KUALA LUMPUR (REUTERS) - Malaysia's stock exchange on Monday (Aug 15) said it will launch a voluntary carbon market (VCM) by the end of the year, with the aim of increasing transparency and enabling companies to buy carbon credits to offset their emissions.

The new exchange will encourage investments in high-quality offsetting projects, Bursa Malaysia chief executive Muhamad Umar Swift said in a statement. These can include projects like planting trees or switching to less-polluting fuels.

Critics say carbon offsets can allow companies or countries to keep polluting while paying someone else to take climate-friendly action.

Bursa Malaysia will adopt the Verified Carbon Standard, also known as Verra, to ensure the integrity of the carbon credits, it said.

"We believe that the VCM exchange can serve as an important lever in realising Malaysia's net-zero GHG (greenhouse gas) emissions aspiration, as well as supporting the private sector's voluntary climate commitments and decarbonisation journey," Datuk Umar Swift said.

Carbon credits are currently traded in a small but growing market and Bursa Malaysia joins global exchanges, such as the Chicago Mercantile Exchange, Intercontinental Exchange and European Energy Exchange, that have also launched voluntary carbon market products in recent years.

It plans to offer standardised carbon credit products for trading via a rules-based VCM exchange, with distinct product categories for carbon credits derived from nature-based solutions and technologies that reduce or remove carbon emissions from the atmosphere.

It plans to auction a supply of carbon credits by year end to enable price discovery for the new carbon credit products that will be listed on the VCM exchange.