The state government under the stewardship of Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg has undertaken various steps to pave the way for Sarawak to commence carbon trading.
Sarawak is the only state in Malaysia that has enacted legislation to allow carbon trading to take place.
Abang Johari together with the Sarawak delegation has made several trips overseas to learn and study more on the mechanisms and international protocols of carbon trading including procedures to tax carbon producers.
Most recently, they were in Bergen, Norway and it was reported that more in-depth information regarding the handling of carbon to be used as a trading material were obtained.
Following the trip to Norway, Abang Johari and his delegates met with Shell’s top officials in London, United Kingdom to explore collaboration opportunities with oil and gas companies to study matters concerning the development of carbon capture and storage (CCS).
This ambition of tapping into carbon trading not only aligns with Sarawak’s Post COVID-19 Development Strategy (PCDS) 2030, but it is part of Abang Johari’s efforts to generate more revenues for the state and approach to creating a green economy.
Moreover, it is also in support of the United Nations Framework Convention on Climate Change (UNFCC).
Since 1992, the UNFCC has been the foundation treaty that has provided a basis for international climate negotiations including landmark agreements such as the Kyoto Protocol 1997 and the Paris Agreement 2015.
The goal of the Convention is the stabilisation of greenhouse gas concentrations in the atmosphere, preventing dangerous anthropogenic interference with the climate system within a timeframe, allowing both the planet and its people to adapt as well as for economies to develop sustainably.
Enacting legislation to move forward
The amendments made to the Forests Ordinance and Land Code have enabled Sarawak to initiate activities that will reduce emissions of greenhouse gases in efforts to mitigate the impacts of climate change.
The amendments also cover airspace and properties above the surface of land as well as the seabed of the state’s continental shelf.
This is to provide a legal framework for carbon capture, utilisation and storage (CCUS) activities.
As the largest state in Malaysia, Sarawak has a total land area of approximately 12.4 million hectares in which 7.7 million hectares or 62 per cent is still under forest cover areas.
Under the Sarawak Land Use Policy, 7 million hectares have been earmarked for sustainable forestry and conservation whereby 6 million hectares are Permanent Forests (PFs) and 1 million hectares are Totally Protected Areas (TPAs).
From these forested areas, carbon sequestration can be carried out to form carbon stocks and carbon credit units can be derived.
Through Forest Carbon Activity, Sarawak is expected to create a new source of revenue with its value ranging from RM315 million to RM1.039 billion annually as PFs can yield carbon credit units at the rate of 200 tonnes of carbon per hectare.
At the same time, Sarawak has the largest carbon storage capacity in Malaysia with an estimated 30 trillion cubic feet (TCF) of storage in offshore areas.
The state’s capacity for CCS could generate carbon credits equivalent to RM3.5 billion annually when traded in compliance with Carbon Standards recognised or accepted internationally.
Pushing for carbon to be recognised as a trade commodity
Through the amendment of its Land Code and Forests Ordinance, Sarawak is the first state in Malaysia to enact legislation permitting carbon and nature venture businesses.
Abang Johari said the legislation is enacted to demonstrate the state’s efforts to be at the forefront of climate change mitigation.
With Sarawak targeting to commence carbon trading next year, he said it is crucial for the federal government to expedite the amendment process and update Malaysia’s legislation in accordance with international protocol and placing carbon as a trade commodity.
“Without a comprehensive legislative framework aligning with international protocol, it will hinder Sarawak’s production and trading of carbon.
“Therefore, I have urged and requested the federal government to promptly update the national legislation by incorporating carbon as a community under Deputy Prime Minister Datuk Seri Fadillah Yusof who is also the Plantation and Commodities Minister,” he said.
Abang Johari who is also the Energy and Environmental Sustainability Minister pointed out that carbon is a commodity which has been defined by the United Nations (UN), thus it should be a commodity under Fadillah’s ministry.
“If this can be done, it means that carbon trading can be done. Parameters and legislation must be in place for us to trade carbon which in Sarawak we have acted upon.
“I hope that at the federal level they will also have legislation on carbon trading,” he said.
Abang Johari said Sarawak is an international player since carbon trading is carried out internationally.
“Malaysia must have its position in the international carbon trading protocol since we are just a constituent state in Malaysia. They must have engagement with world players,” he said.
Following the UN’s definition that carbon is a commodity, Abang Johari asserted that Malaysia should follow suit and group carbon under Fadillah’s ministry instead of the Ministry of Natural Resources, Environment, and Climate Change.
