Malaysia is spearheading the operationalisation of the Asean Frequent Carbon Framework (ACCF) through an settlement with representatives from Singapore, Thailand and Indonesia, struck late final 12 months at COP29 in Baku, Azerbaijan.
Renard Siew, president of Malaysia Carbon Market Affiliation (MCMA) advised Eco-Enterprise that 2025 might be a transformative 12 months for the nation’s carbon market. He mentioned the event of an emissions buying and selling scheme, talked about in Malaysia’s Nationwide Local weather Change Coverage 2.0, may pave the best way for the co-existence of each voluntary and compliance carbon markets in Malaysia going ahead.
The nation’s extremely anticipated draft local weather change invoice may see the institution of a authorized framework for local weather motion in Malaysia, with long-term local weather targets put in place. Nonetheless, the plan has been criticised by civil society teams for its lack of provisions for local weather adaptation, loss and injury and the rights of Indigenous peoples.
Malaysia is poised to advance its sustainability agenda this 12 months by persevering with essential structural reforms comparable to the gasoline subsidy minimize that started final Could and the introduction of a locally-assembled electrical automobile (EV). However challenges in transitioning to cleaner power sources stay, as Malaysia has but to launch an emissions buying and selling system to tax essentially the most polluting industries and the addition of latest information centres will additional drive up greenhouse gasoline (GHG) emissions.
From cross-border collaboration to financial reform, Eco-Enterprise has recognized 5 developments that would form Malaysia’s sustainability story in 2025.
Regional carbon market management
Malaysia is predicted to leverage its management as Asean chair to drive the adoption of the ACCF, an initiative that goals to foster regional collaboration on the carbon markets and advance sustainable growth throughout member states.
In July 2024, Malaysia proposed an Asean normal for carbon initiatives that’s mentioned would make sure the integrity of carbon credit within the area. A month after this announcement, it launched the MCMA to speed up the event of Malaysia’s carbon market. At COP29 final 12 months, a memorandum of cooperation (MoC) was signed between Malaysia, Singapore, Thailand and Indonesia to advance cross-border carbon buying and selling. As Asean chair, Malaysia is pushing for the mutual recognition of member states’ methodologies on carbon crediting guidelines.
The MoC signed in Baku, Azerbaijan, supplies a two-year roadmap for collaboration which extends past Malaysia’s Asean presidency. Siew famous that the primary problem in growing the Asean carbon market is to get nations to agree on methodologies for what constitutes a reputable carbon undertaking.
“As soon as that is sorted on the market might be scrutiny of the governance construction and the way to make sure requirements and methodologies are according to the most recent science,” he added.
Siew additionally mentioned that nature-based options proceed to be an space of curiosity within the carbon area and 2025 may see the talk round biodiversity credit evolve; will they may add worth to carbon credit generated from nature or be a distraction?
Domestically, Malaysia might be participating corporations within the iron, metal, and power sectors to organize for the carbon tax introduced in the 2025 funds. Conversations this 12 months will delve into how the tax might be applied, the emissions thresholds for taxation, and the capacity-building efforts required to assist huge polluters. Whereas the specifics of the carbon tax have but to be formalised, Siew anticipates 2025 to be pivotal for shaping governance, coverage, and operational frameworks.
Improvisation to local weather change invoice
Malaysia’s long-awaited draft local weather change invoice underwent the primary spherical of public session in October 2024. The proposed laws seeks to institutionalise long-term local weather targets, offering a strong authorized framework to make sure consistency in local weather motion amid political change. Whereas Pure Assets and Environmental Sustainability (NRES) minister Nik Nazmi Nik Ahmad has emphasised the necessity to depoliticise local weather commitments, issues have been raised about gaps within the draft invoice.
Sustainability lawyer and co-chair of the Malaysian CSO-SDG Alliance, Kiu Jia Yaw advised Eco-Enterprise that the session course of lacked rigour as solely “obscure descriptions of tentative facets” of the invoice textual content have been made public.
The session paper didn’t set out the drafting framework and guiding rules, that are important parts for the general public to evaluate the invoice, he mentioned. Kiu highlighted the necessity for inclusive and participatory local weather governance and known as for numerous illustration in the decision-making processes, together with youth, ladies, Indigenous peoples, and different marginalised teams.
Beforehand, civil society representatives have criticised the invoice for missing in emphasis on points comparable to Indigenous land rights, local weather adaptation and environmental impression assessments.
“Local weather motion have to be evidence-based. Malaysia must undertake an open and clear strategy to local weather information,” Kiu mentioned, stressing that substantial enhancements must be made to the invoice, as the security and wellbeing of future generations depend upon it.
The draft local weather change invoice is predicted to be tabled in parliament this 12 months.
Waste discount pushed by polluter-pays insurance policies
Malaysia is transferring in the direction of a polluter-pays mannequin to encourage trade to cut back waste. The Ministry of Worldwide Commerce and Business (MITI) launched a round economic system framework for the manufacturing sector in September 2024 with a plan to implement a compulsory Prolonged Producer Accountability (EPR) scheme throughout the subsequent 5 years.
