Bursa Carbon Exchange to launch trading platform in Q4 this year

The Bursa Carbon Exchange (BCX) is set to launch its trading platform in the fourth quarter of this year, Dr Chen Wei-nee, the head of the carbon market at Bursa Malaysia, told ISFI. Dr Chen also shared that the move toward a carbon compliance market in Malaysia may take a matter of years.

“The platform will be able to have continuous trading as well as off-market transactions,” Dr Chen shared.

Dr Chen noted that depending on how fast the Sarawak-based carbon credit project receives Verra verification, the BCX may be able to hold its sophomore carbon auction to introduce Malaysia-generated carbon credits to the exchange this year.

The upcoming auction will serve to both introduce new standardized products to the platform as well as enable price discovery.

In a bid to stimulate participation from Malaysian corporates, the BXC is working on curating carbon projects for specific sectors, particularly those that are compelled by sector-specific regulations to participate in carbon offsetting.

The aviation sector is at the top of the BCX’s agenda due to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) requirements that Malaysian aviation players are obliged to follow.

With airlines set to be required to purchase CORSIA-eligible carbon credits in 2027, the BCX met with Malaysia’s national task force on CORSIA to understand the needs of the Malaysian aviation sector and develop relevant carbon credits to meet the demands of the local aviation sector.

According to Dr Chen, the banking sector can also play a significant role in developing the Malaysian voluntary carbon market space, as many of them already have carbon trading desks established.

Banks can further participate by playing the role of brokers and market makers as well as by curating their own portfolios of carbon projects to provide carbon offsets as a product to their clients.

“Certain banks have come to us already. They want to moot up a carbon project so that they can have their own inventory of carbon credits that they can offer as solutions to their clients,” Dr Chen shared.

Notably, in a podcast interview with Ralph Dixon, the executive director of sustainability at YTL Corporation (YTL), which is also a member of the BCX’s industry working group, ISFI learned that YTL signed an MoU with CIMB Group to collaborate on carbon-related projects and provide solutions and financing for carbon emissions-reducing projects.

Also in the works this year is a carbon market handbook that Bursa Malaysia is developing as part of its work on the UN Sustainable Stock Exchange’s advisory team, which is set to be launched in Abu Dhabi this October.

The Malaysian regulatory space

While according to Dr Chen, the Malaysian carbon market has been established as a voluntary market with the strategy to evolve into a compliance market like its neighbor Singapore, which introduced its carbon tax regime in 2019, the policy decision in Malaysia to implement a carbon tax or opt for an emissions trading system may be years down the line.

Alongside the launch of the National Energy Transition Roadmap late last month, the government also shared that the Ministry of Finance (MOF) and the World Bank are collaborating on a feasibility study for carbon pricing instruments, which is set to be completed in 2025.

“What the World Bank is helping us to do is to work out policy designs on compliance carbon markets. We are looking at the moment at carbon tax to see how Malaysia can possibly design one…

“This study will take about two years … at the end of the two years, the Malaysian government will make a decision on how the carbon compliance market would look like,” Dr Chen shared.

As part of this study, Bursa Malaysia is conducting an impact analysis of the carbon tax as well as studying the necessary infrastructure that needs to be in place should the government decide to proceed with implementing a carbon tax.

According to Dr Chen, both the MOF and the Ministry of Energy and Natural Resources are working on various policy and regulatory efforts as they try to juggle the compliance market, driven largely by international pressure as well as the need to prepare Malaysian companies for a future that is going to look very different from today.

This is an excerpt of an interview with Bursa Malaysia’s Dr Chen Wei-nee on the upcoming launch of the Bursa Carbon Exchange trading platform and the development of the Malaysian carbon compliance market. To listen to the full discussion, log on to IFN OnAir.

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