Technology-based carbon credits clear at RM18.50 at Bursa Malaysia’s inaugural auction; nature-based ones fetch RM68
Janice Lim
CONTRACTS for the auction of technology-based carbon credits were oversubscribed at the inaugural auction of Bursa Malaysia’s carbon exchange (BCX), eventually reaching a clearing price of RM18.50 (S$5.52) per credit.
Alongside the auctioning of 50,000 of these technology-based credits from a biogas and power generation project in China, another 100,000 nature-based carbon credits were sold at a price of RM68 per credit.
The nature-based credits were tied to the Southern Cardamom Project, which protects national parks and wildlife sanctuaries in south-west Cambodia and is under the United Nations REDD+ (Reducing Emissions from Deforestation and Forest Degradation) scheme.
In a media statement last Friday (Mar 17), Bursa Malaysia said there was strong interest and a healthy price signal by the domestic corporate sector, notably government-linked companies and financial institutions.
Overall, a total of 150,000 carbon credits, all of which are registered with Verra – a common standard used globally for certifying carbon emissions reductions – were bought by 15 Malaysian companies.
They included MayBank, AmBank and CIMB. National oil company Petronas was also among the buyers.
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Carbon credits are an emerging commodity which companies and governments are buying as a means of offseting their own carbon emissions, with one carbon credit said to remove one tonne of carbon dioxide from the atmosphere. However, criticisms over the credibility of these credits have been mounting.
Bursa Malaysia said that both projects were carefully selected and curated to spur local interest in similar carbon offsetting project development.
The technology-based carbon credits, which are tied to biogas and power generation project in China, have a vintage of between 2019 and 2020. This means that the purported emission reductions associated with these credits occurred during those years. Credits from the Southern Cardamon Project have a vintage of 2021. The carbon credits from both projects were supplied by Vitol Asia, a Swiss-based energy and commodity trading company.
Malaysia’s bourse operator added that it did not participate in the bidding process, but only purchased carbon credits at the auction clearing price to ensure proper governance during price discovery.
“By establishing a market-based price for carbon credits, the auction provides a clear signal to potential project proponents and developers on the economic viability of carbon credits. This will incentivise local project owners to develop carbon credit projects that can make a real impact in the fight against climate change,” said Bursa.
Bursa Malaysia’s chief executive officer Muhamad Umar Swift noted that this inaugural auction has raised the awareness level of voluntary carbon markets and carbon offsetting opportunities in the country.
“We now have a proven market mechanism which provides price discovery,” he said. “This is a significant step towards unlocking Malaysia’s potential as a supplier of high-quality carbon credits”.
Jigar Shah, head of sustainability research at Maybank Investment Banking, said BCX auctions offer a benchmark in which companies can estimate the economic cost of their greenhouse emissions or internal carbon price.
“This helps guide more well-thought-out net zero plans and credible investments into avoidance or removal offsets. We hope to see more projects in Asean coming into the market, especially those related to carbon sequestering as we are home to one of the largest biodiversity regions,” he added.
Carbon prices vary widely across the globe, with prices hitting as high 100 euros (S$143.49) per tonne in the European Union.
In November last year, the first major carbon credit auction brokered by Singapore-based Climate Impact X (CIX) fetched US$27.80 per credit, translating to a premium of close to 40 per cent above current spot prices for major credits of similar vintage, the carbon marketplace said.
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