**1. Introduction**

In recent years, the literature on emissions trading regulation has expanded rapidly. This is due to the awareness relating to environmental change and a sustainable future gaining more attention worldwide. The global debates on climate change and mitigation strategies have led policymakers to address the governmen<sup>t</sup> concerns about promulgating and implementing regulations to overcome the challenges of mitigating carbon emissions [1] and be more resilient in overcoming climate impacts. Malaysia has ratified the United Nations Framework Convention on Climate Change (UNFCCC) under the Kyoto Protocol since 2002. Malaysia's commitment to the carbon market is also closely related to, and affected by, overall climate change policy developments. Since the Paris Agreement in 2015, the UNFCCC has annually improved the climate policy standard, which also directs the international carbon market.

The carbon trading implementation review has changed drastically post-Kyoto and has developed into the new sustainable development mechanism (SDM) and sustainable development goals (SDGs). The United Nations (UN) SDGs have set out a vision for future sustainability principles and Malaysia is one of the countries that has committed to engage in their implementation. Malaysia's national economic development policies, which were put into practice more than forty years ago, reflected several UN SDGs even before the introduction of the initiative in 2016 [2]. For example, the ambitious goals and targets that Malaysia set have been indicated through sustainable and systematic e fforts by putting into practice the mechanism for the SDGs. Despite the desired sustainable goals, the palm oil industry in Malaysia plays a significant role in influencing growth towards trade and industry globalization business environments [3]. Moreover, Malaysia has acted on various strategies to invest in sustainability projects, as well as complying with sustainable practices in the palm oil business.

The clean development mechanism (CDM) is one example of a carbon trading project. The mechanism involves value-added investments that can generate carbon credits from environmental projects that have a monetary value. It is reviewed under the UN SDGs initiatives and its main aims are, first, to achieve sustainable development and productive environmental practices for present and future generations; second, to conserve the country's uniqueness and diverse cultural and natural heritage with e ffective participation by all sectors of society; third, to achieve sustainable living and strategies in sustainable production [4,5]. The CDM serves not only as an instrument to fight climate change issues but also as an important tool to achieve rapid economic growth for sustainable development and a strategy that can provide a constant source of business opportunities for corporations. CDM is designed to support foreign direct investment and clean technology transfers, leading to a reduction in greenhouse gas (GHG) emissions.

The palm oil industry in Malaysia has taken the necessary steps to respond to technological advancements as well as having carried out research. The growing upstream sector has had a rising impact on the whole value chain [6]. Based on various studies, as indicated, the carbon market plays a distinct role in bringing together various concerns across the globe and growth between developed countries and underdeveloped nations, reflecting opportunities that might result in a win-win situation and the achievement of the carbon market instrument [7,8]. However, few studies have been conducted to understand the challenges that have led to a decrease in carbon trading implementation in Malaysia. Furthermore, carbon trading ought to result in sustainable development and lead to benefits, such as investment, technology transfers, poverty relief, development of rural areas, and the provision of new opportunities for developing expertise and knowledge [9,10], more so in developing nations, but there has been a lack of further research indicating the impact of carbon trading on sustainable development.

A number of lessons can be learned from the CDM experience in the new policy framework's development. As in Figure 1, Malaysia is one of the biggest palm oil producers in the world, thus, the review of the findings suggests that the governmen<sup>t</sup> needs to view the role played by the markets in a new way. The policy formulated must not simply be a repetition of past practices and must also be given time to make proper contributions to achieve the projects' goals. In other words, there must be a shift from o ffsetting and there should be greater concentration to be issued for financial verification, as well as an integration of human rights, public consultations, and transparency, as the mechanism's core principles. This mitigation action on emission reduction will provide useful recommendations that can facilitate the achievement of an e fficient and robust SDM in the future.

In analyzing the possible future of palm oil sustainability and carbon trading, the significant benefits for the development in rural areas and biodiversity need to be examined in order to identify the projects' challenges and their sustainable development impact. The challenges and factors that have previously confused palm oil producers have continued to concern the palm oil industry in recent years. Despite this challenge, the engagemen<sup>t</sup> level and follow-up actions have continued to rise. However, with the European Union's (EU) threat of banning palm oil use in biofuels being perceived as trade discrimination, the carbon trading scheme appears to have an uncertain future.

**Figure 1.** Palm oil production by country, 2017 [11].

The paper aims is to discover the challenges that have led to the conundrum of carbon trading projects and whether the palm oil companies that have engaged with carbon trading have achieved sustainable development from the projects. This research is intended to facilitate an incisive understanding of future development in palm oil companies in Malaysia to ensure a better standard of practices relating to climate change mitigation strategies and would contribute to the SDGs and national development. In addition, based on the qualitative research in this study and the analysis of the palm oil companies that are engaged with carbon trading in Malaysia, this research unpicks the carbon trading policy towards developing better strategies to allow palm oil to meet the sustainability goals.
