Building Reliable Carbon Markets

20 August 2026

Remarks by:

• His Excellency Jacques (Jaap) Werner, Ambassador of the Kingdom of the Netherlands to Malaysia

• Dr Gary Theseira, Chair of Council, Climate Governance Malaysia

Keynote Speaker

• Rutger de Witt Wijnen, International Legal, Ethics and Governance Consultant

Panelists:

• Rutger de Witt Wijnen, International Legal, Ethics and Governance Consultant

• Dr Renard Siew, Head of Sustainability, Yinson Holdings Berhad; President, Malaysia Carbon Market Association (MCMA)

Moderator:

• Dr Gary Theseira, Chair of Council, Climate Governance Malaysia

The session brought together policymakers, project developers, financiers, and legal practitioners to examine what it will take for Malaysia to build a carbon market that is credible, transparent and reliable as the country moves from a voluntary to a more structured, compliance-based ecosystem. Titled “Building Reliable Carbon Markets,” it marked the fifth session in the series co-organised by Climate Governance Malaysia and the Embassy of the Kingdom of the Netherlands, and the first to be convened in a hybrid format.

Dr Gary Theseira delivered the welcoming remarks, framing the session around Malaysia’s transition from what would conventionally be understood as a voluntary carbon market towards a more compliance-based system, a shift currently being undertaken by many countries. He observed that Malaysia is comparatively fortunate to have a progressive private sector that has not pushed back against this transition to the same degree seen elsewhere. 

Following this, His Excellency Ambassador Jacques Werner delivered the introductory remarks, positioning carbon markets as one instrument within a broader climate policy toolkit rather than a solution in themselves. He noted that carbon markets can place a value on emissions and create incentives for their reduction or removal, but only where reductions are real, measurable and properly accounted for, supported by clear standards and reliable systems for tracking both emissions and credits. Without this credibility, he cautioned, carbon markets will struggle to deliver their intended impact. He highlighted that while the Netherlands addresses these questions through the European Union’s Emissions Trading System, Malaysia is developing its market within a different institutional context, meaning that no single model can simply be transplanted from one country to another. 

In the keynote session, Rutger de Witt Wijnen traced the evolution of carbon markets from the Netherlands' early role as one of the first sovereign buyers of international credits through to the architecture now emerging under the Paris Agreement. Reviewing the EU Emissions Trading System an expensive but ultimately workable exercise, he argued that the cap, not the price, is the decisive element of any cap and trade design, illustrating the point through the two price collapses caused by political over-allocation and by the 2008 recession coinciding with an inflow of Kyoto credits. He traced a parallel trajectory in the voluntary market, where the absence of government validation required an entire private infrastructure to be built, and where the subsequent integrity crisis stemmed less from bad faith than from ambiguous rules, prompting the creation of the Integrity Council for the Voluntary Carbon Market. The most significant unresolved obstacle, in his view, remains the lack of an agreed legal definition of a carbon credit, which constrains bankability by leaving developers unable to pledge credits as security. Turning to the region, he assessed ASEAN's fundamentals as favourable substantial supply potential, building demand, and CBAM adding urgency for exporters and urged the establishment of a regional or interoperable system within five years, built on interoperability and equitable benefit sharing.

Following the keynote, the session moved into a panel discussion moderated by Dr. Gary, who opened by holding up a retirement certificate for a single verified carbon unit and observing that its weight lies not in the paper but in the burden of proof behind it: the establishment and verification that a specific tree in a specific forest has sequestered carbon and continues to stand. He recalled the difficulties encountered when afforestation and reforestation credits under the Clean Development Mechanism were effectively rejected by European markets after considerable national investment in assessing eligible forest areas, and noted that the concerns then raised around permanence and reversal remain live.

Dr. Renard Siew provided the Malaysian perspective, highlighting that recent policy developments including Pillar 4 of the National Climate Change Policy 2.0 and the National Carbon Market Policy launched in April 2026 position carbon markets as an important mechanism for addressing Malaysia’s climate financing gap and achieving its Nationally Determined Contribution, with around 70% of the required solutions already available and the remainder dependent on market mechanisms. However, he candidly described progress since the launch of the Bursa Carbon Exchange in December 2022 as slow rather than thriving, noting that despite Malaysia being one of 17 megadiverse countries, only one nature-based project the Kuamut Rainforest Conservation Project in Sabah has reached the market after more than a decade to achieve its first issuance. 

