Executive Summary

Malaysia has no registered mangrove carbon projects on the Voluntary Carbon Market (VCM), though three other nature-based projects exist under Verra’s Standard. While the government has introduced non-binding guidelines for projects participating in international markets, it has yet to enact national carbon trading laws. To participate in the VCM, project developers must obtain authorization and submit detailed project information, including boundaries, methodologies, emission reduction strategies, and annual updates on carbon unit generation, sales, and retirements, to the National Steering Committee on
Climate Change (NSCCC). Forestry projects have additional reporting obligations to the National Steering Committee on REDD+. Although states can establish their own rules, alignment with federal guidelines varies. Sarawak and Sabah have developed more advanced frameworks, incorporating licensing requirements and fees for carbon projects.

Malaysia is developing a national carbon registry to track these projects, though public access has yet to be established. Once projects receive positive validation, they must register and report specific details, including serial numbers of issued units and information on pending, holding, and retirement accounts. While Malaysia does not mandate benefit sharing mechanisms for nature-based carbon credit projects nationally, the REDD+ National Strategy encourages federal and state governments to collaborate on benefit distribution. There are also no legal requirements for Free, Prior, and Informed Consent (FPIC); instead,
the government recommends stakeholder consultations at local and subnational levels but does not outline a process for obtaining community authorization to use forest areas for carbon projects. Additionally, Malaysia does not require nature-based carbon credit projects to implement Measuring, Reporting, and Verification (MRV) processes.

In Malaysia, forests are primarily state-owned (95.4%), with 4.6% under private ownership. States permit private and community leaseholds, concessions, and mangrove ownership for carbon projects, though regulations vary across states. Sarawak’s Land (Carbon Storage) Act 2022 sets limits on license duration and area size. Community involvement in Joint Forest Management (JFM) remains undefined despite Sabah and Sarawak’s focus on social forestry. Malaysia lacks a federal definition of carbon rights or mechanisms for their transfer. While the National Forestry Act grants states ownership of forest produce, it does not address
stored carbon. Sarawak classifies carbon as part of state land, requiring licenses for its transfer, while other states have yet to regulate carbon rights.
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Overall, Malaysia has ambiguous enabling conditions for blue carbon projects. National carbon trading laws are absent, leaving gaps in authorization and regulatory requirements for nature-based carbon credit projects. Requirements vary across states, particularly regarding authorizations, land ownership, concessions, and leaseholds. Additionally, carbon rights remain undefined in many states, with no consistent mechanisms for their transfer.

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