Jun 3, 20225 min read

An EU-Malaysia dialogue: Fighting Climate Change with Market Mechanisms

Updated: Oct 4, 2022

Closing Remarks by Datuk Faiz Azmi, Chairman of the KL Business Club. More information on this event below.

His Excellency Roland Galaharague the French Ambassador to Malaysia

Tan Sri, Datuk, Ladies and Gentlemen

First of all I would like to thank the French Embassy and Ambassador Roland Galaharague for inviting the KLBC to be involved in this important EU-Malaysia forum.

KLBC or Kuala Lumpur Business Club was established in 2003, some 19 years ago, and has been very active in helping discourse and networking between companies in Malaysia and also with stakeholders both in Malaysia and abroad. The KLBC Board agreed in 2020 to make Climate Change one of our key agendas and it is this context, KLBC are here today. In fact one of our Board members was a panel members today in the earlier sessions, Datuk Charon.

The premise today of the various panels is that while government has an important role in terms of leadership and setting a policy framework, the corporate sector and market mechanisms in particular are key to making meaningful changes. Market based solutions and interventions are needed to align the interests of society and businesses while still making profit.

We heard from the Ambassador why the EU are focusing in this region. He mentioned that our region Indo Pacific contributes 57% of global carbon gases currently and is expected to account for 70% of the growth in energy needs to 2030. He also expressed the view that EU are happy to help Malaysia in our Green Transition and in that context, forums such as these are part of that help.

Later, we heard in Tan Sri Francis Yeoh’s words, that we need “leadership and zeal” and that is something we need not just in governments but from many in the corporate sector. In his session, while sharing what YTL has done, his key message is that Carbon Tax is a key step in the right direction.

We had an interesting panel moderated by Khoo from BFM on carbon markets in the EU. We had a useful introduction to the ETS and it’s recent revisions. Essentially each company works to a cap and there is a market mechanism to trade its unused allocation. This has generated some new revenue stream for states when these allowances are traded. Stripping out the impact of the recent energy crisis, EU emission numbers in 2021 is 4.4% below 2019 numbers. It would also seem that EU ETS model is being considered in other jurisdictions.

CBAM too was explained which results in a charge on goods that are imported. It is to incentives other countries to do their part. Its also seen as an anti abuse provision.

However there were cautions noted, meaning the impact to the population as these taxes are passed onto consumers and the need for a holistic series of policies and not just carbon pricing mechanisms alone, needs to happen to successfully reduce GHG gases.

We had a panel on the Malaysian plan moderated by the redoubtable Datin Sri Sunita which had a recorded session with our KASA Sec Gen Datuk Seri Zaini Ujang. He mentioned some help is being given by the global community to fund various local initiatives.

With regards to Carbon Markets, while commitments have been given, the details of how and the frameworks needed will take years to achieve. So KASA has come out with a Sept 2021 approved framework for Voluntary Carbon Market.

Also he mentioned a study being done on Carbon pricing, which will be used towards creating a National Carbon Trading Framework.

Another notable fact is the centralizing the GHG data under KASA as Malaysia needs more robust and reliable data to make decisions.

Our CEO of Bursa mentioned the three initiatives Bursa is working on with government, VCM, Carbon Tax and Domestic Trading.

We also had a fascinating presentation from the world bank where I noticed that Forestry and Land use seems to be where many of the VCM projects seem to be. Good for us as Malaysia has a Forest and Tree cover of about 73% or forest cover of 50%.

Our final panel moderated by my ex-boss, the very lively Dato Seri Johan Raslan.

We heard from Charlotte Wolff-Bye of Petronas on some of the corporate concerns. Yes carbon taxes do encourage emission reductions but the revenues should be used judiciously to solve the problems in country. It’s for virtuous purposes.

She mentioned Petronas Net Zero target by 2050 and some of the transition plans. Her advice was to Start your measurement and also look at it as an opportunity not just a cost.

Dato Charon was provocative, as usual, pointing out that emissions per capita shows Malaysia per person are higher emitters than China. And also US consumers are consuming twice as much as the Chinese. So why pick on China just because it is 30% of global emissions. He also observed oil producing countries generally have higher emission numbers.

Lynette from Saint-Gobain Singapore stated her firms ambition and shared their transition plans.

So in summary what are the takeaways from this webinar/forum? I would suggest 4 key points:

First that we need more leadership and zeal from both government and the corporate sector to do more, faster.

Second, we note that the collective commitments currently made by governments will lead to warming beyond the cap of 2 degrees, which was agreed at Paris. So more needs to be done sooner. You can’t wait till 2050 and so transition plans are needed now and to be bolder.

Third, we all need to learn more about the topic and quickly. Participating and supporting the thoughtful insights and conversations like those we have just heard - from key actors in the domestic ecosystem as well as experts from the EU - are critical if we are to get it right, within the short window of time we still have

And finally, Malaysia is not immune from what’s happening in the rest of the world. Our emissions may indeed be less than 1% of global emissions but recent flash floods and the sheer volume of rain we have had this year alone in 2022 is staggering.

Thank you again for being given this opportunity to speak and I wish you a safe journey home this rainy day!

On 25 May 2022, in close collaboration with the Embassies of the European Union and France, Climate Governance Malaysia (CGM) convened An EU Malaysian Dialogue with the theme "Fighting Climate Change with Market Mechanisms".

This event aimed to:

Benchmark prospective policy-initiatives against lessons learned and experience gained (from both the EU and ASEAN region)
Present the current legislation in the EU about carbon trading (EU ETS) and the implementation in stages starting 2023 of the Carbon Border Adjustment Mechanism (CBAM)Engage a dialogue with Malaysian stakeholders about the economic implications of CBAM.
Understand challenges and effective policies in developed and developing nations in fighting climate change.
Forge a better understanding of the potential impact of new standards and policies in the journey to lower carbon or GHG emissions on businesses (both large and small).
Contribute to a closer relationship between Malaysia and the EU.