As Malaysia embarks on its mission against climate change, one of the nation’s efforts in creating a sustainable future is through the implementation and facilitation of the carbon trade market. The carbon trading mechanism was formulated to regulate and diminish the amount of carbon dioxide and greenhouse gases being released by companies into the environment.
The carbon trade market is a platform which administers the trading of carbon credits. Carbon credits are defined as certificates or permits that warrant the emission of a specific amount of carbon dioxide and/or greenhouse gases over a stipulated period of time. One carbon credit is equivalent to the emission of one metric ton of carbon dioxide and/or greenhouse gas.
As such, corporations can sell and purchase carbon credits depending on their usage. For instance, if a company achieves its reduced emission target and possesses excess carbon credits, they can sell their carbon credits to other companies in need of extra credit. This market-based approach allows carbon offset amongst the corporations which encourages industrial players to reduce carbon footprint and adopt a more sustainable business model.
In line with this, Malaysia has proudly pledged its commitment of achieving net zero greenhouse gas emissions by 2050. As such, industrial players such as Petroliam Nasional Berhad (PETRONAS) and Tenaga Nasional Berhad Malaysia (TNB) have alongside declared their aspiration to reduce emission in supporting the country’s goal.
One of the prominent efforts taken in achieving this goal is through the implementation of the Bursa Carbon Exchange (BCX). The BCX is Malaysia’s first voluntary carbon marketplace which offers two types of standardised contracts offered for trading. The first type of contract involves technology-based projects that utilises innovation in reducing carbon emission and combating climate change. The second type of contract is catered for the nature-based sector which involves projects in the agriculture, forestry and land use industries.
At the end of 2022, BCX launched its marketplace by holding an initial auction which resulted in the sale of carbon credits to ten companies, including CIMB Bank and Vitol Asia. Approximately 16,500 units of carbon credits were traded in the first two days. However, the trading marketplace witnessed a significant drop as the subsequent trading days was reduced to a total of 80 credit units traded over the past weeks, while it continued to suffer a painstaking drop to zero units of carbon trading on some days.
This depletion was met with criticism by the Minister of Energy and Natural Resources of Malaysia, Nik Nazmi bin Nik Ahmad which summoned and called out corporations in Malaysia to support the national efforts on sustainability.
In reality, whilst the concept of carbon trading seems promising, its implementation has undeniably been met with several hurdles. Hence, the government plays an essential role in promoting carbon trading by introducing economic reliefs and tax incentives to encourage businesses to actively participate in the carbon trading market.
In conclusion, the nation remains hopeful in its progress towards a sustainable future that strives to develop the carbon exchange market in Malaysia.