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National Guidance on Forest Carbon Market

1. Purpose of the Guidance

The National Guidance on Forest Carbon Market is not a legally binding document. It is intended to be a point of reference for any state or entity planning to engage in forest carbon related activities. Additionally, the guidance identifies the roles and functions of the various actors involved in forest carbon projects in Malaysia. This will ensure no double counting takes place when accounting for the forest sector’s emission reductions, which will be reported in the Biennial Update Report (BUR) and / or the Biennial Transparency Report (BTR) to the UNFCCC. Double counting of emission reductions is avoided by undertaking adjustments for anthropogenic emissions by sources and removals by sinks.

2. Background on Forest Carbon Credit Guideline

The Paris Agreement under the United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 2015. The objective of the Agreement is to strengthen the global response to the threat of climate change. The aim is to keep global temperature rise well below 2 degrees Celsius above pre-industrial levels, and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. The Paris Agreement requires all Parties to pledge their efforts through their Nationally Determined Contributions (NDC) and to strengthen these efforts in the years ahead. This includes requirements for all Parties to report biennially on their emissions and removals of greenhouse gases (GHG), as well as their emissions reduction target. Some countries have pledged an ambitious target and would require carbon offsets to fulfil their target. Due to this, there is a sudden surge in demand for carbon offsets globally, in particular for forest carbon offsets. Several state governments have been approached by various parties wishing to engage in forest carbon offsets in Malaysia.

National Guidance on Forest Carbon Market

3. Institutional arrangement

3.1 The state government’s responsibilities The following shall be reported to the National Steering Committee on REDD Plus (NSC REDD Plus), coordinated by the Ministry in charge of forestry:

  • Information on the carbon project;
  • The scope of the activity and the crediting periods;
  • The project boundary;
  • The methodology used and baselines developed;
  • Policy guidance applied to achieve the emission reductions; and
  • Annual reporting of units generated, sold, retired and cancelled.

3.2 Responsibilities of the Ministry in charge of forestry

  • Secretariat to the National Steering Committee on REDD Plus (NSC REDD Plus) and the National Technical Committee on REDD Plus (NTC REDD Plus);
  • Provide guidance on forest carbon market as appropriate;
  • Maintain a Registry to track forest carbon projects;
  • Undertake corresponding adjustments for REDD Plus reporting; and
  • Any other requirements agreed under Article 6 of Paris Agreement

3.3 Responsibilities of the Ministry in charge of climate change

  • Verify no double counting occurs when reporting of NDC progress and achievement;
  • Undertake corresponding adjustments consistent with UNFCCC’s decisions on Article 6 of Paris Agreement;
  • Any other requirements agreed under Article 6 of Paris Agreement;
  • Maintain Malaysia’s NDC in accordance with Article 4 paragraph 2 of Paris
  • Agreement and decision 4/CMA.1 under the UNFCCC;
  • Ensure Malaysia’s participation in the Article 6 of Paris Agreement contributes to the implementation of Malaysia’s NDC and long-term low GHG emission development strategy; and
  • Ensure that Malaysia’s use of the mechanism developed under Article 6.4 of Paris Agreement does not lead to an increase in emissions within and between NDC implementation periods.

4. Jurisdictional or project level carbon offset 4.1 Scope

  • The UNFCCC decisions on Articles 6 and 13 of the Paris Agreement should be considered for any forest carbon project;
  • The Intergovernmental Panel on Climate Change (IPCC) principle on transparency, completeness, consistency and accuracy shall be adhered to; and
  • The carbon project maintains consistency in activity data, emission factors and activities reported in National GHG Inventory for the Land Use, Land Use Change and Forestry (LULUCF) Sector.

5. Requirements to enter into voluntary carbon markets at state level 5.1 Activity design

  1. The activity shall be designed to achieve reduction of GHG emissions or increase in removals;
  2. The activity shall endeavour to:
    • Deliver real, measurable and long-term benefits related to climate;
    • Minimize the risk of reversals and displacements of emission reductions and, where reversals occur, ensure that these are addressed in full;
    • Avoid negative environmental and social impacts; and iv. Establish a robust accounting system.
  3. Shall undergo local and, where appropriate, subnational stakeholder consultations consistent with applicable domestic arrangements in relation to public participation, local communities and indigenous peoples;
  4. Transfer of technology is mandatory and shall be environmentally sound;
  5. The activity shall:
    • Set a baseline for the calculation of emission reductions and/or removals to be achieved by the activity;
    • Demonstrate the additionality of the activity;
    • Ensure monitoring of emission reductions and/or removals; and
    • Calculate the emission reductions and/or removals achieved by the activity