Malaysia is a global titan in palm oil production. Yet, the Southeast Asian nation remains a rule-taker rather than a rule-maker in the burgeoning carbon credit market.
This was the talking point among local players on the sidelines of the International Palm Oil Congress and Exhibition held at the Kuala Lumpur Convention Centre two weeks ago. Conversations of such a nature were also heard within Menara Felda, located just a stone’s throw away from the venue.
For domestic players, the frustration is palpable. They champion the industry but when it comes to monetising the carbon stored in the nation’s oil palms, they are forced to look West for approval. Europe has been rather critical of palm oil producers in this region, citing environmental issues. The European Union has the EU Deforestation Regulation (EUDR), but the Malaysian Palm Oil Council had in September said the regulation lacks a clear implementation pathway and contains “significant operational and structural flaws” that undermine companies which have already invested heavily in compliance preparation.
The core grievance is simple. There is no Malaysian body overseeing a “Malaysian Standard” for carbon credits that international buyers accept. Instead, the industry relies on foreign bodies like Verra (USA) or Gold Standard (Switzerland) – regulators whom local players argue do not fully understand the nuances of tropical agriculture.
One of the biggest hurdles for local players – especially mid-sized estates and smallholders – is confusion.
“People want to know who can do it,” said a local industry player who requested anonymity. “We have the assets, but we don’t know who can process them.”
Currently, a Malaysian company selling to a Malaysian buyer on the Bursa Carbon Exchange (BCX) still requires verification from a foreign auditor to validate the credit – part of a service ecosystem of multiple layers with multiple fees.
Unfortunately, international buyers trust standards they know. The Malaysian Sustainable Palm Oil (MSPO) certification is mandatory and robust, but it has not yet been converted into a tradable carbon credit standard recognised globally.
“We are relying on Western regulations because we haven’t built a credible alternative that the market will buy,” added another local player.
“If Malaysia created a ‘Palm Carbon Standard’ tomorrow, we would still need to convince global buyers it isn’t just greenwashing. That is the hurdle.”
The industry buzz suggests a potential game-changer as Malaysia passed the Asean chair baton to the Philippines last month: What if Indonesia, Malaysia, and Thailand joined forces to create a carbon credit system?
Indonesia is the largest palm oil producer, followed by Malaysia, while Thailand has moved ahead with its own domestic standard.
Together, these three nations control over 90 per cent of the world’s palm oil. A unified “Asean Palm Carbon Standard” could force the global market to accept a locally derived, scientifically backed methodology for calculating carbon storage in oil palm estates.
There is movement in this direction. The Asean Alliance on Carbon Market (AACM) was recently discussed at COP29 in Baku in September, with Malaysia, Indonesia, and Thailand signing a framework to align their markets.
While Malaysia hesitates for reasons best known to the policymakers, Thailand established the T-VER (Thailand Voluntary Emission Reduction) scheme. Realising that international buyers were sceptical of local standards, Thailand upgraded to “Premium T-VER”, which aligns with international standards.
The Thai Department of Agriculture is now acting as a certification body for crops, developing baselines specifically for its agricultural sector so farmers don’t have to pay expensive foreign consultants to calculate their carbon baseline from zero. Thai universities are also actively participating, assisting local planters so they can earn carbon credits and increase economic opportunities.
“For Malaysia to lead, the industry needs a local methodology. The Plantation and Commodities Ministry must work with scientific bodies and the Malaysian Palm Oil Board to create a carbon methodology specifically for oil palm that is accepted by the Bursa Carbon Exchange,” said the player. “We also need to train local auditors who are accredited by international bodies so that planters don’t have to fly in verifiers from abroad.
“Malaysia must aggressively push the Asean alliance. If the ‘big three’ producers agree on how to count carbon in a palm tree, the West will have no choice but to listen.”
This matter will be raised, yet again, at the ‘2nd Unlocking Revenue and Sustainability – Exploring Carbon Credit: Opportunities in the Palm Oil Industry 2025’, scheduled Dec 5–6 in Genting Highlands, Pahang.
Representatives from the Federation of Palm Oil Millers Association, Malaysian Palm Oil Council, Malaysia Biomass Industries Confederation, Malaysian Palm Oil Board, Palm Oil Refiners Association of Malaysia, Malaysian Estate Owners’ Association, and the Federal Land Development Authority (Felda) are expected to participate in the event.
Industry players will now wonder what progress has been made since the inaugural event last year. What initiatives have been taken to ensure Malaysia develops its own carbon credit system for palm oil? And what is the progress by the Natural Resources and Environmental Sustainability Ministry in developing such a mechanism following engagements with industry representatives?
Or perhaps, this year’s event will see the representatives take charge and work closely with Felda to come up with their own system.
Malaysia must quickly build its own “bridge” to the international market. Otherwise, it will continue to see profits leak out to foreign verifiers and consultants.
As an industry player concluded: “We are the champions in this scene, but we need verification from those who already have a biased view about our industry. It doesn’t make any sense but no one wants to say it out loud.”
