Creating a credible carbon marketplace in Malaysia

IN a recent interview on prime-time national TV, I was asked what it would take for Malaysia to become a serious player in the carbon trade.   

In my opinion, even a cursory overview suggests Malaysia is a better fit as a carbon hub than its neighbours because it has the demand for carbon offsets (industry, petrochemicals), as well as supply. Unlike Singapore, for example, Malaysia can supply carbon credits from nature-based sustainability solutions like reforestation, and renewable projects (solar and hydro), carbon sequestration, etc. This allows Malaysia to seed and grow carbon trade much more efficiently than Singapore.   

It is Singapore, however, that is portrayed as a Southeast Asian carbon hub. One must ask why this is so. Singapore’s thrust towards digitisation is one reason. The country is a founding member of the World Bank-sponsored, blockchain-based CAD Trust. It has also signed agreements with standards bodies such as Doha’s Global Carbon Council that plans to use digital measurement, reporting, and verification to validate and verify carbon credit claims.  

In contrast, one of the two approved, non-digital standards bodies associated with Bursa Malaysia was recently questioned about the veracity of carbon credits certified by it. Now that Malaysia is embarking on this journey, it behooves us to get it right the first time around.  

I also mentioned it is commendable that Malaysia has pledged to go net zero by 2050. In comparison, however, the EU already have laws in place requiring they go net zero by 2050. German law requires they go net zero by 2045!  Singapore has a detailed in-policy document laying out their plans to go net zero by 2050. This is the first step towards enacting a law and something Malaysia needs to consider as a next step. 

Going net zero by 2050 is almost impossible unless enforced. It is very different from net neutral, which means you can compensate for your emissions through offsets. In contrast, net zero requires that you must get rid of emissions through efficiency, electrification, renewables, and other means. 

Here are my recommendations to move towards net zero: 

a) Revive and digitise the National Carbon registry. Use private sector expertise if needed. It’s useless to enact laws if we cannot ensure compliance, which requires digitisation.  

b) Invite native digital standards bodies to connect to the registry. Get the World Bank involved. They are eager to help Malaysia digitise its carbon trade.  

c) Require carbon emitters to first reduce their emissions before being allowed to offset. Without this, we cannot achieve net zero by 2050.   

I was also asked about ideas on developing infrastructure and support for hydrogen technology, bioenergy growth, and electric mobility. Let’s not, however, confuse green hydrogen with renewables. It is important to understand that hydrogen is not a primary energy source. It simply stores energy. As such, green hydrogen is a solution only for uses that cannot directly rely on clean energy sources. Besides, it is expensive to transport. It makes much more sense for Malaysia to encourage bioenergy and to increase the percentage of renewable energy directly connected to its grid.   

I also mentioned that insufficient technical and vocational education and training for energy transition is a world-wide problem impacting Malaysia. The sustainability world needs more IT people for example, while the IT world needs people who understand the carbon trade. Malaysia should avoid mistakes being made elsewhere and include digital processes in college courses on sustainability. 

Finally, I give full marks to the Bursa Carbon Exchange for making serious attempts to connect to the carbon trade ecosystem by tying up with global standards bodies. Much more can be done, however, to get us going as a carbon marketplace. We can begin by opening doors to newer digital native standards bodies endorsed by the World Bank and in doing so, increase velocity while ensuring the credibility of Malaysia’s carbon trade.  

Malaysia has significant potential as a carbon hub, but it is crucial to get it right from the start to achieve a net-zero future. – March 14, 2023. 

* Rais Hussin is the president and CEO of Emir Research.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.

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