Making a nationwide customary for forest carbon credit

This text first appeared in The Edge Malaysia Weekly on December 30, 2024 – January 12, 2025

The perennial query on the planet of local weather finance has been how capital from the personal sector will be channelled to forest conservation. In Malaysia, that is difficult by the truth that forests are underneath the purview of every state, which has its personal priorities and techniques.

Nonetheless, because the demand for carbon credit is predicted to extend from firms and entities that wish to offset their emissions, the federal authorities recognised the necessity to streamline this course of on the nationwide degree.

That was why the Malaysia Forest Fund (MFF) was established by the Ministry of Pure Sources and Environmental Sustainability in 2021 to facilitate and mobilise financing for the forestry sector in Malaysia.

The MFF affords two most important devices — the Forest Conservation Certificates (FCC) protocol and the Forest Carbon Offset (FCO), which serve the completely different wants of firms. The FCC is a non-market-based instrument that swimming pools voluntary contributions from the personal sector to help forest-based initiatives.

“Earlier than this, firms had been doing company social accountability (CSR). Now, they’re trying into impression financing. We do this by offering third-party assurance on how a lot these gamers are supporting the forest [projects],” says Suhaini Haron, senior director of company and technique at MFF.

Eligible actions underneath the FCC embody safety or conservation of present forests; enhance in forest space of everlasting reserved forests, everlasting forest estates, protected areas or completely protected areas; restoration of degraded forests; and group engagement.

In response to MFF, verification of forest conservation advantages is a core characteristic of the FCC, the place individuals must report a set of obligatory indicators primarily based on the eligible programmes to offer transparency. There can be mission evaluations, third-party audits and a public registry.

MFF is at the moment evaluating three verification our bodies to carry out the peace of mind service. 

It should be famous that getting the FCC is a voluntary effort and it doesn’t generate carbon credit.

“Within the early years, firms centered on tree planting as a result of it was a tangible mission that may very well be reported. However now, they’ll transcend tree planting, the place the FCC recognises the total spectrum of forest administration,” says Suhaini.

As an illustration, the MFF has recognized a forest in Sungai Besi Tambahan that was gazetted as a forest reserve in 2019. Nonetheless, mandatory actions resembling land demarcation have seen extended delays because of the want for extra funding.

“How firms can help initiatives like these is to fund the land demarcation and even the event of the forest administration plan,” she says.

This can be a pilot website given to MFF to guage the FCC protocol and check if such public-private partnerships will be environment friendly.

Offering funds for the rehabilitation of gazetted forest reserves, nonetheless, is often the accountability of the federal government. Why is the FCC required for this objective?

When requested, MFF responds that the concept behind the FCC is to mobilise personal sector funding for forest initiatives, in order that it doesn’t simply depend on authorities funding.

The MFF has thus far profiled seven states in Malaysia and recognized 79 potential websites that may be supported by way of the FCC. One instance is a forest newly gazetted as a alternative forest for the Sungai Besi-Ulu Klang Elevated Expressway in Kuala Lumpur. Once more, regardless that this forest was gazetted in 2019, the bodily boundaries haven’t been decided and there was no administration plan.

“This can be a former mining website. In case you had been to plant bushes, they might die as a result of there isn’t any prime soil. What they’ll do is to start out restoration by doing soil remedy, earlier than doing tree planting … We additionally look into how funding will be channelled to enhancing connectivity amongst fragmented forests,” says Suhaini.

When requested why a former mining website was chosen as a alternative forest, MFF says it’s outdoors of its mandate because it focuses on financing forest initiatives. One view is that such efforts can rehabilitate degraded forests, which might in any other case stay in its broken state.

The forests are usually not essentially on authorities land. Some firms have submitted functions for his or her land as effectively. As an illustration, some firms have excessive conservation worth areas inside their plantations. Their efforts to revive and handle these forests will be recognised by way of the FCC, says Suhaini.

The length of initiatives recognised by the FCC can be as much as the donor and mission developer. Suhaini says MFF desires to encourage firms to transcend CSR actions and help initiatives in an space for an extended timeline.

“In case you’re tree-planting programmes, some initiatives solely require a one-off sort of help, however the continuation of tree monitoring to make sure its survival needs to be maintained.”

For firms that need their forest conservation efforts not solely recognised but in addition used for offsetting their very own emissions, the FCO turns into extra fitted to objective.

