IN recent years, Malaysia has taken significant strides towards becoming a key player in the global carbon credit trading market.
As the world grapples with climate change, Malaysia's carbon credit trading sector is emerging as both a lucrative opportunity for businesses and a vital tool for sustainability.
Carbon credit trading is a market-based mechanism aimed at reducing greenhouse gas (GHG) emissions. Companies or entities that reduce their carbon emissions below a certain threshold earn carbon credits.
These credits can then be sold to other companies that exceed their emission limits, effectively creating a financial incentive for reducing emissions.
As a comparison, carbon credits in 2023 cost US$40 to US$80 per tonne of carbon dioxide or equivalent GHG emissions. In 2021, it was at US$12.70 per tonne.
The government has been proactive in establishing a robust framework to facilitate carbon credit trading.
The National Carbon Policy, launched three years ago, sets the stage for a comprehensive approach to carbon management, including the establishment of a carbon trading platform.
This platform aims to connect Malaysian businesses with international carbon markets, fostering greater participation and investment in carbon reduction initiatives.
For Malaysian companies, carbon credit trading presents a significant business opportunity.
By investing in cleaner technologies and sustainable practices, businesses can generate additional revenue through the sale of carbon credits.
Sectors such as agriculture, forestry, energy and manufacturing stand to benefit the most, as they have substantial potential for emission reductions.
For instance, oil palm plantations that adopt sustainable practices and reduce deforestation can earn substantial carbon credits.
Similarly, energy companies that transition to renewable sources can generate and trade credits, offsetting the costs of their green investments.
Beyond profitability, carbon credit trading is a crucial element in Malaysia's broader sustainability agenda.
By incentivising emission reductions, the system supports the country's commitment to international climate agreements, such as the Paris Agreement.
The revenue generated from carbon credit sales can be reinvested into further sustainability projects, creating a positive feedback loop for environmental conservation.
Moreover, carbon credit trading encourages technological innovation and efficiency.
Companies striving to earn more credits are likely to invest in cutting-edge technologies, driving green technology development within the country.
Malaysia is well-positioned to become a regional leader in carbon credit trading if it develops a strong regulatory framework, active participation from businesses and a commitment to sustainability.
The path ahead will require collaborative efforts from the government, the private sector and civil society.
By working together, Malaysia can harness carbon credit trading to achieve its climate goals, drive economic growth and contribute to a sustainable future.
DR ARIFHA MOHAMAD
Johor Business School, Universiti Tun Hussein Onn Malaysia