Malaysia Sets the Direction for Its Carbon Market

Malaysia has launched a national carbon market policy to formalize its voluntary carbon trading framework, aiming to align with global standards like Article 6 of the Paris Agreement and Corsia for aviation. While the policy establishes a national registry and paves the way for exporting carbon credits—particularly to Singapore—it leaves critical questions unanswered: no clear timeline for a carbon tax (delayed to 2028), uncertain export volumes, unclear revenue-sharing mechanisms for Sabah and Sarawak, and insufficient legal enforceability. Dr. Peter Steck warns that without a binding climate law and meaningful carbon pricing—currently projected at just 15 ringgit per tonne, far below the 200 ringgit needed to drive industrial change—Malaysia risks stagnation in decarbonization. The absence of a carbon tax also means Malaysian exporters face no domestic incentive to reduce emissions, even as the EU’s Carbon Border Adjustment Mechanism siphons revenue away from the national treasury. The episode reveals a pattern of policy sequencing delays, with carbon markets, CCUS, and climate legislation introduced out of order, undermining coherence and investor confidence. The core challenge isn’t just technical—it’s political. Delaying carbon pricing under the guise of protecting energy affordability ignores the long-term economic and environmental costs.