MITI’s round economic system framework will maintain producers accountable for all the lifecycle of merchandise, together with post-consumer waste administration.
Malaysia additionally plans to launch a variety of waste-to-energy (WTE) vegetation to sort out the nation’s rising municipal stable waste burden, regardless of issues that WTE generates GHG emissions and discourages recycling efforts. Non-governmental organisations, Zero Waste Malaysia and Middle to Fight Corruption & Cronyism (C4) advised Eco-Enterprise that having measurable waste discount targets and timelines with the suitable financial incentives and penalties for non-compliance are essential to encourage the transition in the direction of EPR.
For an efficient implementation of EPR, they mentioned, Malaysia would require insurance policies that prioritise waste segregation and retrieval to make sure that recyclables are despatched again to producers or producers to be re-processed. Information reporting mechanisms are additionally wanted to watch progress.
Over 1,000 kilotonnes of producing waste is at present labeled as “others”, indicating a hole in how Malaysia identifies and processes used supplies. On the identical time, insurance policies ought to deal with lowering useful resource extraction and making certain merchandise are used for longer, re-used, and repaired.
Vitality sector reforms
The power sector contributes to the vast majority of Malaysia’s GHG emissions. As power demand grows, Malaysia is endeavor sector reforms to boost effectivity and promote renewable power integration in keeping with its 2050 net-zero emissions goal.
The federal government is specializing in substantial investments in grid infrastructure and complete electrical energy planning within the medium time period. This consists of upgrading the nationwide grid to accommodate a better share of renewable power sources, revising electrical energy planning and tariff buildings, and liberalising the electrical energy market.
In September 2024, the Ministry of Vitality Transition and Water Transformation launched the Company Renewable Vitality Provide Scheme (CRESS), permitting company shoppers to buy renewable power instantly from impartial energy producers (IPPs).
Nonetheless, there’s a push to additional liberalise the renewable power market to extend participation from new gamers within the system as Malaysia is predicted to see a surge in energy-intensive information centre operations this 12 months. Whereas the federal government is liberating up the electrical energy marketplace for third-party involvement, it’s prone to retain management of the trade.
Malaysia plans to enhance renewable power capability to 31 per cent of the power combine this 12 months, as an illustration by including 1,058.4 megawatts of extra solar energy. The 12 months may also see the execution of flagship initiatives below the Nationwide Vitality Transition Roadmap (NETR) comparable to 2.5GW of hybrid hydro floating photo voltaic initiatives at Chenderoh Hydro-reservoir, Perak and Tasik Kenyir, Terengganu.
Gasoline subsidy cuts
Malaysia is urgent forward with gasoline subsidy reforms as a part of its broader technique to boost financial effectivity and promote environmental sustainability. Following a 56 per cent enhance in diesel costs (from US$0.46 to US$0.71 per litre) in June 2024, Prime Minister Anwar Ibrahim introduced throughout the tabling of the 2025 federal funds that subsidies for RON95 petrol could be minimize for the highest 15 per cent of earnings earners, beginning mid-2025.
These reforms intention to cut back authorities expenditure, curb gasoline smuggling, and remove blanket power subsidies whereas redirecting assist towards lower-income teams. Nonetheless, there are issues about pushback from high-income earners over the federal government’s transfer to cut-back subsidies with rising fears of inflation that would disproportionately burden lower-income teams.
Economist Professor Dr Geoffrey Williams advised Eco-Enterprise {that a} tiered pricing system just like an electrical energy tariff is critical to make sure these reforms are equitable and don’t disproportionately burden lower-income teams. Below this method, subsidies would steadily lower as consumption will increase, with full subsidies supplied for the primary 10 litres of gasoline and no subsidies for consumption exceeding 40 litres.
“This ensures equity, as these shopping for small volumes of petrol for bikes and small automobiles – primarily low-income teams – obtain full subsidies, whereas these with huge automobiles, sometimes wealthier people, get much less,” Williams mentioned, including that such a system would additionally incentivise lowered gasoline utilization whereas sustaining some stage of subsidy for all shoppers.
As the federal government slowly cuts again on blanket subsidies, the growth of electrical automobiles (EV) is predicted to proceed an upward pattern with extra wealthier people buying EVs. In December 2024, Malaysian carmaker Proton launched its first domestically assembled EV, the e.MAS 7. This vital milestone is predicted to spice up EV adoption nationwide, supported by government-led incentives and infrastructure growth.
Whereas some advocate for extra incentives to speed up EV uptake, Williams says market forces are already driving the shift. “There isn’t any must have incentives for EVs. The market is bringing down costs and creating new cheaper fashions out there to low-income teams,” he mentioned.
He famous that rising petrol costs from the removing of blanket subsidies would additionally naturally make EVs extra viable.
