Bursa Malaysia chief executive Muhamad Umar Swift said in a statement that the exchange will encourage investments in high-quality offsetting projects, which 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.
Swift believes 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 commitments and decarbonisation journey.
Bursa Malaysia joins the global exchanges CME, ICE and EEX, which have launched voluntary carbon market products in recent years, despite the fact that carbon credits are currently traded in a small but growing market.
It plans to offer standardised carbon credit products for trading via a rules-based VCM exchange, with different 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 the end of the year to allow price discovery for the new carbon credit products that will be listed on the VCM exchange.