There are parties in Malaysia who are advocating market driven mechanisms to reduce carbon emissions and thus transition to a low carbon economy. And they are being given the platform to do so by parties who should know better. StarBiz for example, featured a write up extolling the benefits of carbon trading platforms as its front-page story on 8/12/24.
What are Carbon Markets?
These are platforms where carbon “credits” can be traded. Companies or NGOs that carry out projects that remove carbon dioxide from the atmosphere, by planting trees for example, or by preserving existing forests, will be awarded “carbon credits” – one credit for each tonne of carbon removed from the environment. These companies can then monetize these credits by selling these carbon credits to companies which wish to “offset” their carbon emission.
Basically, the purchasers of carbon credits are buying the right to continue their polluting activities. The carbon credit producing company or NGO gets funds to intensify their carbon reducing activities – according to the proponents of this idea. The platform that enables the buyers to transact with the sellers is the carbon market, and Malaysia is in the midst of setting up such a market.
The PSM fully agrees with the environmental groups which criticize carbon markets. It is extremely “iffy” and is open to all sorts of abuses. Allow me to share an example from Perak –
The Kledang Saiong Forest Plantation
The Perak State Government has approved a Forest Plantation Project involving 4280 hectares of forest in the Kedang Saiong Forest Reserve. The plan is to completely fell the existing trees in about 90% of the total area (areas with a gradient of 35 degrees will be exempted) and replant the logged area with 3 species of trees that can be harvested for timber 5, 10 or 15 years down the line. Four firms have been given the approval to implement this project, namely Seri Tualang Sdn Bhd, Rimbun Cengal Sdn Bhd, Rimba Kembara Sdn Bhd, and Syarikat Sri Kruing Sdn Bhd1,2. These companies will earn handsomely from selling the logs obtained in the initial clear-felling phase of the project, as well as from selling the carbon credits derived from re-planting the area with trees3.
Kledang Saiong Forest Reserve is a biodiverse forest with 62 species of mammals, 60 species of reptiles and 205 species of birds, of which 249 species or 76% are on the “Protected” or “Totally Protected” lists4. However, the EIA report prepared by ChemSain Konsultant Sdn Bhd1 characterizes the entire 4280 hectares of forest as “severely depleted”5. Hence the negative impact of the initial felling of trees on carbon capture from the environment is grossly under-estimated, and the carbon credits “generated” by the replanting exercise, maximized.
Corporate Greenwashing
The Kedang Saiong saga demonstrates the weaknesses of the market approach. A project that will destroy a healthy, bio-diverse forest that is already functioning as a “carbon sink”, has been dressed up as a major contribution to climate mitigation by misrepresenting the forest as severely depleted. All the monitoring agencies from the Perak State Exco, the Forestry Department to the Department of Environment are not prepared to call this bluff. The major players – the logging companies, the EIA consultant and the politicians empowered to approve the project – are driven by the mega bucks this project will generate. Environmental protection has become mere rhetoric.
This is exactly what will occur in the carbon market. The buyer of the carbon credits just wants carbon credits to enable him to continue polluting, instead of taking steps (which might be expensive) to reduce his own carbon footprint. The buyer does not care particularly much about the veracity of the carbon reducing claims of the NGO or company selling the credits as long as these enable him to put off the difficult steps required to reduce his greenhouse gas emissions!
The independence and objectivity of the agencies calculating and quantifying the amount of carbon credits produced is suspect. In the example above, ChemSains Konsultant Sdn Bhd is a company that was chosen by and paid for by the 4 companies that were awarded the project. Where do you expect its allegiances to lie?
Given the way the Malaysian government operates today, the agency certifying the carbon credits will “corporatized” and required to collect fees from the producers of carbon credits. The assessment of the amount of carbon emission reduced by each project will be entrusted to companies like ChemSains Konsultant, and paid for by producers of carbon credits. As they say, “He who pays the piper calls the tune”. How objective will this process be?
The PSM believes that carbon trading is a terrible idea. Both the buyers and the sellers are in it to make money. So too the “assessors” and the “regulator” who certify the veracity of claims that the project actually removes that much carbon from the atmosphere. The carbon trading idea represents corporate capture of efforts to cut down our greenhouse gases emission! It will not help in actually reducing carbon emissions.
Cap and Tax
We would like to suggest another approach – cap and tax. In other words, the amount of CO2 “permitted” for industries should be capped – each industrial unit will be given an upper limit (the cap) based on the industry and its scale of production. Any greenhouse gas emission in excess of this cap, will be taxed. The money gained from this tax can be used to fund projects6 that further reduce greenhouse gases, and to pay for the transition to renewable energy. The cap should be progressively lowered and the tax rate increased to provide the financial initiatives to transition to cleaner and more sustainable industrial practices.
The need for collaboration among ASEAN members
Vietnam has already introduced a carbon tax of USD 0.50 per ton CO2. Indonesia is planning to introduce it at USD 5.2 per ton. These rates are far lower than those instituted in the Europe – France taxes USD 52 / ton CO2 and Sweden USD 137/ton. Too low a tax rate will not create the economic incentives for the users of hydrocarbon-based fuels to switch to renewable energy.
The truth of the matter is that a CO2 tax will increase the cost of production and thus create a comparative disadvantage for any country trying to attract Foreign Direct Investments – an important economic strategy for ASEAN countries. This is why we need to have an ASEAN wide discussion on Carbon Taxes so that these can be initiated jointly at a level that creates the financial incentives for industries to diversify to less polluting sources of energy, without creating a disadvantage for any of the ASEAN countries.
Talking Truth to Power
Climate change is real and we need to implement effective policies to reduce our carbon footprint quickly. Unfortunately, it appears that climate change mitigation efforts in our country have been overly influenced by the corporate narrative, and the politicians in power seem to have embraced dodgy policies like Carbon Trading and “Carbon Capture and Storage”. The Madani government is on the verge of diverting funds and effort into these highly questionable policies.
It is high time for environmental NGOs and concerned individuals to push strongly back against corporate driven false solutions, and push for effective, sustainable programs to contain the climate change crisis.
Jeyakumar Devaraj
Chairperson
Parti Sosialis Malaysia
.12th December 2024
Notes
1. All these parties are clearly specified in the EIA Report.
2. Incidentally all these 4 companies are owned by a distinguished gentleman who lives in Kajang, Selangor.
3. The intention to sell carbon credits is clearly specified in the EIA Report.
4. Figures derived from Chapter 6, EIA Report.
5. EIA Report: Table 7.3.9 – Estimation of Soil Losses Before, During and After the Project
6. Rehabilitate logged forests, harvest methane from organic municipal waste to generate electricity, install solar panels on the roofs of all government owned buildings,