PUTRAJAYA: A domestic emissions trading scheme (DETS) will be developed by the Environment and Water Ministry (KASA) to serve as a catalyst for the country's carbon trading sector.

Its minister, Datuk Seri Tuan Ibrahim Tuan Man, said its development would be carried out jointly with the Finance Ministry, Bursa Malaysia and other stake holders to enhance the capabilities of industry players in producing products and services that are competitive at the level international.

The Cabinet, at its meeting yesterday, has in principle agreed to KASA's proposal to develop DETS, as well as on the Voluntary Carbon Market guide, he said in a statement today.

He said the government planned to implement DETS in phases and a single business platform would be be developed.

State government authorities and the private sector can leverage DETS to execute carbon credit transactions at domestic level compared with at international market which has high cost of transaction and more stringent technical requirements, he said.

Tuan Ibrahim said DETS is also capable of enhancing the capacity and reputation of private companies, including government-linked companies, through environmental, social and governance (ESG).

He said it was important as preparation for industry players to face the implementation of carbon control mechanisms through international trade such as the Carbon Border Adjustment Mechanism (CBAM) by the European Union in 2023.

On VCM guide, he said, it would serve as a source of reference for all stakeholders, including the state governments and the private sector, that are keen to be involved in carbon credit transactions at the international level.

He said the development of the VCM guide was to ensure the country's interest in climate change reporting and commitment to reduce greenhouse gas (GHG) emission is not compromised.

"Through this VCM guide, state governments or the private sector that are involved must report information on their carbon projects to KASA," he added.

He said the VCM guidelines and DETS are important not only to protect the country's interests, but would also serve as a catalyst for the country's socio-economic growth in line with its aspiration of low carbon development and sustainable development agenda.