Executive Summary
Vietnam’s green transition is gathering pace, shaped by a mix of bold climate commitments, entrenched fossil fuel dependencies, and complex policy trade-offs. The country has pledged to achieve net-zero emissions by 2050 and is aligning its domestic agenda with global measures such as the EU’s Carbon Border Adjustment Mechanism. Yet coal still provides over half of Vietnam’s electricity, anchoring local economies and major state-owned enterprises, and making the shift toward cleaner energy politically and economically sensitive.
Power Development Plan VIII (PDP8) charts a rebalancing of the energy mix, but these ambitions face significant financing, infrastructure, and regulatory hurdles. The $15.5 billion Just Energy Transition Partnership (JETP) is designed to accelerate this shift, though progress has been slowed by disbursement delays and implementation barriers, underscoring the need for sustained political will and investor-friendly frameworks.
Transport is becoming a highly visible decarbonization front, with policies to phase out fossil fuel vehicles in major cities and push electrification across both private and public fleets. Domestic players like VinFast are capitalizing on this shift, but charging infrastructure gaps, uneven support for two-wheelers, and grid resilience remain challenges. In parallel, the government is pursuing near-term emissions cuts through the nationwide rollout of E10 biofuel from 2026, a program whose success will hinge on scaling domestic ethanol supply and securing public acceptance.
Vietnam’s transition is less a straight line than an evolving puzzle of political priorities, market realities, and technological change. Its eventual success will depend on aligning these pieces into a coherent whole – balancing energy security, economic growth, and environmental goals. For businesses, this is a critical window to adapt operations, build partnerships, and position for leadership in a low-carbon economy that is taking shape now.
In July 2025, the Vietnamese government issued Directive No. 20/CT-TTg, outlining a phased plan to restrict and eventually ban fossil fuel vehicles in central Hanoi. Around the same time, the Ministry of Industry and Trade (MOIT) announced that E10 biofuel would be rolled out nationwide, starting in January 2026. Both measures have attracted public attention and sparked debate.
At first glance, these two developments may appear to be pulling in opposite directions: one aims to eliminate combustion engines altogether, while the other prolongs their viability. Yet together, they reflect the multi-layered and sometimes contradictory path of Vietnam’s green transition.
This transition is best understood not as a single linear story, but as a complex puzzle made up of interlocking pieces: political commitments, global finance, entrenched energy structures, top-down policy directives, emerging technologies, and difficult trade-offs.
While efforts toward sustainability touch every sector from agriculture to manufacturing, energy and transport have emerged as the most visible and politically charged fronts. In the following sections, Vero Advocacy examines some of the most revealing puzzle pieces that particularly drive the transition in these two critical areas.
Puzzle Piece 1: The Black Gold – Coal
Coal remains the backbone of Vietnam’s energy system, supplying over 54% of electricity as of mid-2025. It is deeply embedded in provincial economies such as Quang Ninh and Thai Binh, where entire communities depend on mining, logistics, and thermal generation. It is also closely tied to the financial stability of some major state-owned enterprises (SOEs), such as EVN, Vinacomin, and PV Power, all of which depend on legacy infrastructure and long-term power purchase agreements.
Ironically, many modern coal plants, built with foreign financing, are designed to burn imported coal rather than domestic anthracite, making Vietnam a resource-rich country reliant on global suppliers and exposed to price volatility.
Meanwhile, renewable energy, primarily solar and wind, remains intermittent, accounting for just under 14% of electricity output. Despite national targets, coal’s dominance is reinforced by infrastructure lock-in, long-term contracts, and grid constraints.
Shifting away from coal has proven politically and economically challenging, given sunk costs, vested interests, and ongoing concerns over energy security. Yet, against this backdrop of coal dependence, Vietnam made a leap that surprised many observers — a bold climate pledge on the world stage.
Puzzle Piece 2: The Promise – A Landmark Commitment at COP26
In November 2021 at COP26 in Glasgow, Prime Minister Pham Minh Chinh pledged that Vietnam would achieve net-zero emissions by 2050 – a bold and unprecedented move for a lower-middle-income, fossil-fuel-reliant economy. This historic commitment marked a turning point, signalling Vietnam’s readiness to align with global climate goals and placing the country firmly under international scrutiny.
This pledge did not come out of nowhere. Over the past decade, the Government has steadily built a legal and policy foundation to support this vision – enacting and amending laws, issuing new regulations, and creating dedicated strategies to promote green growth across sectors. The first milestone came in 2014 with the National Action Plan on Green Growth for 2014–2020. This was followed in 2021 by the National Strategy on Green Growth for 2021–2030, with a vision to 2050 under Decision No. 1658/QĐ-TTg, which reaffirmed green growth as a central pillar of sustainable national development.
