Carbon Markets Insight Series: Malaysia

Malaysia is advancing its carbon market to support its climate goals of achieving net zero by 2050 and reducing carbon intensity by 45% by 2030. With annual emissions of 283 million metric tons of CO₂ and high per capita levels of 9.1 tons, the energy sector accounts for 75% of emissions.

To address this, Malaysia launched the Shariah-compliant Bursa Carbon Exchange in 2022, began trading in 2023, and is preparing a domestic ETS through the MY PMI program.

This insight article highlights key developments in the carbon market in Malaysia. and planned initiatives by the country.

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Way Forward

Carbon Tax

Malaysia will implement a carbon tax targeting the iron, steel, and energy sectors by 2026, as announced in Budget 2025. This tax aims to incentivize low-carbon technologies and align with the EU’s Carbon Border Adjustment Mechanism (CBAM).

CCUS Legislation

Malaysia passed the Carbon Capture, Utilisation and Storage (CCUS) Bill, enabling large-scale CCUS projects. A CCUS hub will be established in Kertih to support industrial decarbonization and boost green industry and investment

National Policy on Climate Change 2.0 (NPCC 2.0)

Released in 2024, aligns national strategies with updated climate targets and global commitments. It introduces guiding principles, five strategic thrusts, and catalytic initiatives—covering governance, low-carbon development, adaptation, financing, carbon pricing, and stakeholder engagement—to strengthen resilience and accelerate Malaysia’s low-carbon transition.

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