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INTERVIEW: Voluntary carbon market first step for Malaysia toward carbon pricing: Bursa Malaysia CEO


Exchange acts as catalyst to establish carbon pricing in Malaysia

Working with companies like Petronas to set up supply chain emissions accounting

In early stage of setting up voluntary carbon projects

  • Author
  • Ivy Yin    Eric Yep
  • Editor
  • Debiprasad Nayak
  • Commodity
  • Agriculture Energy Transition

The voluntary carbon market is a first step for Malaysia towards putting a price on carbon until the country charts a longer-term pathway to more stringent carbon taxes or a cap-and-trade scheme, Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, said in a recent interview.

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Malaysia is in the early stages of building a carbon market. Despite having a large forest cover and natural resources, it has been under pressure to accelerate decarbonization as it is home to some of Southeast Asia's most energy-intensive industries in agriculture and petroleum.

Bursa Malaysia, which operates Malaysia's stock exchange, manages the nation's first government-backed voluntary carbon exchange, Bursa Carbon Exchange (BCX). The exchange has been working with the government agency Malaysian Green Technology and Climate Change Corporation or MGTC, to establish the groundwork for carbon emissions monitoring and reduction in the country.

"What we seek to do is to create a marketplace so that producers of carbon credits can see a reference price, which is a lit market. So it's not bilateral. It's objective. And purchasers can see the reference price," he said.

Muhamad Umar said the exchange was doing this as the voluntary carbon space is currently dominated by bilateral trades and companies only purchase credits once a year resulting in an inactive marketplace. A voluntary market would be a first step towards price discovery.

In late July, the Malaysian government said in its National Energy Transition Roadmap that it was working with the World Bank on a feasibility study, expected to conclude in 2025, for the most suitable carbon pricing instrument to adopt.

"So the voluntary carbon market is the best solution for Malaysia at this point in time. That was, if you like, a policy decision," Muhamad Umar said.

"Will we move to a carbon tax as a country? Ultimately. Will we have [a] cap and trade or a domestic emissions trading scheme? Yes. But that is a longer body of work because there's a value judgment on what is the acceptable level of emissions while achieving your glide path to net zero and bringing everyone along on that journey," he said.

"So we use the voluntary carbon market as a tool for educating all participants and key stakeholders," Muhamad Umar said, adding that the exchange was engaging large Malaysian corporates who had been thinking about purchasing carbon credits but had not crystallized their position.

"And so we were acting as a catalyst to also create a market," he added.

First step toward carbon pricing

Muhamad Umar said that voluntary carbon credits have been "demonized."

"They're not inherently good or bad. They are just what they are. However, they have [a] positive impact," he said, adding that whether entities are responsible in their usage of voluntary credits is another conversation.

"We do view voluntary carbon credits as a start of the process where we can educate stakeholders ... we're talking [to] government, companies, local communities, local governments ... 'Here is a tool that you can use to have a positive outcome'," Muhamad Umar said.

"We see it as a first step of the journey," he said when asked whether Bursa Malaysia's carbon platform is expected to lay the ground for a broader ETS or domestic carbon trading scheme.

He said Bursa Malaysia was actively talking to listed companies about how to decarbonize their supply chains and leverage the carbon products offered by BCX, even though these companies only account for 2% of all companies sit in Malaysia.

"We are working with Petronas on actually looking at calculating carbon [footprints] for supply chains, Scope 1, 2 and 3," Muhamad Umar said.

He said Bursa Malaysia is running different user cases to understand the difficulties of emission accounting in different sectors, and ultimately will help companies to calculate their carbon footprints with confidence.

Besides Petronas, pilot companies from the property and car manufacturing sectors are involved, and the exchange is assisting in matching offsets between the companies and the future carbon project owners.

Regional presence

Despite abundant natural resources, Malaysia has a very nascent voluntary carbon market. Based on the Verra registry's records, Malaysia only had 13 projects registered at the time of writing, and only 2 of these were nature-based projects.

Muhamad Umar said that the carbon market in Asia was not homogeneous, and Bursa Malaysia was talking to regional peers for standardization on carbon as well as climate-related topics.

"I'm actively talking with the Stock Exchange of Thailand and IDX [Indonesia Stock Exchange] about what commonality we can have, what are they doing around carbon, and how can we work together to achieve a positive outcome," Muhamad Umar said

Muhamad Umar said hurdles for Malaysia to scale up the carbon credit supply included the long verification process for projects as well as bureaucratic hurdles as carbon policies and strategies are made at the federal level, while the natural resources are managed at the state level.

"We work with MFF [Malaysia Forestry Fund]. We work with the states. We work with project promoters to educate that realistically, what can be done and what can't be done," Muhamad Umar said.