Carbon Credits in the context of MSPO
Written by Yusman Haruna, MSPO
Understanding Carbon Credits in the Context of MSPO
As sustainability becomes a critical priority across the globe, the Malaysian palm oil industry has aligned itself with international environmental goals through various certifications and initiatives. One of these is the Malaysian Sustainable Palm Oil (MSPO) certification, which ensures that palm oil is produced responsibly and sustainably. A noteworthy aspect related to sustainability that is garnering attention is the concept of carbon credits. This article explores how carbon credits relate to MSPO certification and the potential benefits for the industry.
What Are Carbon Credits, the Role of MSPO in Sustainability, and How They Connect
A carbon credit represents the right to emit one tonne of carbon dioxide or an equivalent amount of greenhouse gases. They serve as a market-based tool to incentivise companies to reduce their carbon emissions by enabling them to purchase or sell excess credits. Companies that reduce their emissions below a set cap can sell their unused credits to those struggling to meet their targets.
The MSPO certification is designed to ensure that the production of palm oil in Malaysia adheres to strict environmental, social, and economic standards. It addresses various aspects of sustainability, including reducing the environmental impact of production, enhancing biodiversity, and promoting safe and fair labor practices. With the increasing global focus on climate action, integrating carbon credit mechanisms within the MSPO framework could further strengthen its environmental initiatives.
While MSPO certification already emphasises sustainable practices such as reduced deforestation, better waste management, and efficient use of resources, adding carbon credit initiatives could provide additional incentives for certified entities to lower their carbon footprint. For instance, palm oil plantations and mills that implement energy-efficient practices or adopt reforestation projects may generate carbon credits. These credits can be sold in carbon markets, providing a financial return while also contributing to Malaysia's climate goals.
Currently, there are several platforms for carbon credits, including well-known ones like Bursa Malaysia’s Voluntary Carbon Market (VCM) and Verra Verified Carbon Standard. These platforms offer comprehensive guides on the use and application of carbon credits. In the near future, MSPO plans to develop its own platform or methodology for calculating carbon credits, with a release planned for 2025.
Oil Palm - A Zero Waste Crop
The Malaysian palm oil industry, the world’s second largest, practices zero waste by converting solid and liquid waste into useful products like biofuel, organic fertiliser, and biogas, supporting sustainability and economic growth
Benefits for MSPO-Certified Entities
Economic Gains: MSPO-certified palm oil producers can benefit financially by participating in carbon markets. The sale of carbon credits can generate an additional revenue stream, encouraging further investments in green technology and sustainable practices.
Improved Market Reputation: Companies engaged in carbon credit projects are seen as leaders in sustainability, which helps attract buyers focused on eco-friendly products.
Supporting National Goals: By participating in carbon credit programs, MSPO-certified producers help Malaysia meet its climate targets and show that the industry is serious about tackling climate change.
Challenges to Consider
Verification and Tracking: Ensuring that carbon credit projects are real and effective requires careful monitoring and independent checks, which can be costly.
Market Changes: The value of carbon credits can go up and down, which may affect financial planning.
The Way Forward
Combining MSPO certification with carbon credit projects is a promising step for Malaysia’s palm oil industry. This approach not only enhances sustainability efforts but also offers financial rewards and supports climate goals. While there are challenges, the potential benefits make it a worthwhile pursuit.