Carbon credits are one type of compensatory mechanism for offsetting the emissions of carbon dioxide or other greenhouse gases. When a company buys a carbon credit, usually from the government, it gains permission to generate one ton of CO2 emissions. The first auction for Malaysian Carbon Credit was held by Bursa Carbon Exchange (BCX) recently. This is a monumental step toward admitting the first Malaysian nature-based carbon project onto the BCX. This is a testament to Malaysia's ability to develop its own carbon projects that meet international standards. Another feather in the cap, BCX is the world's first Shariah-compliant multi-environmental product exchange that facilitates the trading of carbon credits via standardised contracts.

The lush forests in our country, which cover about 55.3% of the land area, are an important resource for capturing carbon. With an area of more than 18.27 million hectares, these forests are extremely important for removing carbon dioxide, which is one of the main gases that causes global warming. The World Bank estimates that the global market for carbon credits will reach USD 50 billion by 2030. This will be a significant source of income for a country with vast bioreserves like Malaysia.

It must be noted that our forests can only reach their full potential if the federal and state governments work together, much like the spirit that established Malaysia in 1963. Article 74 of Malaysia's Federal Constitution gives state governments the power to control land use, which includes forestry. Hence, each state often has its approach to forest management.

Essentially, all states within Malaysia need to agree on how to handle carbon tracking and forest management. However, for these attempts to work, federal and state governments need to strengthen their collaboration. The federal government should set national standards for carbon tracking and forest management. Subsequently, supportive action should be given to all states to implement the policy. The Malaysia National Carbon Market Policy should be promptly introduced so that the new bill of the National Climate Change Act can act as the main instrument for ensuring the effective operation of the national carbon market.

Prof. Ir Ong Hwai Chyuan, Prof. Long Chiau Ming, Dr Woon Chin Ong, Sunway University