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Tuesday, January 31, 2023

Launch Partners

Malaysia launches world’s first Islamic voluntary carbon market exchange

Bursa Malaysia has launched the Bursa Carbon Exchange (BCX), Malaysia’s voluntary carbon market exchange, with the first carbon auction set for early 2023.

The BCX, which is also the world’s first Shariah compliant carbon exchange, will enable corporates to purchase carbon credits which will contribute to financing and driving the development of domestic greenhouse gas emission reduction.

“We believe Bursa Carbon Exchange can serve as an important lever in realizing Malaysia’s net-zero greenhouse gas emissions aspiration, as well as supporting the private sector’s voluntary climate commitments and decarbonization journey,” Umar Swift, CEO of Bursa Malaysia, commented.

Bursa Malaysia has shared that the inaugural auction will take place in early 2023, delayed from its initial target of the end of 2022.

The auction will enable price discovery for the new standardized carbon credit products listed on the exchange with the clearing price from the auction, establishing a baseline demand for carbon credits in Malaysia, according to Bursa Malaysia. The pricing will provide a reference point for secondary trading.

While the specific details of the inaugural auction will be made available soon, the BCX portal indicates that the exchange will allow companies to purchase carbon credits generated locally as well as international carbon credits.

Bursa Malaysia is also set to announce its Bursa Carbon Exchange Rules soon. The rules will detail how corporations can register to become market participants to purchase standardized carbon contracts to meet their voluntary climate goals.

The exchange will enable the trading of standardized carbon contracts, which represent a collection of credits from projects that meet certain specified characteristics. The BCX uses standardized contracts to mitigate the avoidance of companies buying credits due to uncertainty regarding the quality of carbon projects.

Bursa Malaysia announced in October 2021 that it was working with government ministries to launch a voluntary carbon market exchange. It signed an MoU with Verified Carbon Standard (Verra) in May 2022 to ensure the integrity of carbon credits traded to avoid potential greenwashing claims.

Although discussions on potential revisions of the 2023 budget are currently underway due to a change in government, it is worth highlighting that the budget allocated RM150 million (US$34.07 million) to sovereign wealth fund Khazanah Nasional, through Dana Impak, to promote the development of nature-based solutions to support the development of Malaysia’s carbon market ecosystem and to undertake restoration of degraded forests.

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