8 mins read
Published Aug 29, 2025
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Malaysia has pledged to cut greenhouse gas (GHG) emissions intensity by 45% by 2030 (from 2005 levels) and achieve net-zero by 2050. To deliver, Malaysia is rolling out new policies and laws that will affect businesses across the board.
National Climate Change Policy 2.0 (NCCP 2.0)
Launched 30 September 2024, NCCP 2.0 is Malaysia’s master plan for climate action, guiding emission cuts, adaptation, and finance. It updates the 2009 policy and aligns national plans with global mechanisms such as the Paris Agreement’s Article 6 carbon markets and the EU’s Carbon Border Adjustment Mechanism (CBAM).
It’s a high-level policy for new regulations, including the upcoming Climate Change Act, and signals that climate considerations will be embedded across government planning.
The Climate Change Act – A New Legal Framework (Expected 2025)
Malaysia’s first comprehensive climate law will consolidate scattered rules into a single framework.
Legally binding GHG targets — national emissions goals written into law.
Climate governance body — an agency to oversee programs, compliance, and data.
National Integrated Climate Data Repository — a central platform for emissions and mitigation data, with likely mandatory reporting for large emitters.
Carbon trading rules — enabling regulated carbon markets and international trading under Article 6.
National Climate Fund — financing for climate projects, potentially funded by government and market fees.
Enforcement powers — penalties for non-compliance, including fines and imprisonment.
The Act will initially target major emitters, typically power, oil & gas, petrochemicals, manufacturing, and large agriculture or waste operations, with scope to expand.
The Carbon Capture, Utilisation and Storage (CCUS) Act 2025 – A New Law for Carbon Capture
Passed in March 2025, the CCUS Act creates a licensing and compliance framework for capturing, transporting, and storing CO₂. A new Malaysia CCUS Agency will oversee safety, environmental standards, and liability.
Applies to Peninsular Malaysia and Labuan (Sarawak has separate rules). Cross-border storage, such as with Singapore, will require special permits and registration. Non-compliance carries fines up to RM1 million and/or up to 5 years’ imprisonment.
Carbon Tax and Other Climate Policies – What’s Next?
Aside from the big three (NCCP 2.0, Climate Act, CCUS Act), Malaysian businesses should be aware of complementary policies that are coming into play. The government is introducing market-based measures and sectoral policies to drive decarbonisation:
Carbon Tax (by 2026): In the national Budget 2025 announcement, the Prime Minister confirmed that Malaysia will introduce a carbon tax by 2026, initially targeting the iron and steel industry and the energy sector. The aim is to encourage these heavy emitters to adopt low-carbon technologies by putting a price on carbon pollution. Revenue from the carbon tax will be used to fund green technology and R&D programs, creating a feedback loop to support further emissions cuts. For a steel mill or power plant operator, this means by 2026 you could be paying a tax on each tonne of CO₂ emitted (details like the ringgit per tonne rate are still being worked out). To prepare, such companies are exploring efficiency upgrades, switching to cleaner fuels, or even recycling waste heat to cut down their carbon output. Notably, the impending carbon tax also aligns with international pressures. For example, as mentioned earlier, the EU’s CBAM will impose import fees on carbon-intensive products like steel, cement, and aluminium. Having a local carbon tax and reduction plan helps Malaysian exporters remain competitive and avoid double penalties abroad.
National Energy Transition Roadmap (NETR): Launched in 2023, the NETR is a blueprint for shifting Malaysia’s energy sector from fossil fuels to cleaner sources. While not a law, it’s producing actionable initiatives. For instance, the NETR includes targets to reach 31% renewable energy capacity by 2025 and 40% by 2035 in the power mix. It also covers emerging areas like hydrogen fuel, electric vehicles (EVs), and power market reforms. For businesses, the NETR means increasing support and possibly incentives for renewable energy projects (solar, wind, etc.), and more opportunities in the green tech sector.
