BIMB Securities Research has foreseen carbon tax to add MYR 1 billion ($240 million) to the Malaysian government coffer.

The research house said in its recent note that at an introductory rate of S$5 ($3.88) per ton (assuming S$1~MYR 3.40, Malaysia could potentially collect up to MYR 980 million in annual revenue.

In his Budget 2025 speech, Malaysian Prime Minister and Finance Minister Anwar Ibrahim reaffirmed Malaysia’s commitment to reducing carbon intensity by 45 percent by 2030 and achieving net-zero emissions by 2050.

As an initial step, a carbon tax will be introduced in 2026, targeting high-emission sectors such as iron, steel, and energy, which are among the largest contributors to the country’s carbon footprint.

Among ASEAN countries, only Singapore and Indonesia currently have operational carbon pricing systems in place, while Brunei, Vietnam, and Thailand have announced similar plans.

Malaysia’s 2026 rollout of its carbon tax aligns with the commencement of the European Union’s Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tariff on high-emission imports to ensure a level playing field in global carbon pricing.

In 2023, Malaysia emitted around 325 million tons of carbon dioxide (CO2e), with the energy sector contributing more than 80 percent of the total.

Per capita emissions stood at 9 tons, reflecting high fossil fuel reliance.

Though accounting for less than 1 percent of global emissions, the rising trend highlights the need to meet its 2030 carbon intensity and 2050 net-zero targets.

In 2023, Malaysia’s greenhouse gas emissions from key sectors totalled approximately 325.3 million tons CO2e.

The power industry was the largest contributor, emitting 117.3 million tons, accounting for over 36 percent of total emissions.

This was followed by transport (67.4 million), fuel exploitation (43.3 million), and industrial combustion (36.1 milion).

Emissions from processes (23.8 million), agriculture (14.6 million), waste (13.2 million), and buildings (9.6 million) were relatively smaller but still notable.

Introduced in 2019, Singapore’s carbon tax is Southeast Asia’s first carbon pricing scheme, targeting facilities that emit 25,000 tons or more of CO2-equivalent annually.

Initially set at S$5/tCO2e, the rate rose to S$25 in 2024 and will increase to S$45 by 2026, with a projected range of up to S$80 by 2030.

Covering approximately 80 percent of national emissions, the tax provides no exemptions or free allowances.

However, starting in 2024, emitters may offset up to 5 percent of their taxable emissions using approved international carbon credits.

Tax revenues are allocated to green initiatives in support of Singapore’s 2050 net-zero target.

According to former Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad, Malaysia’s carbon tax should start at a low rate and be gradually increased.

This approach mirrors Singapore’s carbon pricing model, which began in 2019 at S$5 per ton and is set to rise to S$50–S$80 by 2030.

Starting modestly allows time to evaluate its economic and environmental impact while giving industries room to adapt.

In 2023, Malaysia’s targeted sectors namely the power industry, transport, fuel exploitation, industrial combustion, and industrial processes collectively emitted an estimated 288 million tons of CO2e.

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