“That is why I suggested to Fadillah to bring this up in the Federal Cabinet. Carbon is now under the ministry of energy (Ministry of Natural Resources, Environment, and Climate Change). More importantly, the UN has decided that carbon is a commodity, so we follow,” he said.
Issuing licenses for carbon trading and forest carbon study
Earlier this year, the state government issued a license for carbon trading to Petroleum Sarawak Berhad (PETROS).
This marked PETROS’s beginning in its strategic role as resource manager for Sarawak’s natural CCUS resources.
The license issued by the Sarawak Land and Survey Department (JTS) covers an area located in the North Luconia province, offshore Bintulu.
PETROS group chief executive Janin Girie said Sarawak has the biggest potential for carbon storage capacity in Malaysia in its offshore areas.
He said the development of CCUS infrastructure would enable stranded sour gas reservices offshore of Sarawak to be commercialised.
“The additional gas unlocked by CCUS can ensure long-term energy and gas supply security for Sarawak, complementing the energy transition for the state and Malaysia.
“In the long run, the base CCUS infrastructure can be further expanded to allow other carbon dioxide emitters both local and foreign to capture and store carbon dioxide.
“This will reduce the greenhouse warming effect and enable the realisation of a new carbon-zero economy,” he said.
Janin said these expansions would in turn create business opportunities to operate CCUS infrastructure, generate revenue for Sarawak and further develop local capabilities.
“We welcome organisations who are committed to achieving their decarbonisation targets to explore utilising CCUS potential in Sarawak with PETROS,” he said.
Meanwhile, SaraCarbon Sdn Bhd, a subsidiary company of Samling Group, is the first organisation in Sarawak to receive a forest carbon study permit.
The permit allows SaraCarbon to study and undertake a carbon nature-based project within Samling’s industrial tree plantation area in Marudi near Miri.
Samling Strategic Corporation Sdn Bhd chief executive officer Lawrence Chia said this carbon study permit would allow the development of a project which is a potential game-changer in driving Sarawak towards a green economy.
“Our project in Marudi is aligned with the state government’s objective to reduce greenhouse gases and provide a new source of revenue for Sarawak.
“We are fully supportive of the state government’s carbon policy as it will see Sarawak pursuing a new direction in forest management, planting even more trees and restoring degrading forests,” he said.
Partnering with other countries
In the exploring CCS opportunities, PETROS has partnered with South Korea-based Posco Group for this.
PETROS is also working with Petroliam Nasional Berhad (PETRONAS) to establish a road map for a CCS ecosystem.
PETRONAS is embarking on a RM4.5 billion mega CCS project off Bintulu northern Sarawak in the Kasawari gas field which is poised to revolutionise the regional upstream oil and gas industry.
The game changing initiative will not only drive innovation in the sector but marks a significant step towards sustainable energy production benefiting both the industry and environment.
The project is expected to reduce up to 3.3 million tonnes of carbon dioxide each year making it one of the largest offshore CCS projects in the world.
At the same time, reputable companies from countries like Singapore and Japan have also expressed their keen interest in participating and investing in CCUS ventures in Sarawak.
Indonesia is also keen to work with the state government considering Sarawak and Kalimantan are both located in the Borneo archipelago which offers substantial untapped potential in carbon trading due to their vast untouched forests.
Setting up a climate change centre
Sarawak is also planning to set up a centre to oversee and manage the development of carbon trading and storage towards mitigating climate change.
Abang Johari said this would help ensure that carbon trading policies and practices would be aligned with the state’s sustainable goals.
The proposed Sarawak Climate Change Centre would be set up once the legal framework and rules are in place for climate change and carbon trading initiatives.
“The legal framework is now being worked out in stages by our lawyers in collaboration with international bodies.
“We have already amended our Land Code and Forests Ordinance which enabled us to venture into carbon trading and storage,” he said.
Abang Johari said the proposed centre would serve as a hub to coordinate, manage, support, and guide all climate change and carbon trading initiatives in Sarawak.
It will also support the development of policies and regulations promoting sustainable practices including renewable energy, energy efficiency, and forest management.
“With the centre, Sarawak can position itself as a leader in climate change and carbon trading initiatives in the region thus attracting investments and talents to drive sustainable economic growth.
“We are also developing a state climate change policy to reduce carbon emissions and mitigate their impacts.
“This policy will guide all communities in Sarawak towards a more sustainable and resilient future,” he said.
Other strategies that the state government is embarking on include developing low-carbon blueprints for cities and towns in Sarawak and protecting and restoring forests which act as carbon sinks.
At the same time, the state government is actively pursuing participation in carbon offset programmes as well as investing in CCS technologies.