Circular Economy & Waste Policies: Climate action is also about reducing waste and promoting efficient use of resources, which indirectly lowers emissions. Malaysia launched a Circular Economy Blueprint for Solid Waste (2025–2035) in 2024. This plan includes new legislation to implement Extended Producer Responsibility (EPR) schemes and a “zero-waste-to-landfill” certification for manufacturers. Under an EPR law, companies that produce products (especially plastic, electronics, packaging) will be responsible for the end-of-life of those products, meaning you might have to fund or manage recycling/collection of your packaging or goods. A zero-waste-to-landfill certification, meanwhile, would recognise factories that divert all waste away from landfills (through recycling, reuse, or energy recovery). These initiatives, while framed as waste management, directly contribute to climate goals by cutting methane emissions from landfills and reducing the need for energy-intensive production of new materials. Implication: Companies in consumer goods, electronics, automotive, etc., should be ready for stricter waste and recycling requirements. Moreover, this can open new markets – recycling companies and resource recovery services will see more demand, and manufacturers who innovate in eco-design will have an edge as sustainability becomes a market differentiator.
Sustainable Finance and Disclosure: Though not a law yet, regulators are nudging businesses towards transparency in climate risks. Bursa Malaysia (the stock exchange) and Bank Negara (central bank) have guidelines on climate risk reporting and sustainability disclosure for listed companies and financial institutions. It’s likely that reporting standards will tighten, possibly mandating climate-related financial disclosures in the next few years.
Compliance Requirements and Opportunities for Businesses
Business Compliance Checklist
By the late 2020s, a Malaysian business (especially medium to large) will likely need to comply with several climate-related requirements:
GHG Emissions Reporting: If you’re a significant emitter (e.g., a factory, power plant, plantation, logistics company with many vehicles, etc.), be prepared to measure and report your emissions annually – possibly even more frequently for big facilities. The coming Climate Change Act is set to mandate GHG reporting at national, state, or facility level. This means establishing a system to track fuel consumption, electricity use, process emissions, etc., and calculate CO₂ equivalent emissions. Fortunately, there are tools to simplify this – Carbon Central can automate data collection and calculation.
Meeting Standards and Targets: Some regulations might set performance standards. For example, an emissions intensity benchmark for your industry, or energy efficiency standards for buildings and equipment. Ensure you’re aware of any sector-specific guidelines. The government could also introduce carbon budgets or caps for certain sectors under the Climate Act. Compliance may involve investing in mitigation projects (like installing solar panels on-site, upgrading to more efficient machinery, or purchasing green power through schemes like the Corporate Renewable Energy program).
Carbon Tax Liabilities: If you fall under the sectors for carbon tax in 2026 (steel, cement, power, possibly oil & gas), you’ll need to account for that cost in your financial planning. It might start small but expect the tax to increase over time and/or expand to more industries. To manage this: integrate an internal carbon price in your project evaluations. For example, when considering a new boiler or factory expansion, factor in a hypothetical carbon cost per tonne of CO₂. This helps prioritise low-carbon options that will save money once the tax kicks in. Also explore offsets – the government might allow carbon credits to offset a portion of the tax – but ensure they are credible (and note that with a domestic trading mechanism likely on the way, standards will be set).
Adhering to New Industry Regulations: Different industries will see specific rules:
– Energy/Utilities: Renewable portfolio standards, possibly limits on coal usage, requirements to adopt CCUS for big plants by a certain date, etc.
– Manufacturing: EPR rules for product take-back, restrictions on high-carbon processes, requirements to use a certain % of recycled content in packaging.
– Agriculture/Forestry: Likely more monitoring of land-use change emissions, encouragement of climate-smart practices (the government may require large plantation companies to report on their carbon footprint and deforestation metrics, for example).
– Transport/Automotive: Fuel economy or emissions standards for vehicles, quotas for EVs or biofuels in company fleets, etc.
Keep an eye on guidelines from respective ministries or agencies (e.g., the Department of Environment for any Environmental Quality Act updates, MITI for industrial standards, etc.).Documentation and Audits: Climate compliance will increasingly resemble financial compliance. Just as you maintain books for audits, maintain records of your energy use, emission calculations, waste disposal manifests, and any improvement actions. Authorities could conduct audits or request evidence to back up your reported numbers or your claims of sustainability. Being organised now, having a central repository of sustainability data, will save a lot of headaches later.
Conclusion
Malaysia’s climate framework is entering a new chapter, where commitments are underpinned by law, data, and enforcement. For businesses, this is a chance to act early, structure internal systems around emissions and compliance data, and stay ahead of what’s coming.
Cross-team collaboration between sustainability, operations, and finance will be essential. With the right preparation, aligning with new policies becomes a manageable and strategic part of business planning.
Every organisation will navigate this shift differently. If you’re mapping out next steps, our team can help you build a clear, practical path forward. Reach out today!
