Viet Nam’s aviation sector under growing carbon cost pressure

New cost pressures

Under CORSIA, established by the International Civil Aviation Organization (ICAO), airlines from participating countries are required to offset carbon emissions exceeding the 2019 baseline by purchasing eligible carbon credits and implementing emission-reduction measures.

According to Dinh Van Tuan, Deputy General Director of Viet Nam Airlines, the implementation of CORSIA will generate significant costs regarding the purchase of carbon credits. In the first compliance year alone, the national flag carrier estimates it will need to offset anywhere from 312,000 to more than 420,000 eligible emission units, with obligations expected to rise in subsequent years.

A key question is how airlines will manage these carbon costs in practice. If carriers absorb the full expense themselves, profits will shrink. If part of the burden is passed on through ticket prices, passengers will be directly affected at a time when travel demand remains sensitive to price fluctuations.

These pressures come as airlines are already coping with volatility in global fuel prices. In addition, one of the greatest risks in implementing CORSIA lies in the price and supply of carbon credits. The market for CORSIA-eligible credits is still in its early stages, with limited supply, while legal frameworks governing the development, certification, and trading of credits in many countries remain incomplete and inconsistent.

Globally, although many countries and projects have launched carbon credit mechanisms, only a limited number of credits qualify under CORSIA. Currently, ICAO recognises only six types of eligible credits, while in practice only three projects fully meet the conditions for trading within the CORSIA framework. Exchange rate fluctuations and difficulties in forecasting compliance costs also pose challenges for airlines in medium- and long-term financial planning.

Moreover, compliance obligations extend beyond purchasing carbon credits, requiring airlines to invest in systems for emissions monitoring, measurement and reporting — costs that were previously not fully incorporated into aviation operations.

CORSIA also lacks uniform global participation. Differences in the level of participation among countries may raise concerns over fair competition, as airlines proactively complying with environmental commitments bear additional costs while competitors in the same market may not yet face similar obligations.

According to Do Hong Cam, Deputy Director General of the Civil Aviation Authority of Viet Nam, implementing CORSIA, airlines will face additional compliance costs during the 2026-2030 period, including expenses for purchasing eligible emission units for carbon offsetting, verification costs, emissions data management and reporting costs, as well as costs related to sustainable aviation fuel (SAF).

Viet Nam Airlines has been studying and preparing for SAF use as the fuel can reduce up to 80 per cent of CO2 emissions over its lifecycle. However, SAF adoption would significantly affect operating costs. With a blending ratio of just 2 per cent, SAF would account for up to 7 per cent of Viet Nam Airlines’ fuel cost structure because SAF prices are currently around four times higher than traditional Jet A1 aviation fuel.

At the same time, global SAF supply remains limited and unevenly distributed. Some airports in Europe are still unable to provide SAF refuelling services. In Asia, Viet Nam Airlines has used SAF on flights from Bali to Viet Nam, but the blending ratio remains very low at around 0.26 per cent. Domestically, SAF production only began in 2025 and has so far been tested only on short-haul flights with a 5 per cent blending ratio.

Need for comprehensive solutions

The trend of treating carbon as an operational cost in aviation is becoming inevitable. For Viet Nam’s aviation sector, the challenge lies not only in paying additional costs, but also in managing them effectively and sustainably over the long term. This requires stronger emissions management capacity within enterprises as well as appropriate support mechanisms to balance environmental objectives with industry development.

According to Dinh Van Tuan, Viet Nam Airlines will prioritise using available carbon credits on the market and participating in suitable international trading channels and agreements to meet CORSIA obligations. The airline is also considering advance purchase agreements and long-term price and volume stabilisation mechanisms to reduce exposure to market volatility.

In the longer term, once the legal framework is completed and the economic and technical efficiency of carbon projects becomes clearer, the airline will consider participation or investment in suitable carbon credit generation projects.

In addition, to help businesses proactively comply with CORSIA requirements and reduce long-term risks, Tuan also stressed the need to promptly complete the legal framework and carbon market mechanisms, including detailed regulations on credit standards, recognition, trading and utilisation in line with CORSIA requirements while ensuring compatibility with international markets. At the same time, it is necessary to study and introduce appropriate support mechanisms, particularly policies on taxes, fees and incentives for infrastructure investment for airlines during the transition to sustainable aviation fuel use, with the aim of developing a green and sustainable aviation industry in the long term and participating in domestic emission reduction projects.

From a regulatory perspective, policy improvements must also involve stronger inter-agency coordination. According to Do Hong Cam, it is necessary to soon issue a circular replacing Circular No. 22/2020/TT-BGTVT (dated September 28, 2020), issued by the former Ministry of Transport, on the management of fuel consumption and CO2 emissions from aircraft in civil aviation activities. The new regulation should fully incorporate ICAO’s updated requirements on monitoring, reporting, verification, and carbon offsetting obligations while ensuring consistency with domestic environmental, energy, and carbon market regulations.

Cam noted that implementing CORSIA is not solely the responsibility of the aviation sector but requires close coordination among ministries and sectors. Viet Nam also needs to closely monitor new policies introduced by ICAO, the European Union and major international partners so as to avoid regulatory overlaps and minimise the risk of technical barriers affecting Vietnamese airlines.

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