Malaysia on track to implement National Carbon Policy this year: minister

Malaysia's National Carbon Policy is expected to be ready for implementation within this year and will provide more clarity on carbon trading at the state level, Nik Nazmi Bin Nik Ahmad, the country's Minister of Natural Resources, Environment and Climate Change, said late Oct. 5 at an industrial forum.

The minister said carbon markets are expected to support the country's decarbonization goals, including voluntary carbon markets which "will be very important for Malaysia moving forward."

He said the frequency of weather events like floods increased and represent a threat to Malaysia's assets like power plants, LNG regasification terminals, gas pipelines, ports and urban developments, located next to coastlines.

In May, the government announced plans to raise the share of Malaysia's installed renewable energy capacity to 70% by 2050 from 25% currently, followed by the launch of the National Renewable Energy Roadmap to accelerate energy transition.

VCMs can help host countries to achieve their nationally determined contributions even if such sales are to corporate buyers outside of Malaysia, because sales of carbon credits in VCM do not require authorization from host countries, Nik Nazmi said.

"This is an opportunity as Malaysia is well endowed with resources that can propel us towards a lower carbon economy," he said, adding that in 2019, 54.9% of the country was under forest cover that could be managed to ensure permanent carbon sequestration.

The minister said that forest lands in Malaysia are largely owned by state governments that are seeking to align carbon policies for forest carbon assets, and the Bursa Carbon Exchange is organizing their next auction to offer Malaysian nature-based carbon credits.

BCX is also getting ready to auction carbon credits from the Kuamut Project, which is located in the state of Sabah, he added.

VCM handbook

The minister was speaking at the launch of Malaysia's VCM handbook that provides the industry with the basic guidelines for participating in a carbon market framework.

Malaysia is developing the country's Long-Term Low Emissions Development Strategy to meet its target of net-zero GHG emissions by as early as 2050, Prime Minister Anwar bin Ibrahim said in the handbook.

"The VCM is one of the key initiatives identified to enable Malaysia to become a net zero greenhouse gas (GHG) emission nation as early as 2050," the handbook said.

It noted that the country's first carbon exchange BCX offered three modes of trading: auctions conducted for the purpose of facilitating the price discovery of new products with bids ranked by price, volume and time basis, off-market transactions that are also known as block trades or over-the-counter transactions, and continuous spot trading for real time bids and offers that went live since Sept. 25.

BCX is open to Malaysian and international corporates to participate and market participants will be introduced in stages, starting with traders and suppliers, while brokers and market makers will be included at a later stage.

The handbook also stated that in Malaysia, state governments have jurisdiction over matters such as land administration, agriculture and local government, and with regards to the carbon market, a few states have developed policies and regulations related to carbon trading.

Among the states, Sarawak is considered the most advanced and has enforced a law on carbon trading, while Sabah is formulating its law. The state of Pahang is amending laws to accommodate carbon trading, while Terengganu, Johor and Kelantan are engaged in the REDD+ program and looking to align policies with the federal government.

Malaysia previously stated there were no restrictions on the sale of carbon credits generated to overseas buyers, BCX traded carbon credits shall not be authorized to meet the NDC of other countries or for other international mitigation purposes and the trading of BCX carbon credits does not require approval from the national authority, although all VCM projects with registries need to be reported to the national authority.

Developing domestic carbon products

The Asia Carbon Institute, a new Asia-based voluntary carbon credit standard organization and registry, was launched in Singapore and Hong Kong in August, focusing on urban technology-based solutions, and aims to register up to 100 projects within a year, Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, said in a speech at the same event.

"This development is significant given the region's influence on international standards from outside of Asia. We look forward to ACI's methodology development and its acceptance by international market participants and schemes such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the Science Based Targets initiative (SBTi)," Umar said.

"We envisage perhaps in a not too distant future where there are local standards in the ASEAN region that are recognized among respective markets for high quality carbon credits. Perhaps there might even be an inter-operable ASEAN carbon registry, where it can facilitate both cross-border carbon trading and data linkages," he added.

Umar confirmed that Malaysia's nature-based project, the Kuamut Rainforest Conservation Project in Sabah, was nearing its first issuance and hoped the country's carbon "supermarket shelves" will be stocked with Malaysian products, even as there are more projects in the pipeline.