March 9, 2023
Introduction Undeniably, there has been an increase on the level of awareness on how greenhouse gases (“GHG”) emission has significantly affect the world every year. For companies, CSR campaigns were undertaken where pledges were made to help reduce and potentially prevent climate change by taking the initiative to reduce their GHG emission and setting the goal to achieve net zero carbon emission by 2050. Companies such as Petronas declared their Aspiration to achieve net zero carbon emission by 2050.1 One of the potential ways to achieve this net zero emission goal is through the carbon credit market. Carbon credit also gained the attention in ESG investing which contributes to the reduction of carbon.2 This article will focus on explaining how carbon credits work and how it will help to achieve the net zero emission goal. Most importantly, this article will explain how carbon credits can be claimed and traded followed by a further discussion on the initiative taken by Malaysia in promoting the carbon credit market. What are Carbon Credits Carbon credits are certificates or permits that allow the owner to emit a certain amount of carbon dioxide or other GHG3 over a certain period time4. 1 credit permits the emission of 1-ton of carbon dioxide or its equivalent in other GHG.5 Carbon credits are tradeable and only exist in jurisdictions that are governed by a “Cap-and-Trade” system.6 Countries or regions that have already implemented the cap-and-trade system includes the European Union (“EU”), Australia, New Zealand, South Korea, California and Quebec.7 The purpose of carbon credits is to overall lower the amount of GHG released by the buyers. This allows companies and individuals to account...