External forces are also accelerating the shift. As the first Southeast Asian country to sign a free trade agreement with the European Union (EVFTA), Vietnam is also exposed to external climate-related trade measures – most notably, the EU’s Carbon Border Adjustment Mechanism (CBAM). CBAM, which will begin phasing in from 2026, puts a price on the carbon content of certain exported goods like steel, aluminum, and cement. For Vietnam’s exporters, aligning with EU green standards is no longer optional – it is becoming a condition for continued market access. This is expected to drive deeper decarbonization across Vietnam’s industrial base and supply chains.
The challenge has shifted from “why” to “how”: how to turn this high-level pledge into action while safeguarding energy security and growth.
Puzzle Piece 3: The Plan – PDP8
Vietnam’s answer began to take shape through Power Development Plan VIII (PDP8), approved in 2023 after a long wait and recently revised in April 2025. The plan maps out the country’s power sector through 2030 and beyond, initially aiming to increase the share of renewables to 30.9 – 39.2% by 2030, with a longer-term goal of reaching 67.7–71.5% by 2050.
But a clean energy transition is not simply about building wind or solar farms. It demands a smarter, more flexible grid capable of managing variability and integrating distributed sources. Vietnam’s long, narrow geography, combined with densely populated urban centers and fast-growing industrial zones, makes this especially challenging. Draft after draft reflected difficult trade-offs: expanding capacity versus ensuring grid readiness, domestic funding limitations versus international expectations, and accelerating the transition versus safeguarding energy security.
PDP8 also charts an ambitious shift toward liquefied natural gas (LNG) and offshore wind – each with its own challenges. While LNG is not a renewable energy source, it provides a cleaner alternative to coal but deepens reliance on costly imports. Offshore wind holds the potential for large-scale renewables, yet progress is constrained by complex infrastructure demands, significant capital requirements, and a regulatory framework still in its infancy.
The coal sector, of course, also featured prominently in these debates. PDP8 allows existing coal plants to continue operating well into the 2030s and ceases new investments thereafter. Rather than abrupt closures, the plan relies on a combination of market signals, regulatory measures, and renewable incentives to guide the transition. It is a cautious but necessary step toward rebalancing Vietnam’s energy portfolio.
Puzzle Piece 4: The Financier and Catalyst – JETP
To achieve its energy transition targets, Vietnam will require an estimated $136.3 billion between 2026 and 2030, including $118.2 billion for new power generation and $18.1 billion for grid development. For an emerging economy like Vietnam, this represents a massive financial undertaking, equivalent to nearly one-third of its 2023 GDP. To finance this bold transformation, Vietnam struck a landmark deal with the G7 and other partners in 2022: the Just Energy Transition Partnership (JETP), valued at $15.5 billion in public and private finance. The partnership aims to accelerate Vietnam’s shift away from coal and support the implementation of PDP8 while ensuring the process is equitable.
However, the actual disbursement of funds for the eight pilot projects under JETP has faced delays and is yet to be fully realized, with several implementation barriers still to be addressed. Nonetheless, progress is emerging. Pilot renewable energy projects are underway in provinces such as Ninh Thuan and Binh Thuan. Vietnam is also working to improve the framework for green investment, including new grid-access regulations, a national green taxonomy, and potential green bond issuance.
JETP’s success will hinge on sustained political will, regulatory clarity, and inclusive engagement. If realized, it could become a model for just energy transitions in emerging markets.
Puzzle Piece 5: The Push to Electrify – Directive 20 and the EV Transition
On July 12, 2025, Prime Minister Pham Minh Chinh issued Directive No. 20/CT-TTg, calling for urgent and coordinated action to address worsening environmental pollution – an implementation step that directly supports the National Green Growth Strategy under Decision 1658/QĐ-TTg. Consistent with Decision 1658’s targets to reduce greenhouse gas emissions, expand the share of clean energy in transport, and raise the proportion of public transport running on green technologies, Directive 20 instructs all ministries and local authorities to review legal bottlenecks, improve enforcement capacity, and assign clear accountability. It also emphasizes technology adoption, digital transformation, public-private partnerships, and stronger citizen engagement to tackle urgent environmental challenges.
