Carbon trading business in the country is expected to be worth between RM3.2 billion and RM6.4 billion in the next five years, underpinned by companies increased participation in environmentally sustainable projects. Standard Chartered Bank Malaysia Bhd (StanChart) managing director and global markets head Sandeep Bahl said he was optimistic that the local carbon trading market would move in a strong and rapid pace, as companies became more concerned with high emissions of greenhouse gases (GHG), such as carbon dioxide, from their business activities.
"We believe palm oil plantation companies can be big beneficiaries from carbon trading, as it is an energy-intensive industry and therefore, can earn carbon credits from their operations to be traded off", he said at a briefing last week. Carbon trading was part of an initiative set up under the Kyoto Protocol by the United Nations that was enforced in 2005, which saw 36 developed countries pledging to reduce GHG to 5.2% by 2012.
Companies that could not meet the emission limitation target could make up the shortfall by purchasing certified emission reductions from companies in developing nations that ventured into Clean Development Mechanism (CDM)-certified projects.
Sandeep said StanChart was already in talks with several oil palm planters in the country on developing and financing CDM-certified projects, apart from other companies in various energy-intensive industries such as power producers, cement manufacturers and airlines.
"It is a good time to approach these companies, especially those from the plantation sector, as crude palm oil prices are high, which may attract more companies to be involved in the industry", he said, adding that StanChart was expecting some of the deals to be struck this year. He said StanChart's strategy to negotiate with various palm oil players to venture into carbon trading would be its ongoing strategy, as part of the banking group's commitment to encourage companies to embark on renewable and clean energy projects.
According to Sandeep, there were between 120 and 125 CDM-certified projects involving some 50 Malaysian companies that were already being implemented or would be in the next two years.
Carbon trading is currently most developed in the European Union (EU) where the EU Emission Trading Scheme (EU ETS) began operating in 2005. EU accounts for 80% of the global carbon trading market.
"Being a UK-based banking group, we have clientele networks in the EU that we can leverage on to boost carbon trading between local companies and corporations in Europe,? Sandeep said, adding that there was plenty of room for the market in Southeast Asia to grow, given that it accounted for only 1% in the EU ETS. According to a report by Point Carbon, a firm that analyses the international carbon trade, carbon trading has become one of the fastest growing industries, registering a 64% jump in total trade volume in the global carbon market to 2.7 billion tonnes in 2007, from 1.6 billion tonnes in 2006.
A research in the Malaysia Energy Centre has shown that Malaysia has potentially 100 million tonnes of carbon credit, and it could benefit from carbon trading, which is now worth US$60 billion globally but could grow to US$1 trillion in a decade.
Moving forward, Sandeep said StanChart would also be actively involved in structuring products, known as
'green funds', which would invest in companies that were involved in renewable energy and clean projects.
"Like any new market, a lot of time has to be spent on educating and raising awareness of companies and investors on carbon trading first. However, we believe that structuring green funds will be the second phase of our initiative, which will eventually spark the interests of investors in the future", he said.
Since StanChart's first financing of a renewable energy project in 2005, the banking group had advised or financed about US$1.5 billion worth of renewable projects globally in 2007 alone. Last year, StanChart also made a pledge to the Clinton Global Initiative to advise and provide finance for new renewable and clean energy projects with values of between US$8 billion (RM26 billion) and US$10 billion over the next five years.
