. Revenue will be directed first toward protecting and developing forests, then toward supporting the livelihoods of communities that depend on them, and finally toward building out more forest carbon projects and the databases that track them. The decree explicitly ties these activities to Vietnam's international climate pledge—a commitment to reach net-zero emissions by 2050 under the Paris Agreement.
The mechanics are straightforward on paper. Forest carbon services can be delivered through direct contracts or through the country's carbon trading exchange. Payments are calculated in Vietnamese dong per tonne of carbon dioxide equivalent, or per forest carbon credit itself. Money can flow directly to service providers or through the Vietnam Forest Protection and Development Fund, which already collects payments from businesses and organizations for other forest ecosystem services. What matters is that the framework now exists where none did before.
Indonesia moved first. In early April, its Ministry of Forestry released Regulation No. 6/2026, which replaces an earlier 2023 regulation and introduces what carbon market experts describe as a breakthrough mechanism: a "nesting" framework. This system is designed to solve one of the most persistent problems in carbon markets—double counting. When a forest carbon project reduces emissions, multiple parties can claim credit for the same reduction if oversight is weak. The nesting framework forces jurisdictional programs to align their project-level carbon accounting with national and provincial targets, creating a hierarchy that prevents the same carbon credit from being claimed twice. The regulation also establishes binding timelines for project review, a streamlined administrative process for ministerial approval, and an explicit list of which business actors are permitted to participate in carbon trading.
Both countries are racing to build credibility in a global market that is increasingly skeptical of carbon credits. The world's demand for high-integrity forest carbon credits is growing, and nations that can demonstrate rigorous oversight and transparent accounting stand to attract investment and international partnerships. Indonesia's forestry ministry advisor Edo Mahendra framed the new regulation as foundational infrastructure for accelerating forest carbon trade with clearer, simpler business processes. Vietnam's move came more than a month after the government had already introduced a separate legal framework for cross-border carbon trading, which allows offshore wind, carbon capture, and green hydrogen projects to export up to 90 percent of their generated credits.
Vietnam's domestic carbon exchange has slipped a year and is now expected to launch by the end of 2026 rather than earlier. But the country has already secured approval to receive over $70 million from forest carbon credits, based on a proposal submitted jointly to the United Nations-backed Green Climate Fund by the Vietnamese government and the Japan International Cooperation Agency. That funding signals confidence in Vietnam's direction, even as the country continues to build out the regulatory infrastructure that will make the market function. Both nations are positioning themselves not as experimental players in carbon markets but as serious participants with rules designed to prevent the kind of fraud and double-dealing that has undermined carbon credit schemes elsewhere. What happens when these exchanges actually open will test whether the regulations can deliver on that promise.
Notable Quotes
The regulations serve as a foundation for accelerating forest carbon trade with clearer and simpler business processes as global demand for high-integrity credits grows— Edo Mahendra, Indonesia's Ministry of Forestry principal advisor
Another important development in Vietnam's carbon pricing, following similar policy from Indonesia— Mai Duong, policy advisor at the International Institute for Sustainable Development
The Hearth Conversation Another angle on the story
Why does it matter that Vietnam and Indonesia are writing these rules now, rather than waiting to see how global carbon markets develop?
Because they're not waiting. They're building the infrastructure that will let them participate in those markets from a position of strength. If you don't have transparent rules in place, international buyers won't trust your credits.
The "nesting" framework in Indonesia sounds technical. What problem does it actually solve?
Double counting. Imagine a forest project reduces 1,000 tonnes of carbon. Without nesting, the local government might claim credit for those reductions, the national government might claim them too, and the project developer might sell credits for them. You've just sold the same carbon reduction three times. Nesting creates a hierarchy that prevents that.
So these regulations are really about market integrity rather than environmental protection?
They're both. You can't have a functioning carbon market without integrity. And you can't fund forest protection at scale without a functioning market. The regulations make sure the money actually goes to forests and communities, not just into traders' pockets.
Vietnam's exchange keeps getting delayed. Does that undermine confidence in these new rules?
Not necessarily. The rules are solid. The delay is about getting the technical infrastructure right—the trading platform itself. That's a different problem. The fact that Vietnam already has $70 million approved for forest carbon credits suggests international partners believe in the framework.
What happens if these regulations don't work—if traders still find ways around them?
Then both countries lose credibility in global markets, and the whole forest carbon sector suffers. That's why the rules are strict. They're betting that rigorous oversight now will attract more investment later.