Malaysia is proposing an Asean standard for carbon projects following the recent launch of its first nature-based carbon credits on the Bursa Carbon Exchange (BCX).
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The proposal was announced by the country’s minister for Natural Resources and Environmental Sustainability, Nik Nazmi Nik Ahmad, during a fireside chat with Eco-Business founder and managing director Jessica Cheam at the Unlocking capital for sustainability 2024 conference in Kuala Lumpur last week.
The minister said an Asean framework for carbon projects is necessary to ensure the credibility of carbon credits. Since a free market can lead to issues such as fraud or overclaiming, regulation is needed to maintain high standards for carbon credits, he said.
“We need to work on our standards. We don’t have to start from zero. We can look at what Thailand has done with T-VER [Thailand’s voluntary emissions reduction programme]. I met my counterpart and we’re trying to bring about an Asean framework for the carbon market, so we have a standard that is recognised,” he said.
His comments were made with reference to the Kuamut Rainforest Conservation Project, Malaysia’s first nature-based carbon credits scheme, which took 10 years to come to fruition, from inception to auction.
The Kuamut project, verified under the Verra Verified Carbon Standard (VCS) and the Climate, Community & Biodiversity (CCB) Standards, protects 83,381 hectares of tropical rainforests in Sabah.
It was auctioned on BCX at a floor price of 50 Malaysian ringgit (US$10.79) on 25 July – the day after the summit – and was given a high ranking for improved forest management practices by carbon project ratings firm BeZero.
Nik Nazmi said the project took a long time to see the light of day and to ensure faster scaling of successful carbon projects a regional framework is crucial.
The minister did not elaborate on how an Asean standard might work alongside internationally recognised carbon standards.
“If it’s just Malaysia or even Thailand [implementing carbon projects], we can only go so far. We need that size, that scale of 670 million people [the population of Southeast Asia],” he said, highlighting Asean’s potential to become the fourth largest economy in the world by 2030.
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I’m always very cynical about any absolute free market position, but I definitely think there has to be regulation because we’ve seen that there is a tendency for what they call sham carbon credits being marketed.
Nik Nazmi Nik Ahmad, Natural Resources and Environmental Sustainability Minister, Malaysia
Industry observers commenting on Nik Nazmi’s remarks said that establishing a regional standard for carbon markets is not possible without mutual agreements and legal alignment between member states.
Marc Allen, co-founder and chief sustainability officer of Unravel Carbon, an AI-powered decarbonisation platform, said discussions around Article 6 of the Paris Agreement need to happen among Asean governments to help set the framework for trading carbon credits between countries.
“There needs to be alignment among countries on corresponding adjustments between countries [to avoid double counting], and the minimum requirements of consistent methodologies, measurement and verification of projects.”
“This will ensure permanent and additional emissions abatement,” he said.
Article 6 of the Paris Agreement outlines mechanisms for countries to cooperate in achieving their climate goals.
It provides a framework for international cooperation through carbon markets and other mechanisms to promote sustainable development and reduce greenhouse gas emissions.
Singapore has been leading the charge for carbon markets in Asean by signing bilateral agreements with countries such as Laos and the Philippines this year.
Allen added that achieving a regional standard for Asean also requires addressing challenges such as nationalistic views and consistency in the way carbon credits are perceived.
He said Asean must collectively recognise the legitimacy of carbon credits and work together as a bloc to achieve common decarbonisation goals.
“There needs to be consistent consideration in the role of carbon credits in meeting nationally determined contributions (NDC) targets.”
“The risk of nationalistic views and each country pursuing their own NDCs [Nationally Determined Contributions to the Paris climate accord] at the expense of Asean’s common goal is, in our view, the biggest risk,” he said.
Asean has not set a single decarbonisation target for the region, however nine out 10 Asean countries have set net zero emissions targets for 2050.
Meanwhile, Nik Nazmi also pointed out that Malaysia’s potential for high-quality nature-based carbon credits and unlocking value in the local carbon markets will have important repercussions for the country’s policies beyond climate change.
Ahead of Malaysia’s upcoming Asean chairmanship in 2025, it is anticipated that the country could lead the formation of the regional standard for carbon markets.
Renard Siew, president of industry body Malaysia Carbon Market Association (MCMA) told Eco-Business that Malaysia is in talks with Thailand and Indonesia with a view to setting up an Asean association for carbon markets.
“There is Thai Carbon Market Association and Indonesia Carbon Trading Association and also an Asean Alliance on Carbon Markets (AACM). What we are trying to do bring all of them together,” he said.
“We [Malaysia] intend to push for Asean Common Carbon Framework but the details of it will need to be worked out collectively.”
Unlocking capital for sustainability is an annual flagship event on sustainable finance organised by Eco-Business in partnership with UN Environment Programme (UNEP). The next regional edition will be held in Manila, Philippines, on 14 August 2024. Register here.
