This article first appeared in The Edge Malaysia Weekly on August 19, 2024 - August 25, 2024
Bursa Malaysia Bhd’s Bursa Carbon Exchange (BCX) successfully held an online auction on July 25 for the first Malaysian nature-based carbon credits generated by the Kuamut Rainforest Conservation Project in Sabah.
The Kuamut project is developed by Permian Global, a company that channels private-sector carbon finance into projects that protect and restore threatened tropical forests in Malaysia, Indonesia and Brazil. It plans to use the funds generated from the auction to protect and restore 83,381ha of tropical rainforest in the Tongod and Kinabatangan districts of Sabah.
The auction saw eight successful bidders, mostly larger corporates from the oil and gas and financial sectors. They included BBB Asia Capital Bhd, CIMB Bank Bhd, Eco Green Carbon Ventures Sdn Bhd, Gas Malaysia Bhd, Malayan Banking Bhd (Maybank), Petroliam Nasional Bhd (Petronas), TROX Malaysia Sdn Bhd and Yinson Holdings Bhd.
The total volume of carbon credits sold was over 20,000 tonnes CO2e, according to Bursa Malaysia.
ESG approached the companies to understand their motivation for doing so. As Malaysia does not have a carbon price, those that purchase carbon credits to offset their emissions are doing so voluntarily, unless they are subject to carbon tax in other countries or to meet stakeholders’ requirements.
“We participated in this initiative mainly because it was the country’s first issuance of such credit and considering the intensive due diligence and standards applied to the listing of these credits by Bursa Malaysia. We are using these credits to partially offset our Scope 1 and 2 emissions,” Maybank group chief sustainability officer Shahril Azuar Jimin tells ESG in an email reply.
He adds that Maybank purchased BCX’s carbon credits at its auction in 2023 to offset its residual emissions and support the country’s carbon exchange.
Meanwhile, TROX says it participated in the auction to be able to achieve climate neutrality at its production facilities for its Scope 1 and 2 emissions by 2025.
“TROX has already implemented several measures to reduce carbon emissions, including [installing] solar power and rainwater harvesting [systems] and switching to green electricity. However, not all emissions can be eliminated at present,”says Michael Hakel, manufacturing director of TROX Malaysia.
The floor price of the auction was cleared at RM50 (about US$10.70) per contract, with a minimum bid order of 1,000 units vintaged from 2017 to 2021.
Neither company disclosed how much they spent on the auction or how many credits they had bid for. TROX only stated that it successfully secured all the carbon credits that it had planned for at the initial bid price.
Permian Global and Bursa Malaysia hope that this project will show Malaysia’s potential in generating high-integrity carbon credits as it is assessed against one of the most widely used global standards for carbon credits — Verra’s Verified Carbon Standard and its Climate, Community and Biodiversity Standards.
The area was once a production forest that was repeatedly logged. The project is expected to prevent commercial logging in the forest for more than three decades.
The clearing price for the auction of these credits, however, was lower than that of BCX’s first auction of Global Nature-Based Plus Carbon Contract credits last year at RM60 per contract. Those credits were sourced from the Southern Cardamom Project in Cambodia.
After that auction, Verra suspended carbon credit issuances from the project pending a review after receiving complaints about alleged human rights violations. No new credits from this project has been issued from BCX.
When asked, Bursa Malaysia says the vintage for the carbon credits from Kuamut were blended for five years (2017-2021), while the ones from Southern Cardamom were from 2021. Carbon credit prices tend to be higher for those that were generated recently.
The regulator says given the current market conditions, it is satisfied with the price and volume achieved at the auction.
Demand for carbon credits will increase if it is allowed to be used in compliance carbon mechanisms, such as a carbon tax or emissions trading scheme.
This is still being studied by various ministries and the World Bank under the Partnership for Market Implementation on Carbon Pricing Instrument (PMI CPI).
“On the back of the latest Kuamut action, Bursa Malaysia has suggested that the Malaysian government consider implementing a form of CPI so as to accelerate the local demand for carbon credits and implement more local carbon projects, to support a transition towards a lower-carbon economy,” it said in an email reply to ESG.
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