Bursa Malaysia launches first Shariah-compliant carbon trading platform


Bursa Malaysia launched the country’s first voluntary carbon market (VCM) on December 9, with the first carbon credit auction to take place next March.

The Bursa Carbon Exchange (BCX), which is also the world’s first Shariah-compliant carbon exchange, calls for project developers, investors, and buyers to build local capabilities for the VCM ecosystem.

Bursa Malaysia chairman Abdul Wahid Omar said the online auction is currently in the trial phase, while the carbon projects for auction are now in the final stage of screening.

“The first trade will be conducted via an auction which will facilitate price discovery for the new standardised carbon credit products listed on BCX,” he said.

According to Ecosystem Marketplace, the value of the VCM has quadrupled since 2020 to nearly US$2 billion in 2021. Despite the positive development in the voluntary landscape, the compliance carbon market still dominates the global carbon market, with a total value of US$270 billion in 2021.

In addition, the compliance carbon market accounts for around 16% of greenhouse gas emissions, while VCM accounts for only 0.2%. As a result, there is a tremendous opportunity to scale up the VCM, according to Wahid.

The BCX will provide three carbon trading modes, namely carbon trading auctions, spot-trading for standardised carbon credit contracts, and spot-trading services for off-exchange transactions.

Muhamad Umar Swift, chief executive officer of Bursa Malaysia, said that the BCX enables both buyers and suppliers to transact high-quality carbon credits and use them to offset their existing climate impact alongside their other internal carbon reduction initiatives.

“The exchange will make carbon trading a more inclusive ecosystem, allowing more market participants to engage with clients looking for environmental, social and corporate governance as well as Shariah-compliant related solutions,” he added.

Currently, BCX has adopted the Verified Carbon Standard (Verra), a global certification standard for carbon emissions reductions, with which projects from 2016 onwards will need to be registered.

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