He identified three key structural constraints: high upfront costs for validation and verification, which can run into millions even before project viability is established; questions surrounding sovereignty over carbon standards, as Malaysia develops its own protocols through the Malaysian Forest Fund in recognition of state jurisdiction over land, forests and water; and muted corporate demand arising from uncertainty over claims due to misalignment between SBTi and VCMI guidance, particularly amid the global shift towards removals despite the continued economic relevance of avoidance and reduction credits in Malaysia and Indonesia. Stressing that integrity remains non-negotiable for MCMA, he concluded by highlighting the ASEAN Common Carbon Framework as a key deliverable under the ASEAN Business Advisory Council during Malaysia’s chairmanship.

The panel discussion opened on additionality, with the moderator framing the market as caught between price discovery on one side and the combined weight of additionality testing and verification cost on the other. Rutger argued that additionality is a clear case of the perfect becoming the enemy of the good, and that tests should be kept simple precisely because transaction costs must come down. Dr Renard accepted the necessity of the test as a defence against the charge that credits amount to a licence to pollute, but emphasised that integrity carries a price which developers themselves bear, paying independent third parties to demonstrate that credits are investment grade before viability is confirmed. He extended the point to Article 6, describing a sequence of memoranda, letters of authorisation, corresponding adjustments and registration in which missing a timeline can cost a year, and noted that the rules themselves were only finalised at COP29. His concern is compounded by the limited number of ASEAN methodologies that have secured the Core Carbon Principles label and the backlog in approvals, raising the prospect that credits may be treated as lower quality or effectively stranded.

Questions from the floor pressed on three fronts how a carbon tax relates to carbon markets, whether the market has become so heavily regulated that it has lost sight of the underlying climate objective, and whether additionality creates adverse incentives, since gazetting land as forest reserve can disqualify it from crediting. On carbon tax, Dr Renard set out MCMA's position that fossil fuel subsidies must be removed first, since taxing carbon while subsidising its consumption amounts to applying brake and accelerator simultaneously. Subject to that, the association supports a tax and points to Singapore's model, which permits a proportion of the liability to be offset through carbon credits, with MCMA advocating a higher allowance directed specifically at domestic credits. A tax establishes a price floor while the voluntary market allows companies to go further. He noted that iron and steel producers are already approaching the association because of their exposure to the European border mechanism. Responding to the philosophical challenge, Rutger agreed that the market has become considerably too complicated and argued for a return to basics, noting the incongruity of active discussion around the tokenisation of carbon credits at a point when the market has not established what a carbon credit is.

On safeguards and community benefit, Rutger identified the absence of a reliable and accessible justice system for local communities as a material gap in the architecture; recourse exists where a financier such as the World Bank operates its own grievance mechanism, but no globally applicable framework has been established. Dr Renard added that research from Cambridge has found carbon credits to have improved conservation outcomes globally notwithstanding documented overstatement in some projects, and offered the Aboriginal Carbon Foundation in Australia as an example of a programme run primarily by Indigenous communities, applying savanna burning methodologies transmitted across generations, with revenues returning to community development.

Closing the discussion, Dr. Gary noted that the most severe Intergovernmental Panel on Climate Change (IPCC)  scenario has become less plausible as policy implementation and the rapid growth of renewable generation in countries including China have begun to bend the emissions curve, and asked how the definition of low-hanging fruit should shift as a result. Rutger responded that carbon markets have a defined and enduring role but must be simplified, and expressed the hope that Asia would lead by learning from the European experience. Dr. Renard cautioned that national projections may already be outdated, observing that the National Energy Transition Roadmap predates the surge in data centre development. His closing argument was for movement over perfection: the hierarchy of reduction and removal before compensation is sound, but the greater problem is that most actors have not taken any step at all, and waiting for every element to fall into place risks acting too late. The discussion closed on the need to build a carbon market that is both credible and practical, with the right balance between integrity, accessibility and timely action.