Carbon Tax in Malaysia Targets Iron, Steel, and Energy Sectors

Highlights

• RM15 per tonne carbon tax in the offing in Malaysia to reduce industrial emissions.
• To be levied on iron, steel, and energy companies starting in 2026.
• Companies may trade quotas or pay taxes to manage excess emissions.

Malaysia’s carbon tax of RM15 per tonne to cut pollution is on the cards as part of its climate action plans.

The tax will be levied on polluting industries, including iron, steel, and energy companies, and is expected to kick in next year.

This is part of Malaysia’s strategy to peak emissions between 2029 and 2034 and reduce the nation’s climate footprint.

Read More: Malaysia’s Energy Transition: 2026 Budget and Carbon Tax Explained

Consultations on the carbon tax also include the creation of a new climate agency to manage initiatives. Under the scheme, companies will receive emission quotas, and any excess emissions would trigger a tax.

Firms can manage their emissions by paying the tax, buying credits from Malaysia’s carbon exchange, or trading unused quotas with other companies.

Analysts project the tax could generate around RM1 billion annually for the government.

The plan is buoyed by regional examples, such as Singapore’s carbon-pricing system, launched in 2019.

Singapore’s levy began at S$5 per tonne and subsequently increased to S$25 per tonne, thereby giving companies time to adjust operations.

Also Read: Debates Galore: Singapore’s Carbon Tax Concessions to Oil Giants

So, Malaysia’s proposed legislation will move through three separate bills before taking effect, which signals a structured approach to climate regulation and industrial compliance.

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Source: Bloomberg