Certain quarters in Malaysia are pushing for market-driven mechanisms to cut carbon emissions and transition to a low-carbon economy.
And they are being given a platform to do so by parties who should know better. The Star, for example, featured a write-up extolling the benefits of carbon trading platforms.
What are carbon markets?
Carbon markets are platforms where “carbon credits” can be traded.
Companies or NGOs that carry out projects to remove CO2 from the atmosphere by planting trees or preserving existing forests will be awarded “carbon credits”. They will be given one credit for each tonne of carbon removed from the environment.
These companies can then monetise these credits by selling these carbon credits to companies that wish to “offset” their carbon emissions.
Basically, the purchasers of carbon credits are buying the right to continue their polluting activities.
The carbon credit-producing companies or NGOs will then get 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. Malaysia is now setting up such a market.
The socialist party PSM fully agrees with environmental groups that criticise carbon markets. These markets are extremely “iffy” and are open to all sorts of abuse.
Allow me to share an example from Perak.
Kledang Saiong forest plantation
The Perak state government has approved a forest plantation project involving 4,280 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). The logged area will then be replanted with three tree species that can be harvested for timber five, 10 or 15 years down the line.
Four firms (specified in the environmental impact assessment report) have been given the approval to implement this project.
These companies will earn handsomely from selling the logs obtained in the initial clear-felling phase of the project.
They will also gain from selling the carbon credits derived from replanting the area with trees. (The intention to sell carbon credits is clearly specified in the impact assessment report.)
Kledang Saiong forest reserve is a biodiverse forest with 62 mammal species, 60 reptile species and 205 bird species, of which 249 species or 76% are on the “protected” or “totally protected” lists (Chapter 6 of the impact assessment report).
However, the report characterises the entire 4,280 hectares of forest as “severely depleted” (see Table 7.3.9 in the report on “estimation of soil losses before, during and after the project”)
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, maximised.
Corporate greenwashing
The Kedang Saiong saga demonstrates the weaknesses of the market approach.
The project will destroy a healthy, biodiverse forest that is already functioning as a “carbon sink”. It 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 executive council, the Forestry Department to the Department of Environment are not prepared to call this bluff.
The major players – the logging companies, the environmental consultants and the politicians empowered to approve the project – are driven by the mega-bucks this project will generate.
Mere rhetoric
This is exactly what will occur in carbon markets. The carbon credit buyers just want the credits to enable them to continue polluting, instead of taking steps (which might be expensive) to reduce their own carbon footprint.
The buyers do not care much about the veracity of the carbon-reduction claims of the NGOs or companies selling them the credits. All the buyers care about is that the credits will enable them to put off the difficult steps required to cut their greenhouse gas emissions!
The independence and objectivity of the agencies calculating and quantifying the amount of carbon credits produced is suspect.
If the environmental impact consultants are a company that was chosen by and paid for by the companies that were awarded the project, where to you expect the consultants’ allegiance to lie?
Given the way the Malaysian government operates today, the agency certifying the carbon credits will be ‘corporatised’ 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 environmental impact consulting companies 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?
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 greenhouse gases emissions! It will not help in actually reducing carbon emissions.
Cap and tax
We would like to suggest another approach – cap and tax. 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 exceeding this cap should be taxed. The money gained from this tax can be used to fund projects that further reduce greenhouse gases and to pay for the transition to renewable energy. Such projects could include rehabilitating logged forests, harvesting methane from organic municipal waste to generate electricity, and installing solar panels on the roofs of all-government owned buildings.
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.
Asean collaboration
Vietnam has already introduced a carbon tax of 50 cents per ton of CO2. Indonesia plans to introduce it at $5.20 per ton.
These rates are far lower than those instituted in Europe. France, for instances, taxes it at $52 per ton of CO2 and Sweden at $137 per ton.
Too low a tax rate will not create the economic incentives for users of hydrocarbon-based fuels to switch to renewable energy.
The truth is a CO2 tax will raise the cost of production and create a comparative disadvantage for any country trying to attract foreign investments – an important economic strategy for Asean countries.
This is why we need to have an Asean-wide discussion on carbon taxes. In this way, such taxes 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.
Speaking 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 Malaysia have been overly influenced by the corporate narrative. The politicians in power seem to have embraced dodgy policies like carbon trading and “carbon capture and storage”.
The “Madani” (civil and compassionate) 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 false corporate-driven ‘solutions’. Instead, they need to push for effective, sustainable programmes to contain the climate change crisis.
The views expressed in Aliran’s media statements and the NGO statements we have endorsed reflect Aliran’s official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran’s official position.
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