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Will the NCA Contribute to Net Zero?

27 September 2023, Kota Kinabalu: Over the past few months, the world has seen frequent episodes of extreme weather. From heatwaves in Europe to recent floodings in Asia and the Middle East, it is safe to say that all of us, even the most skeptical, can arrive at a common conclusion - that climate change is real and it is here to stay.

Addressing climate change is a collective responsibility. Globally, over 194 states and the European Union have signed up to the Paris Agreement - the most important pact for international cooperation to tackle climate change. Signatories to the Paris Agreement agree to commit to limit the increase in global warming to well below 2°C with a goal to keep it at 1.5°C.

As signatory to the Paris agreement, Malaysia too has amped up its efforts to address the climate crisis. In the 12th Malaysia Plan, the government has outlined its path to net zero emissions including reducing its greenhouse gas emission intensity by up to 45% by 2030 and phasing out coal-powered energy generation.

In our quest for net zero, many different mechanisms have been introduced to help encourage and incentivise individuals, communities, businesses, markets, and governments to act with urgency in reducing carbon emissions. One such mechanism is carbon credits. Carbon credit, or carbon offset represents GHG emissions, usually measured in carbon dioxide equivalent (CO2e), that have been reduced, avoided, or captured from the atmosphere, through climate action projects. For example, a carbon credit can be used by a business, organization, or individual to compensate for their carbon footprint by financially rewarding an activity that has reduced or sequestered GHGs from the atmosphere.

If done right, carbon credits have the potential to be an effective tool to encourage businesses to reduce carbon emissions and adopt cleaner forms of energy, accelerate solutions to climate change, and improve the protection and enhancement of nature. On the other hand, without the right safeguards, these solutions can undermine the momentum towards real climate action, harm nature, and result in adverse social spillovers to local populations.

However, it is important to note that carbon credits should not be a substitute for genuine emissions reduction efforts. They should complement a comprehensive strategy that includes efforts to reduce emissions at the source through energy efficiency, renewable energy adoption, and sustainable practices, all of which are crucial for climate change mitigation and adaptation.

Carbon credits have the potential to contribute to reducing GHG emissions but the first step towards this end requires that the carbon credits themselves be legitimate - in that they are generated in accordance to a carbon standard that is recognised by the voluntary carbon market.

A carbon credit project that has now become a hot topic for discussion is Sabah’s Nature Conservation Agreement (NCA). For a project that has committed 2 million hectares of Sabah’s land to a 100-year contract, the NCA is well known for being shrouded in secrecy. NGOs and activists have requested for clarity from the State government on the NCA but has received little response. This has only served to make the NCA more concerning.

Above: A quick outline of what is known about the NCA and what is yet unknown.

Legitimate carbon credit projects are required to go through a standard process to proceed. These projects typically go through a series of steps before it is able to sell carbon credits on the markets.

With what little we know about the NCA, can we confidently say that the NCA has taken the necessary steps to ensure that it will abide by all the processes required for it to be able to sell credits on the carbon market? If it has, we urge that the State government make available the documents that support this. We also urge that the NCA be debated in the State Assembly as typical of projects that include assets belonging to the State.

This is crucial as carbon credit projects that do not conform to the right standards can go wrong. Even more so when a project binds us for a century like the NCA. In the Amazon, there have been cases where indigenous communities are now in conflict with carbon offsetting firms whose carbon deals have threatened their way of life.

It is also important to take into consideration that while there is money to be made in carbon credits, it is not as lucrative as it has been made out to seem. The current carbon price is valued between USD1 - 3 per tonne. On the voluntary market, carbon prices have never gone above USD20 per tonne, a far cry from the USD30 per tonne that had been mentioned by Deputy Chief Minister Datuk Dr. Jeffrey Kitingan during the “Sabah Way Forward” interview in August this year.

At the end of the day and beyond its monetary value, carbon credit projects are meant to serve the most important goal of reducing carbon emissions and pave the way for us to move towards net-zero. This move is crucial now more than ever before because, as we have witnessed, the effects of climate change are devastating.

Climate change impacts food and water security. Extreme heat has brought with it higher occurrences of climate-related food-borne and water-borne diseases. Extreme weather can destroy not only lives but also homes, infrastructures and properties. As scientists have repeatedly warned us, the situation can get worse if we don’t take immediate action.

Projects like the NCA can only be an effective measure to help combat climate change if it checks all the necessary boxes. If it doesn’t, then it does nothing but bind us to a third-party for 100 years with that party retaining the option to renew for a 100 more years if they so pleased.

This month on 21 September, we celebrated Zero Emission Day where many pledged to give the world a one-day break from fossil fuels in an effort to reduce greenhouse gas emissions. But our efforts must not stop there.

Let us also start to ask questions of our leaders on what they are actively doing to combat climate change. Let us seek for more clarity on the NCA so that as citizens, we can determine whether or not NCA will bring benefits to us in the long run, be it socially, economically, or environmentally.

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