The directive’s most headline-grabbing component is its bold roadmap to phase out fossil fuel vehicles in Hanoi—serving as a pilot for future low-emission zones across urban centers. By July 1, 2026, motorcycles and mopeds using fossil fuels will be banned within Ring Road 1, which runs through some of the city’s most densely populated neighborhoods. This restriction will extend to Ring Roads 1 and 2, including personal gasoline cars, by 2028, and to Ring Road 3 by 2030.
Momentum is gradually building. Ho Chi Minh City has also announced plans to convert hundreds of thousands of motorbikes to electric models by 2028, and new incentives from both government and manufacturers are beginning to take shape.
This broader shift has contributed to the growing momentum of the electric vehicle (EV) sector. Domestic manufacturer VinFast is among the more established players and has benefited from earlier policy measures aimed at supporting the broader EV sector. VinFast’s dominance is further reinforced by its infrastructure advantages. Through its affiliate V-GREEN, the company has rapidly developed a branded nationwide charging network over the years, primarily located on its commercial land. Other brands, such as DatBike, Yadea, and Honda, are expanding their presence through alternative approaches, including home charging, dealership-based solutions, and partnerships with third-party providers.
Despite progress, several challenges remain. Charging infrastructure is concentrated in major cities, with limited coverage in rural areas. Past electricity shortages in some northern provinces have raised questions about the resilience of the national grid and the pace of infrastructure expansion. Regulations for battery recycling and second-hand EVs remain underdeveloped. Moreover, as the electricity mix continues to rely heavily on fossil fuels, the net environmental impact of electrification will depend in part on the broader energy transition.
These infrastructure constraints are also reflected in the varying levels of policy attention across vehicle types. Two-wheelers, Vietnam’s most widely used form of transport, currently receive less targeted national support for electrification compared to electric cars. While incentives and infrastructure planning for four-wheel EVs are more clearly defined, the development of electric motorbikes often depends on provincial-level programs, which differ in scope and approach. Similarly, the electrification of public transport remains at a pilot stage in cities such as Hanoi and Ho Chi Minh City, with ongoing efforts yet to be expanded at the national level.
Vietnam’s electrification drive is no longer just a transport story. It is a core pillar of the country’s green growth pathway. As the country moves forward, aligning infrastructure, regulatory clarity, and market readiness will be essential to ensure a practical, inclusive, and effective transition.
Puzzle Piece 6: The New Fuel – E10
As Vietnam advances long-term energy plans, it is also preparing near-term steps to cut transport emissions through biofuels. The Ministry of Industry and Trade (MOIT) is revising the roadmap for ethanol-blended gasoline under Decision 53/2012/QĐ-TTg, with a tentative nationwide rollout of E10 fuel set for January 1, 2026.
Despite its green promise, the E10 rollout could face skepticism. Past attempts to introduce E5 biofuel met with public resistance due to concerns over engine compatibility issues and reduced fuel efficiency, especially in older vehicles.
Ethanol production itself faces challenges. According to the Department of Innovation, Green Transition and Industrial Promotion under MOIT, to meet the projected demand of 1–1.5 million cubic meters annually, the government has encouraged major fuel distributors such as Petrolimex, PVOIL, and Binh Son Refining to ramp up infrastructure for biofuel blending. Ethanol production plants in Dung Quat, Dong Nai, and Quang Nam are being restarted after years of inactivity. However, current domestic production capacity only covers around 40% of this demand, meaning the rest will likely depend on imports from countries like the U.S., Argentina, and Brazil. Moreover, the logistical challenge of setting up nationwide blending and storage systems, particularly in rural and mountainous areas, could strain fuel distributors and local provinces alike.
Despite challenges ahead, Vietnam’s rollout of E10 is a pivotal milestone in its green transition. Its success hinges on scaling domestic ethanol supply and securing consumer acceptance through awareness and pilot programs. Meanwhile, EV adoption is also accelerating, with government support, subsidies, and infrastructure expansion pushing the transport sector in a longer‑term electrification direction.
Puzzle Unfinished: Looking Ahead
As Vietnam assembles the pieces of its green transition, the overall picture remains incomplete – full of both promise and uncertainty. Whether these pieces come together into a cohesive, sustainable future or remain scattered depends on decisions made today, and how bold policy announcements are realized through effective, inclusive implementation grounded in local realities.
For businesses, this is a time to stay engaged. While monitoring policy developments is important, there is also value in developing a clearer understanding of how regulatory shifts may shape specific sectors. Companies that begin aligning with Vietnam’s transition goals through compliance planning, operational adjustments, or partnerships could be better positioned as the landscape continues to evolve.