Malaysia to open voluntary carbon market trading

The Malaysian stock exchange, Bursa, will open a Voluntary Carbon Market (VCM) by the end of 2022. This will help increase transparency and allow entities to purchase carbon credits to offset their emissions.

bursa malaysia is the frontline regulator of the Malaysian capital market. It has a duty to maintain a fair and orderly market for securities and derivatives traded through its facilities.

The new Bursa VCM scholarship will stimulate investment in high-quality offset projects such as planting trees or switching to cleaner fuels.

Bursa Malaysia CEO Datuk Muhamad Umar Swift remarked that:

“Stakeholder engagement is essential to facilitate a better understanding between industry players to enable their participation in the VCM Exchange… and to meet the ESG requirements required by parties such as credit institutions. “

He also added that the VCM exchange can serve as a major lever in achieving Malaysia’s net zero emissions goal. At the same time, it will help support voluntary private sector climate commitments and net zero travel.

The Role of Bursa Malaysia VCM

There has been a growing awareness of climate action around the world. With this in mind, VCMs have played a vital role in funding projects that avoid, reduce or remove emissions.

Market participation will enable entities to offset their carbon footprint and meet their net zero commitments.

Through Bursa Malaysia’s VCM exchange, sellers and buyers of carbon credits can transact at transparent prices.

Currently, carbon credits are traded in a small but rapidly growing market. Bursa Malaysia joins other global exchanges such as CME, ICE, and EEX that have launched VCM products in recent years.

Bursa plans to offer standardized carbon credit products for trading through a rules-based VCM exchange. This means that there will be different product categories for credits from both nature-based solutions and carbon removal technologies.

The exchange will group together carbon credits with similar characteristics, starting with the 2016 vintages. In addition, it will label products to distinguish between carbon credits produced nationally and globally.

Guarantee the integrity of carbon credits

To ensure the integrity of the carbon credits offered through the VCM exchange, Bursa will adopt the Verified Carbon Standard or Verra. It is a widely known carbon standard in VCM.

  • Verra is responsible for issuing approximately 70% of voluntary carbon credits worldwide.

Bursa said that:

“Verra has developed transparent, credible and robust methodologies covering a wide range of climate-friendly activities… [these include] nature-based projects, methane avoidance or capture, sustainable farmland management, green mobility and others.

The Malaysian stock exchange believes that by applying the Verra standards, carbon credit projects will go through a robust assessment. This will ensure that environmental claims are properly measured and independently verified. Thus, greenwashing will not be a problem.

Bursa Malaysia also pointed out that it signed a memorandum of understanding with Verra last May this year. Their partnership focuses on capacity building.

The Bourse has engaged with various stakeholders in the development of a carbon market. They seek to ensure strong participation of different stakeholder groups representing:

  • potential issuers,
  • project developers,
  • corporate buyers (e.g. manufacturers, agricultural companies, financial institutions)
  • validation and verification bodies,
  • government agencies and others.

By the end of the year, Bursa will sell carbon credits through auctions to interested buyers. The auction will uncover the prices of new carbon credit products listed on the VCM exchange.

The offsetting price of the auction will create a base demand for carbon credits in the country. This will help provide a reference point for secondary trading for market participants.

More importantly, it can offer clear price signals to support the development of national carbon credit projects.

Corporate buyers can then use the credits to offset their climate impact with other carbon reduction efforts to reduce their emissions over time.

Interested Project Developers and Project Proponents may submit their interest in providing carbon credits for the auction. Companies can also participate in auctions and buy carbon credits for their offsetting needs.

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