As Malaysia’s stock exchange operator auctions renewable energy certificates (RECs) for the first time since launching a voluntary carbon marketplace, an environmental group has raised concern about the association of these credits with projects linked to human rights violations.
In an analysis document published on Monday, environmental non-profit RimbaWatch said the inclusion of RECs sold from the Murum Dam in Sarawak, Malaysia, on the Bursa Carbon Exchange (BCX) was problematic for the platform and the companies which buy RECs from it, which have included influential Malaysian companies such as state-owned oil and gas firm Petronas.
RimbaWatch also highlighted that carbon credits sold from the Southern Cardamom forest carbon initiative in Cambodia on BCX have faced scrutiny for human rights abuses.
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There is an “urgent need” for BCX, and its buyers, to improve their environmental certificate eligibility criteria, RimbaWatch said in a statement.
In response, Bursa Malaysia said it adopts “leading and globally recognised” standards for carbon credits and RECs. The carbon credits on its platform are accredited by Verra, the world’s largest carbon credits certifier, and the RECs traded on its platform are certified by the I-REC Standard, a global standard for renewables certificates, it said.
“BCX endeavours to promote environmental assets that foster sustainable solutions to be traded on our trading platform,” the organisation told Eco-Business in a statement.
‘End the REC greenwash’
Bursa Malaysia launched BCX in December 2022 as the world’s first Shariah-compliant carbon credit exchange. A slow start for the platform in its first year prompted Malaysian politicians to challenge corporates to buy more carbon credits traded on BCX to prove their commitment to sustainability.
Today marks the first auction for RECs on BCX. An auction for forest-based credits from the Kuamut Rainforest Conservation Project in Sabah, which market observers have talked up due to its additional community and biodiversity co-benefits as well as a high external rating, is set for July.
In its critique, RimbaWatch pointed out that the Southern Cardamom project was suspended by Verra after an investigation found that Indigenous communities living within the project area in Southern Cambodia had been forcibly evicted.
Since the suspension of the project in June 2023, there have been no new carbon credits from the Southern Cardamom admitted on BCX, Bursa Malaysia has confirmed. Singapore’s voluntary carbon marketplace, Climate Impact X, suspended trade in carbon credits from the project in December 2023.
The Murum Dam has faced similar concerns to the Southern Cardamom project, with the rights of Indigenous Penan and Kenyah peoples to free, prior and informed consent (FPIC) violated by starting construction on the dam before communities were engaged, RimbaWatch pointed out.
Construction of the 944-megawatt dam, which is operated by Sarawak Energy, has seen 24,500 hectares kilometres of forest flooded and 1,500 Indigenous people displaced. The Murum reservoir is also a significant source of methane, a potent greenhouse gas, critics have pointed out.
In an open letter published today, RimbaWatch called on BCX to end the trade in RECs from Murum Dam on its platform. “End the REC greenwash. Suspend the Murum Dam REC and all other questionable projects from the Bursa Carbon Exchange,” the non-profit said.
The letter, which called into question the effectiveness of the dam in reducing emissions, has been signed by 54 organisations, including non-governmental organisations Save Rivers, Center for Orang Asli Concerns and Greenpeace Malaysia.
Bursa Malaysia: RECS markets facilitate climate action
In its response, Bursa Malaysia stated that both carbon and RECs markets “play a crucial role in facilitating and accelerating action in climate mitigation efforts, by enabling finance flow from the private sector”.
“An important reality to bear in mind is that while the science in environmental assets is not yet perfect, given the climate urgency that the world faces today, Bursa Malaysia is doing our part with key stakeholders to take climate action today.”
Petronas said it supports the development of Malaysia’s voluntary carbon market, which “aims to be a key instrument in funding high quality and high integrity nature-based climate solutions projects”.
“These projects, which must be verified, validated or certified by an independent third-party organisation, can have a significant impact in the fight against climate change in Malaysia and abroad,” it said.
The oil giant added that it is “encouraged” by the development of stricter integrity standards through the work of industry governance body Integrity Council for the Voluntary Carbon Market (ICVCM), which has been scrutinising the standards of Verra and other carbon project certifiers.
BCX’s second auction kicks off during a global slump in the voluntary carbon markets, which have devalued following investigative reports that alleged that carbon credits certified by Verra overestimated the climate impact of projects.
Malaysia’s environment minister warned in October that “unwarranted cynicism” of carbon markets should not overshadow climate action and that there will be “a lot of trial and error” in the developmental stage of Malaysia’s carbon market.
An earlier version of this story stated that this is second time carbon credits have been auctioned on BCX. Today’s auction marks the first time that renewable energy credits have been auctioned on the platform.
