May 2, 2008 / 12:28 PM / 12 years ago

Malaysia's YTL targets palm oil carbon credits

KUALA LUMPUR, May 2 (Reuters) - Malaysian power-to-telecoms conglomerate YTL Corp (YTLS.KL) took a majority stake in what it said was the country’s largest carbon credit consultancy on Friday, looking to capitalise on growing opportunities in the palm oil sector.

The Kyoto Protocol’s Clean Development Mechanism (CDM) allows companies in developing countries to qualify to sell carbon credits, or Certified Emission Reductions, in global commodity markets when they cut their output of environmentally harmful substances.

Global trade in carbon markets was up 80 percent last year at 40 billion euros ($61.9 billion), dominated by a European Union trading scheme. But a 12-billion-euro market under the Kyoto Protocol faces an uncertain future after the EU firmly linked it to global talks to hammer out a successor agreement to the Kyoto Protocol, which expires in 2012.

The new Malaysian firm, YTL-SV Carbon, expects to be handling 1,000 projects within three years, against 30 now, if the talks on a successor to Kyoto prove successful, Managing Director Soeren Varming told reporters.

“Palm oil is where the big opportunity is in Malaysia,” he added. “The paradigm is changing, from a waste producer to a sector that will actually utilise the waste.”

Malaysia, the world’s second largest producer, expects crude palm oil output to rise to 16.5 million tonnes this year from 15.8 million in 2007, as soaring prices for the commodity have led to conversion of marginal land into plantations.

The joint venture has worked on biogas projects to turn plant waste from palm oil mills into power and compost ventures that turn organic waste into fertilisers, as well as mini-hydro projects, Varming said.

“CDM allows, in some cases, an incremental project income that will go straight to the bottom line, in other cases it allows projects you would never have thought of before, and in yet others, you’ll see new business models become possible, because the income stream of the carbon credits allows this,” he said.

Malaysia’s oil palm industry faces accusations from Western environmental groups that it is destroying rainforest to grow palm oil, but YTL-SV Carbon’s environmental strategies could help blunt such attacks, YTL Chief Executive Francis Yeoh said.

“Biomass and biogas are very high in emissions that cause the greenhouse effect, so if we could recycle them and give it a commercially viable story, that would help keep our palm oil industry from being attacked so much,” he added.

Yeoh declined to discuss any financial details about his firm’s investment in YTL-SV Carbon, however.

Besides Malaysia, YTL-SV Carbon was targeting projects in Southeast Asian neighbours such as Indonesia, Cambodia, Vietnam, the Philippines and Thailand, Varming said. (Editing by Quentin Bryar)

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