PETALING JAYA: Carbon markets and sustainable financing instruments are set to play a pivotal role in helping Malaysian industries navigate rising energy costs while staying on track with the country’s net-zero ambitions.
Bursa Carbon Exchange (BCX) assistant vice-president of business development and sales Muhammad Rizal Azmi said carbon credits and RECs (renewable energy certificates) were no longer optional tools but critical mechanisms for corporates to address residual emissions and demonstrate accountability.
“Carbon markets are essentially a financing mechanism to channel private sector funding into decarbonisation projects. They allow companies to offset the balance of emissions that cannot be eliminated due to technical or financial constraints,” he said during a presentation at the TERA Sharing Session and Panel Discussion today.
Muhammad Rizal explained that while carbon credits can be used to offset Scope 1 and Scope 3 emissions, RECs are designed specifically to address Scope 2 emissions from purchased electricity.
“Companies often use both in combination, credits for their direct and supply chain emissions and RECs for electricity-related emissions,” he said.
Since its launch in 2022, BCX has facilitated the trading of both instruments, conducting Malaysia’s first carbon credit auctions through projects such as the Sabah Green Forest conservation initiative and methane capture at palm oil mills.
More recently, the exchange completed its first REC transaction from a hydro project in Sarawak.
Muhammad Rizal noted that market dynamics were beginning to take shape, with solar RECs trading at around RM20 compared with RM5 for hydro, reflecting higher demand for solar-backed claims.
He added that Malaysia’s forthcoming Climate Change Bill and national carbon market policy, expected after the tabling of Budget 2025, would provide greater clarity on carbon tax mechanisms, including pricing, thresholds and compliance obligations.
“The government’s framework will determine how companies participate in carbon trading, but the direction is clear: decarbonisation is no longer optional for industry,” Muhammad Rizal said.
CIMB Bank regional head of sustainable finance for group commercial and transaction banking Azmir Abdullah echoed this urgency, stressing that banks’ emissions are mainly from financed emissions through their customers.
“We have an ambition to achieve our Net Zero Target by 2050 and this can only happen if our customers also decarbonise,” he said.
Azmir outlined CIMB’s “GreenBizReady” proposition, which focuses on sustainable finance (including Sustainability-Linked Financing “SLF” which provides rebates even for SMEs) and the assistance of various GreenBizReady associates such as Tera, in making renewable energy and energy efficiency adoption more accessible amongst others.
He cited examples of how companies can benefit from sustainable finance, for example a manufacturing SME that installed solar panels and achieved lower financing cost (through BNM’s Low Carbon Transition Facility), hedged their long term electricity bills and understood ESG better (especially carbon footprint) to strategically position themselves with their big foreign customers.
In another case, a local healthcare group is upgrading and financing its cooling systems through Green Technology Financing Scheme (“GTFS”) and concurrently they are also expanding / replacing their old solar rooftop panels.
These actions should result in substantial electricity savings which also positions them to take advantage of the financing rebates from GTFS (by the government) and SLF (by CIMB). “These are not theoretical solutions; they are already happening in the market. What we need now is scale, and greater participation from SMEs and corporates,” Azmir said.
He acknowledged however, that despite a number of incentives, sustainable financing adoption among SMEs remained slow.
“SMEs need to start their journey sooner rather than later to take advantage of these existing incentives, as some may no longer be available as the market matures” he said.
CIMB had recently announced a new sustainable finance target of RM300 billion by 2030, reinforcing its commitment to help its customers navigate risks and build resilience in a lower-carbon, more inclusive economy. “We want to be the catalyst that helps our customers future-proof their businesses,” Azmir said.
The session also underscored the interconnected roles of regulators, financiers and industry players in driving Malaysia’s energy transition.
While BCX provides the market infrastructure for carbon trading and CIMB offers financing pathways, regulators such as the Energy Commission and the Malaysian Investment Development Authority are expected to set the policy framework to support long-term competitiveness.
The TERA Sharing Session and Panel Discussion brought together senior management, regulatory representatives, and decision-makers to explore the implications of the new electricity tariff structure on manufacturers. The event also showcased TERA’s renewable energy solutions, including smart solar and energy efficiency systems, designed to help businesses manage costs while reducing their carbon footprint.