The FCO is actually a carbon credit score, which is a market mechanism that transfers emissions reductions from a forest-based mission to patrons. It was envisioned as a substitute for the worldwide carbon credit score requirements, which can not take into account sure contexts specific to Malaysia.

Thailand, as an example, has its personal nationwide carbon credit score customary. “We realised that government-based crediting techniques are normally coupled with tax or emissions buying and selling scheme programmes that present some form of versatile measures for firms to transition earlier than they’ll obtain web zero or carbon neutrality,” she says.

Subsequently, the FCO is supposed to quantify, measure, monitor and confirm greenhouse fuel (GHG) elimination or avoidance advantages from forest-based initiatives that can be utilized by firms as an answer for reaching web zero emissions. It contains methodologies for GHG estimation, addresses permanence and leakages by way of buffers or changes, requires unbiased evaluation, monitoring and reporting of emissions reductions, and unbiased evaluate and verification.

MFF goals to completely operationalise the FCO by subsequent 12 months so it may be submitted for consideration underneath the Worldwide Civil Aviation Organisation’s Carbon Offsetting and Discount Scheme for Worldwide Aviation programme.

The FCO will even be aligned with Verra and Gold Customary to the extent the place it’s potential, says Suhaini. A memorandum of understanding has been signed with the previous, whereas MFF is underneath remaining discussions with the latter.

“We’re approaching them as a result of we don’t imagine in ranging from zero. A few of our programmes can really be co-labelled. We’re probably creating a particular methodology inside that system that may be mutually recognised,” she says.

This implies MFF can utilise among the present requirements and fill in any gaps that it identifies.

“Worldwide requirements are designed to be as broad and inclusive as potential, accommodating various circumstances in numerous international locations. Whereas these requirements will be extremely rigorous, their generic nature might not totally handle the distinctive challenges and priorities of particular nations,” says Suhaini.

“A government-based system, however, permits for tailor-made approaches that straight reply to native circumstances and wishes, guaranteeing better relevance and sensible impression.”

Sure requirements, as an example, would solely recognise an space for reforestation if it has not been deforested within the final 10 years. “In Malaysia, an space that isn’t deforested for 10 years would have been misplaced to agriculture or different land use,” she says.

One other instance is that in Malaysia, industrial actions like tree plantations for harvesting are allowed in forest reserves. An improved forest administration programme in these plantations wouldn’t be allowed underneath among the worldwide requirements.

“As we progress, when now we have the methodology and extra such initiatives applied in Malaysia, we are going to start to grasp that not all actions or methodologies in worldwide programmes can be relevant within the Malaysian context,” says Suhaini.

It’s price noting that if the mission is simply too small, the funding required to get it verified in accordance with worldwide requirements may not be possible, she provides.

“It’s a query of economies of scale. The price of certification and mission growth or consultancy will add up. And for a small mission, it isn’t sizeable sufficient [to make economic sense].”

The FCO is being developed with a technical working group (TWG), which incorporates the Ministry of Pure Sources and Environmental Sustainability, the Forestry Division of Peninsular Malaysia, the financial planning models of a number of states, a number of universities, firms resembling Petroliam Nasional Bhd (Petronas) and Samling Timber Malaysia, and consulting corporations.

However how can Malaysia persuade others that its nationwide carbon credit score customary is credible?

Suhaini says the FCO will meet market necessities set by the likes of Corsia and the Integrity Council for the Voluntary Carbon Market.

“The intention for the FCO is to not decrease the usual. It’s actually about constructing a system that’s tailor-made to Malaysia’s circumstances, quite than growing a system that’s extra relaxed,” she explains.

MFF is planning to give you seven methodologies for the FCO, which covers improved forest administration, afforestation, reforestation, wetland restoration, avoidance of emissions and decreasing deforestation.

A public session on 4 of the methodologies can be held subsequent 12 months, whereas one other three are nonetheless being developed. The FCC has already been launched. Fourteen functions for initiatives have been acquired from seven states, says Suhaini, and the advisory committee has endorsed two initiatives. “We are actually matching the initiatives with donors. We hope to signal at the very least two conservation agreements by the 12 months finish,” she provides.

Save by subscribing to us for
your print and/or
digital copy.

P/S: The Edge can also be out there on
Apple’s App Retailer and
Android’s Google Play.