This article first appeared in The Edge Malaysia Weekly on August 19, 2024 - August 25, 2024

Thanks to its rainforests rich with biodiversity and abundance of renewable energy sources, Southeast Asia is seen as a hotspot for carbon credit projects.

But several hurdles stand in the way. The leading carbon credit standard setters take a long time to validate projects and the cost of going through the process is steep.

These factors are driving the carbon markets associations of Thailand, Indonesia and Malaysia to develop an Asean Common Carbon Framework (ACCF), where there is mutual recognition of each country’s carbon market standards.

“The verification costs can easily go up to RM2 million because they are priced in US dollars, and the other bottleneck is that we have to wait about six to eight months before [projects] are attended to. That’s from the experiences we have observed,” says Renard Siew, president of the Malaysia Carbon Market Association (MCMA) and group head of corporate sustainability at Yinson Holdings Bhd (KL:YINSON).

Siew was speaking to ESG on the sidelines of the recent Malaysia Carbon Market Forum organised by Bursa Carbon Exchange in Kuala Lumpur, where the MCMA was officially launched.

“The framework has two elements. One is around the standard and the other is the development of a pool of shared resources. This is where different Asean countries mutually recognise and accept the methodologies and standards. This develops a competent pool of Asean-based validation and verification bodies, which would hopefully help expedite the progress of all these projects.”

The goal of the ACCF is to produce high-quality carbon credits in the region and develop interoperable carbon markets. It is also a response to the scrutiny of carbon credits generated in the region and regulations that would require companies to reduce or offset their emissions. Speaking as a region rather than individual countries, they believe, is more influential.

“Thailand only has 70 million people, but Asean has 800 million people, and we have the likes of CBAM (Carbon Border Adjustment Mechanism) waiting for us. That’s why we need something [like an] internationally recognised standard for Thailand,” says Gloyta Nathalang, senior vice-president of sustainability management and corporate communications at Bangchak Corp Pcl and chair of Thailand Carbon Markets Club.

Thailand already has T-VER, which is its own carbon credit standard for its voluntary emissions reduction programme. Each carbon credit unit is called a TVER.

“I’m still not quite sure if the premium TVERs are something accepted by the EU (European Union). So, why don’t we work harder as a region, not just for Thailand, [to have a common standard], then there will be a lot of benefits like cost effectiveness that can help us become stronger.”

A common standard to measure and verify carbon credits in Asean was also mooted in response to the slow progress among governments to resolve Article 6 at the United Nations’ Conferences of Parties.

Article 6 allows carbon credits to be transferred between countries without double-counting emission reductions, and the setting up of an international registry.

“In terms of technicalities, I think it’s something for Asean to discuss and, maybe then, it’s much easier for us to have alignment with other regions,” says Riza Suarga, president and CEO of Agraus Resources, a developer of carbon credit projects, and chairman of the Indonesia Carbon Trade Association.

Verra, the most widely used carbon credit standard in the world, has been under fire for several of its projects. Overcounting of carbon emissions avoided or reduced, and overlooking alleged human rights violations, are some of the problems highlighted. In response, Verra has updated its methodologies, suspended registry accounts and carbon credit issuances from projects pending investigations.

Clearly, establishing trust and confidence in an Asean common carbon standard will be difficult. When asked, Riza says this is a problem the parties want to address.

“We cannot neglect buyers’ preferences. As a project owner, the reason I use Verra is because my buyers want Verra, and some want Gold Standard. I’m not saying that I don’t care what standards I should use; as long as they make sense, they are realistic, compliant and meet market demand,” says Riza.

For this reason, the proponents urge Singapore to be part of forming the ACCF as well, since the country can represent carbon credit buyers.

“If we are all just from the supply side and we decide on something that buyers don’t really like, it’s a bit difficult. So far, Singapore is the only one in Asean representing the buyer side. We need to work on how we can strategise our journey,” says Riza.

The ground work on formulating the ACCF is being currently developed, says Siew, who adds that this is an initiative that Malaysia is pushing as it takes over the Asean chairmanship next year.

“Recently, the Singapore Carbon Market Alliance was announced. We need the support of the four countries to start with and then we eventually want to get other countries to start coming in,” says Siew.

The outcome of the collaboration could take many forms, but it will be seen as a pilot project that showcases what is possible.

“We may start by [having something] like the currency exchange scheme, like one TVER is equal to 100 tonnes of Verified Carbon Units [by Verra]. Then we could move along to have a unified and internationally accepted single standard at the end, but I fully understand it will take years, if not decades,” says Nathalang.

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