Malaysia has the natural resources and technical capability to build a credible carbon industry. However, policy delays, weak demand, inconsistent regulations and questions about community rights could prevent that promise from being realised.
I am worried about the future of carbon projects in Malaysia, not because these projects are unnecessary, but because they are too important to be allowed to fail.
Carbon projects can protect forests, capture methane from industrial wastewater, restore degraded land and remove carbon dioxide from the atmosphere. Carbon capture and storage, meanwhile, may help reduce emissions from industries where cleaner alternatives remain difficult or expensive. Properly managed, such projects could bring investment, employment and environmental benefits to Malaysia.
Our country appears well placed to succeed. We have tropical forests, extensive mangroves, agricultural biomass and an
established oil and gas industry with relevant engineering expertise. Malaysia also has access to regional investors looking for credible ways to reduce their carbon footprint.
Yet having suitable natural resources and technology does not guarantee a successful carbon economy. Projects must produce reductions that are real, measurable and lasting. Investors require stable regulations, while communities need assurance that their rights will be respected. Most importantly, somebody must be willing to buy the credits or pay for the emissions reductions.
Malaysia has already made a promising beginning. Bursa Malaysia launched the Bursa Carbon Exchange in December 2022. It is described as the world’s first Shariah-compliant multi-environmental products exchange and allows companies to trade carbon credits and renewable energy certificates.
The exchange has introduced Malaysian credits from both nature-based and technological projects. In July 2024, credits from Sabah’s Kuamut Rainforest Conservation Project cleared at RM50 per contract in the first auction of Malaysian nature-based credits.
Kuamut protects and restores 83,381 hectares of tropical forest in the Tongod and Kinabatangan districts. According to Bursa Malaysia, it is estimated to reduce emissions by about 800,000 tonnes of carbon dioxide equivalent annually. The project also protects habitats used by orangutans, elephants, banteng and other threatened species.
In June 2025, the exchange held its first auction of Malaysian technology-based credits. These came from a project that captures methane generated by industrial wastewater, beginning with a biogas facility in Langkap, Perak. The credits cleared at RM39.60 each.
These are meaningful achievements. They demonstrate that Malaysian projects can meet international standards and attract corporate buyers. But a few successful auctions do not yet constitute a deep and sustainable market.
Low liquidity remains a concern. Without consistent buyers and transactions, developers cannot reliably forecast revenue, making it harder to secure financing and potentially discouraging investment in carbon projects.
Voluntary demand alone may not generate enough carbon-market liquidity, despite companies’ net-zero commitments. A proposed carbon tax was expected to strengthen incentives for emissions reductions, initially targeting energy, iron and steel sectors. However, the government said in April 2026 that implementation was under review amid economic and geopolitical pressures, adding uncertainty.
By June, the Finance Ministry said Malaysia’s national carbon-tax policy was in its final stage, but businesses were still awaiting details on the start date, tax rate, emissions threshold and carbon-credit rules. This uncertainty complicates long-term investment decisions and business planning. While Malaysia must consider carbon pricing’s impact on consumers and smaller businesses, delays also carry costs. Similar uncertainty surrounds the National Climate Change Bill, or RUUPIN, which is expected to establish a legal framework for climate governance, emissions reporting and carbon pricing. Until the Bill is passed and supported by regulations, Malaysia’s carbon framework remains incomplete.
The National Carbon Market Policy, launched in April, is a welcome step covering voluntary and compliance markets, including international trading under Article 6 of the Paris Agreement. It estimates Malaysia could cut about 56 million tonnes of CO₂ equivalent, with 70 per cent from lower-cost measures. However, investors need clearer rules on carbon ownership, credit exports, double counting and future carbon-tax obligations. Federal-state coordination remains challenging because land and forests fall largely under state jurisdiction. Different approaches to licensing, revenue sharing and community protection could create regulatory and reputational risks, requiring stronger national coordination while respecting state authority.
Malaysia needs national consistency while respecting state governments’ constitutional authority and legitimate interests. A problem in one project could undermine confidence in the entire Malaysian carbon market. Indigenous and local communities must be properly consulted, with information provided in accessible languages, independent advice and sufficient decision-making time. Their customary rights must be recognised, while benefit-sharing agreements should be transparent and enforceable. Carbon projects must not enable outsiders to profit from rural land while long-term custodians receive little. Consultation must involve genuine consent, not merely meetings or signatures, ensuring communities understand and agree to how their land and carbon resources are used.
I am concerned carbon credits could substitute for genuine emissions reductions. Companies should not rely on offsets while wasting energy or expanding fossil-fuel use. Credits should address unavoidable emissions, not excuse poor practices. Every credit must demonstrate additionality, accurate measurement, permanence and exclusive claims, especially for forests vulnerable to fires, illegal logging and future land-policy changes.
Malaysia is investing heavily in carbon capture, utilisation and storage (CCUS), with the 2025 CCUS Act establishing a federal framework for Peninsular Malaysia and Labuan, alongside Sarawak’s own rules. Projects such as Kasawari target offshore gas emissions, while Malaysia aims to become a regional carbon storage hub for imported CO₂.
CCUS may help hard-to-abate industries, but importing foreign carbon dioxide raises concerns over leakage, liability, transport and long-term storage responsibility. Malaysians deserve clarity on who bears future monitoring or remediation costs. Carbon storage must not justify prolonged fossil-fuel dependence or divert investment from renewable energy, efficiency and cleaner alternatives.
Malaysia can still build a successful carbon sector by adopting clear climate legislation, predictable carbon pricing and harmonised state standards. A public registry should disclose project ownership, credit issuance, retirement, community benefits and monitoring. Independent audits must be credible, with penalties for misleading claims. Above all, Malaysia should prioritise emissions avoidance, efficiency, fossil-fuel reduction, ecosystem protection and high-quality credits for residual emissions.
My concern is not about abandoning Malaysia’s carbon projects but strengthening them. Prioritising integrity, consent and genuine emissions reductions over speed, secrecy and publicity can protect the environment and build a valuable industry. Without these safeguards, carbon credits may trade successfully, but public trust and meaningful climate benefits will ultimately disappear.
DISCLAIMER:
The views expressed here are those of the writer and do not necessarily represent the views of Sarawak Tribune.
