The project is done via a public-private partnership between Permian Malaysia, Sabah Forestry Department, Rakyat Berjaya Sdn Bhd and Yayasan Sabah, with support from PACOS Trust and South East Asia Rainforest Research Partnership.

“The protected forest area is entirely uninhabited, with the closest villages some distance away. Some still use the outskirts of the forest for what is referred to as harvesting non-timber forest product... We felt it important to include them in the consultation, design and running of the project,” says Wong.

This engagement with the local Orang Sungai community was done with the intent of finding alternatives to hunting and harvesting outside the project area.

“This includes activities like training and employing local members of the communities to participate in regular patrols of the project area to monitor for and prevent illegal activities,” Wong says.

Prior to the start of the project, the area was designated as a production forest, has been repeatedly logged in the past, and was designated for further commercial exploitation, according to the project description in Verra’s registry. The project is expected to prevent commercial logging in that area over three decades, thus preventing an additional 16 million tCO2e from being released.

Wong hopes that the auction will attract more funding and resources towards forest conservation and carbon sequestration projects, leading to more funds to run community development initiatives like access to clean water.

Bursa Malaysia hopes that a successful launch of the project will encourage other Malaysian states to replicate the model.

“Through this landmark auction, we are able to position the country as an attractive location to invest in similar nature-based carbon projects, thereby encouraging the flow of both domestic and international private financing to contribute towards climate action,” tells Bursa Malaysia in an email answer to ESG.

Responding to criticisms

Carbon credit projects have been scrutinised for various reasons, such as for allegedly overcounting the carbon emissions that are sequestered and ignoring the rights of indigenous communities.

As a result, various organisations, including the popular standard setters like Verra, have had to adapt their processes or introduce principles to label high-integrity carbon credits.

According to Bursa, the Kuamut project is rated best-in-class and as one of the highest-rated improved forest management projects in the world by the carbon rating agency BeZero Carbon.

It has also been assessed against the science-based and globally recognised Verra Verified Carbon Standard and the Verra Climate, Community and Biodiversity Standards, under which it has achieved a gold level for climate status.

The Kuamut project is open for public comment on Verra’s website until Aug 5, 2024.

This carbon credit auction is not the first one by BCX. Last year, it held an auction for carbon credits from the Linshu Biogas Recovery and Power Generation Project in China and the Southern Cardamom Project in Cambodia, which is a conservation project.

However, the Southern Cardamom project has been criticised for failing to obtain free, prior informed consent from the local community. Consequently, no new credits from the project have been issued, and Verra initiated an investigation into the project in June 2023. The review is still ongoing.

Malaysian environmental watch group RimbaWatch raised this issue in June, claiming that out of the four carbon credit projects auctioned by BCX, two — including renewable energy credits (REC) from the Murum Dam in Sarawak — are mired in human rights conflicts and biodiversity implications.

A group of over 50 civil society organisations also protested the auction of RECs from the Murum Dam in late June due to the human rights concerns, negative environmental impact and poor governance practices highlighted in an open letter.

In response, Bursa Malaysia says the technical assessment of RimbaWatch on the Murum RECs is fundamentally flawed, as the criteria such as additionality and permanence used for carbon credits are not relevant to RECs. It also says Sarawak Energy is committed to international standards and community engagement with regards to the Murum Dam.

“On the same note, Bursa Malaysia welcomes engagements with civil society groups who may wish to seek clarifications on environmental projects before making public statements, which may be based on inaccurate facts and/or technical details,” it says.

Bursa Malaysia adds that they collaborate with stakeholders and refines its approach where necessary. It does so through organising annual international forums with international carbon experts and roundtables with local project developers to ensure the importance of working with local communities is maintained and noticed.

“Malaysia’s voluntary carbon market is still in its early years. and as it presently stands, has room to mature, which includes to leverage on known global interventions to reach a global net zero. At the same time, science in environmental assets is not yet perfect, and will continue to evolve.”

Advancements in project methodologies and technology to monitor these projects are beneficial, adds Wong.

“Independent scrutiny of forest projects plays an important role in the checks and balances in the market. Done right, with rigour and balance, it can help expose underperforming projects or poor practices. But unfortunately, misinformation about the effectiveness of these types of projects has proliferated in recent years, which risks harming the chances for environmental conservation and alleviation of poverty in rural communities.”