The issue of climate change is high on the international agenda. Global warming is a reality, and the climate panel of the UN has documented that climatic changes are continually getting worse. Under the Kyoto Protocol – the UN Framework Convention on Climate Change agreement to reduce the emission of greenhouse gasses (GHG), the developed nations that have ratified the treaty are committed to reduce their GHG emissions by an average of 5 % by the year 2012.
One of the options for reducing GHG emissions is by supporting Clean Development Mechanism (CDM) projects, which is aiming at reducing emissions in developing countries for the developed countries to buy the carbon credits. In this regard although developing countries are not obligated to reduce their GHG emissions, they play a significant role in certified emissions reduction (CERs). Malaysia, being a developing country with ample agricultural and natural resources, stands to be a significant beneficiary, and it is foreseen that CER creation will be gaining prominence in Malaysia in the near future.
22 CDM projects from Malaysia have already been registered with the UNFCCC and most of the CERs generated are from biomass projects and landfill projects. As of March 2007, two of the 22 CDM projects had sold 320,000 tonnes CERs valued at about RM 10Million. The Malaysian energy centre PTM estimated that the country has up to 100 million tonnes of carbon credit potential particularly within the plantation sector.
In addition the power, manufacturing, waste management, forestry, oil and gas and the transportation sectors have also been identified as potential beneficiaries. It is expected that the CER trading will increase up to 2012.
From a company’s perspective, the key driver for participating in a CDM project would be their economic viability. From a financial perspective, as far as oil millers go, investments in CDM project technologies are justified with payback periods of less than eight years, mostly averaging three to four years.
As an added incentive, carbon credit income is also exempted from Malaysian tax between 2008 and 2010. Qualitatively, engaging in sustainable, environmentally sound strategies and practices also makes for good corporate responsibility and contributes to a cleaner environment.
Denmark has been active in the CDM development in Malaysia since 2002, both regarding the capacity building of the CDM institutions and development of CDM projects. The first CDM project, which was registered by Malaysia in 2006, had Denmark as its Annex 1 partner. Denmark has a commitment to reduce GHG emissions by 21 %, by the year 2012. Therefore, there is a need and huge potential for utilising the Clean Development Mechanism to develop more projects in Malaysia.
Besides the Danish Government, Danish private companies are also buying Carbon Credits in Malaysia facilitated by the Royal Danish Embassy.