Malaysia is spearheading the operationalisation of the Asean Widespread Carbon Framework (ACCF) by way of an settlement with representatives from Singapore, Thailand and Indonesia, struck late final yr at COP29 in Baku, Azerbaijan.
Renard Siew, president of Malaysia Carbon Market Affiliation (MCMA) advised Eco-Enterprise that 2025 will likely be a transformative yr 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 sustainable growth agenda this yr by persevering with essential structural reforms resembling the gas subsidy lower that started final Might and the introduction of a locally-assembled electrical car (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 knowledge centres will additional drive up greenhouse gasoline (GHG) emissions.
From cross-border collaboration to financial reform, Eco-Enterprise has recognized 5 developments that might form Malaysia’s sustainability story in 2025.
Regional carbon market management
Malaysia is anticipated 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 customary for carbon tasks 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 yr, 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, offers a two-year roadmap for collaboration which extends past Malaysia’s Asean presidency. Siew famous that the primary problem in creating the Asean carbon market is to get international locations to agree on methodologies for what constitutes a reputable carbon mission.
“As soon as that is sorted on the market will likely be scrutiny of the governance construction and the way to make sure requirements and methodologies are in keeping with the most recent science,” he added.
Siew additionally mentioned that nature-based options proceed to be an space of curiosity within the carbon house and 2025 may see the talk round biodiversity credit evolve; will they are going to add worth to carbon credit generated from nature or be a distraction?
Domestically, Malaysia will likely be participating corporations within the iron, metal, and power sectors to organize for the carbon tax introduced in the 2025 price range. Conversations this yr will delve into how the tax will likely be carried out, the emissions thresholds for taxation, and the capacity-building efforts required to help massive 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 Sources and Environmental Sustainability (NRES) minister Nik Nazmi Nik Ahmad has emphasised the necessity to depoliticise local weather commitments, considerations 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 “imprecise descriptions of tentative elements” of the invoice textual content have been made public.
The session paper did not set out the drafting framework and guiding rules, that are important elements for the general public to evaluate the invoice, he mentioned. Kiu highlighted the necessity for inclusive and participatory local weather governance and referred to as for numerous illustration in the decision-making processes, together with youth, girls, Indigenous peoples, and different marginalised teams.
Beforehand, civil society representatives have criticised the invoice for missing in emphasis on points resembling Indigenous land rights, local weather adaptation and environmental influence assessments.
“Local weather motion should be evidence-based. Malaysia must undertake an open and clear strategy to local weather knowledge,” Kiu mentioned, stressing that substantial enhancements have to be made to the invoice, as the security and wellbeing of future generations depend upon it.
The draft local weather change invoice is anticipated to be tabled in parliament this yr.
Waste discount pushed by polluter-pays insurance policies
Malaysia is shifting in direction of a polluter-pays mannequin to encourage business to cut back waste. The Ministry of Worldwide Commerce and Trade (MITI) launched a round financial system framework for the manufacturing sector in September 2024 with a plan to implement a compulsory Prolonged Producer Duty (EPR) scheme inside the subsequent 5 years.
MITI’s round financial system framework will maintain producers accountable for the complete lifecycle of merchandise, together with post-consumer waste administration.
Malaysia additionally plans to launch plenty of waste-to-energy (WTE) vegetation to sort out the nation’s rising municipal stable waste burden, regardless of considerations that WTE generates GHG emissions and discourages recycling efforts. Non-governmental organisations, Zero Waste Malaysia and Heart to Fight Corruption & Cronyism (C4) advised Eco-Enterprise that having measurable waste discount targets and timelines with the precise financial incentives and penalties for non-compliance are essential to encourage the transition in 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 observe progress.
Over 1,000 kilotonnes of producing waste is at the moment categorised 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 enterprise sector reforms to reinforce 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 contains upgrading the nationwide grid to accommodate a better share of renewable power sources, revising electrical energy planning and tariff constructions, 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 immediately 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 anticipated to see a surge in energy-intensive knowledge centre operations this yr. Whereas the federal government is releasing up the electrical energy marketplace for third-party involvement, it’s more likely to retain management of the business.
Malaysia plans to enhance renewable power capability to 31 per cent of the power combine this yr, as an illustration by including 1,058.4 megawatts of extra solar energy. The yr can even see the execution of flagship tasks beneath the Nationwide Vitality Transition Roadmap (NETR) resembling 2.5GW of hybrid hydro floating photo voltaic tasks at Chenderoh Hydro-reservoir, Perak and Tasik Kenyir, Terengganu.
Gasoline subsidy cuts
Malaysia is urgent forward with gas subsidy reforms as a part of its broader technique to reinforce 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 through the tabling of the 2025 federal price range that subsidies for RON95 petrol can be lower for the highest 15 per cent of earnings earners, beginning mid-2025.
These reforms intention to cut back authorities expenditure, curb gas smuggling, and get rid of blanket power subsidies whereas redirecting help towards lower-income teams. Nonetheless, there are considerations about pushback from high-income earners over the federal government’s transfer to cut-back subsidies with rising fears of inflation that might 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. Underneath this technique, subsidies would step by step lower as consumption will increase, with full subsidies offered for the primary 10 litres of gas and no subsidies for consumption exceeding 40 litres.
“This ensures equity, as these shopping for small volumes of petrol for bikes and small vehicles – primarily low-income teams – obtain full subsidies, whereas these with massive vehicles, sometimes wealthier people, get much less,” Williams mentioned, including that such a system would additionally incentivise decreased gas utilization whereas sustaining some stage of subsidy for all shoppers.
As the federal government slowly cuts again on blanket subsidies, the enlargement of electrical autos (EV) is anticipated to proceed an upward development with extra wealthier people buying EVs. In December 2024, Malaysian carmaker Proton launched its first domestically assembled EV, the e.MAS 7. This important milestone is anticipated to spice up EV adoption nationwide, supported by government-led incentives and infrastructure growth.
Whereas some advocate for added 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 accessible 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.
