Cashing in on carbon trading

Published 10th March 2008
by Kathleen Tan, The Edge

Azman Zainal Abidin believes every cloud has a silver lining, and climate change is no exception.

At a forum in January titled “Climate Change Outlook 2008” organised by the Young Presidents Organisation (YPO), Azman, deputy director for policy analysis and research management at the Malaysia Energy Centre, a non-profit organisation administered by the Ministry of Energy, Communication and Multimedia, urged the 25 participants comprising mostly corporate leaders to see climate change as an opportunity for monetary gain while doing something for the environment.

The bulk of greenhouse gas (GHG) emissions are from energy usage, and energy trends from 1990 to 2005 show that Malaysia’s energy demand has grown in tandem with gross domestic product (GDP), said Azman.

Unlike developed countries, most developing countries have not been able to decouple GDP from electrical consumption, which results in inefficient energy usage. Based on extrapolation of current energy trends by the Malaysia Energy Centre, the outlook for energy usage in Malaysia shows that by 2010, energy demand would be about 1.6 times higher than in 2000.

“So eventually all of us will have to do something to ensure that our energy supply is not depleted but to ensure it lasts longer. It’s energy security that we want. One of the ways we can do so is through Clean Development Mechanism (CDM),” Azman said.

CDM is a project-based mechanism provided for under Article 12 of the Kyoto Protocol 1997, which allows public or private entities in developed countries to receive emissions credits for projects that lead to certified emissions reductions (CER) in developing countries.

Under the Kyoto Protocol, Annex I nations (developed countries) agreed to reduce greenhouse gases to at least 5% below their 1990 output level by the first commitment period in 2012. Companies that fail to achieve their reduction targets can either buy carbon credits to fulfil their quota or support projects that reduce emissions in developing countries such as Malaysia via CDM.

Carbon credits generated by these projects are then sold in return for a reduction of greenhouse gases in Malaysia and revenue — a “double bonus”, said Azman. One carbon credit is equivalent to the emission of one tonne of carbon dioxide and every greenhouse gas has a different global warming potential (GWP), which indicates how much heat it absorbs in relation to one tonne of carbon dioxide. For example, nitrous dioxide absorbs heat 310 times more efficiently than carbon dioxide.

Azman believes that through CDM, companies can do their bit for the environment even though their motives may not be driven by love of the country or environment.

“Nobody will bother if we plead for the love of the environment but if they get something out of it, why not? People get what they want and we get what we want — reduction in GHG emissions,” he said.

But Bukit Kiara Properties (BKP) group managing director NK Tong, who is YPO chapter chair for 2007/2008, believes companies would only do their bit for the environment out of moral convictions because “being environmentally responsible right now doesn’t actually pay”.

Tong said the property developer does take environmental concerns into consideration because of its values — quality, innovation, caring and integrity. Among BKP’s efforts are storing rainwater to water the landscape, recycling heat from air conditioners for the water heater and incorporating concrete and metal roofs to keep buildings cooler while lowering energy costs.

“The consumer would not pay extra for features like that, it’s not a differentiating factor. Does it pay? That’s the question which consumers think about,” said Tong.

Despite this, he firmly believes companies must do what they can.

“I think all of us have an impact on the environment that comes back to us, whether here or in another part of the world. And it’s all about the next generation or the future generation so we just have to take a step to do something about it, in our own small ways, whether we can get immediate gain or results,” he said.

Tong added that the efforts might pay off some day if companies that are environmentally responsible get tax incentives.

During the Q&A session following the talk, Goldis Bhd chief executive officer Tan Lei Ching raised the suggestion of having city planners more involved in the planning stages of property conceptualisation, development and construction.

Citing Singapore’s Building and Construction Authority’s (BCA) Green Mark scheme as an example, Tan said the initiative would reward city planners for environmentally friendly buildings to encourage environmental sustainability and awareness.

The BCA Green Mark is a green building rating system, which evaluates a building for its environmental impact and performance. Under the Green Mark assessment system, points are awarded for incorporating environmental-friendly features, which provide meaningful differentiation of buildings in the real estate market.

BOH Plantations Sdn Bhd CEO Caroline Russell said it was heartening to note that Malaysia was taking early steps towards policies in view of climate change, even if progress was slow.

“I think it has to come to the forefront in our policymaking within our businesses. We can’t continue to see it as a side issue — it has to take more prominence,” she said.
She said BOH had taken some initiatives towards using renewable energy sources but unfortunately, the cost had escalated as these became value commodities in different businesses.

“We use burners to dry off moisture, as one of the processes in tea-making is to dry it. At one point in time we were using diesels and fuels to do that, subsequently moving on to renewable (energy) sources. Initially, (we used) rubber wood but then it became a commodity of value as it became useful in furniture making and other value-added products. We moved on to using palm shell but that too became a value commodity and is in fact being exported out of Malaysia,” she said.

Asked how climate change would affect the BOH tea business, she said seasonal variability would be highly detrimental to the tea leaves. Russell said the company experienced flooding in its lower plantations several years ago but climate change could have been just a possible factor.