Malaysia: New Climate Policy to Reduce Carbon Intensity by 2030

Malaysia updates its climate policy, aiming for a 45% reduction in carbon intensity by 2030. This initiative is accompanied by the preparation of a Climate Change Act, expected to be launched in the first quarter of 2025.

Share:

Malaysia is implementing an update to its national climate policy, known as the National Climate Change Policy 2.0 (NCCP 2.0). This directive aims to reinforce the country’s commitment to emission reduction and establish concrete initiatives to support its Nationally Determined Contributions (NDC). The Ministry of Natural Resources and Environmental Sustainability (NRES) is leading this project. The NCCP 2.0 sets a goal of a 45% reduction in carbon intensity relative to GDP by 2030, using 2005 as a baseline. This policy is also supported by the drafting of a specific Climate Change Act, scheduled for the first quarter of 2025.

The NCCP 2.0 framework is designed to structure and coordinate all decarbonation efforts across the country. It includes guidelines on governance, climate adaptation, and low-carbon economic development. The document, conceived as a national strategy, also integrates objectives for climate finance and promotes regional partnerships in the area of carbon market mechanisms.

Impact of the Carbon Tax Mechanism

Minister Nik Nazmi Nik Ahmad also emphasized that Malaysia intends to implement Article 6 of the Paris Agreement as part of its national initiatives. This project specifically addresses the development of carbon market mechanisms. In 2025, the country may introduce a carbon tax on certain high-emission sectors. The aim is to create a financial incentive to encourage industries to adopt cleaner technologies and reduce their environmental footprint.

Although the details of this tax have not been finalized, the industrial sectors affected by this regulation could include those exposed to international trade and the highest emitters of greenhouse gases, such as steel and cement producers. The tax also aims to prepare Malaysian industry for the new rules under the European Union’s Carbon Border Adjustment Mechanism (CBAM). The CBAM, set to take effect in 2026, will impose taxes on several categories of imported products, including cement, steel, and aluminum, to align import costs with European climate requirements.

Malaysia’s Role within ASEAN

As the future chair of ASEAN for 2025, Malaysia also seeks to enhance regional cooperation on climate policy. The country views cross-border collaboration as a key lever for developing effective carbon markets in Southeast Asia. This regional leadership could strengthen Malaysia’s position as a key player in the energy transition within ASEAN. The minister further indicated that Malaysia will present its efforts at the 29th Conference of the Parties (COP29) of the United Nations Framework Convention on Climate Change (UNFCCC), scheduled for November.

Malaysia’s growing involvement in these regional initiatives comes as several countries in the region, including Indonesia, Vietnam, and Singapore, are also exploring solutions to reduce their emissions and achieve ambitious climate goals. Malaysia’s ASEAN chairmanship could catalyze collective action to harmonize regional strategies and maximize the effectiveness of climate policies throughout ASEAN.

Climate Finance Strategy and Economic Support

The success of the NCCP 2.0 and the Climate Change Act will largely depend on Malaysia’s ability to mobilize the necessary financial resources. The country needs to attract both domestic and international investments to fund decarbonation projects, support the adoption of low-emission technologies, and promote resilient infrastructure. The NCCP 2.0 framework includes measures to facilitate access to climate finance and encourages private sector participation in these initiatives.

However, implementing these policies could face challenges, particularly concerning the competitiveness of national industries. Malaysia must balance its climate ambitions with the need to maintain economic growth. The Climate Change Act could also include provisions to mitigate impacts on the most affected sectors.

Overall, Malaysia’s climate policy reflects a desire to accelerate the transition to a low-carbon economy while adapting to international constraints. The establishment of this strategic framework and the introduction of carbon market mechanisms demonstrate a commitment to positioning Malaysia as a regional leader in climate action, while ensuring long-term economic sustainability.

Brazil, Mexico, Argentina, Colombia, Chile, and Peru significantly increase renewable electricity production, reaching nearly 70% of the regional electricity mix, according to a recent Wood Mackenzie study on Latin America's energy sector.
The Canadian government announces an investment of more than $40mn to fund 13 energy projects led by Indigenous communities across the country, aiming to improve energy efficiency and increase local renewable energy use.
The German Ministry of Economy plans to significantly expand aid aimed at reducing industrial electricity costs, increasing eligible companies from 350 to 2,200, at an estimated cost of €4bn ($4.7bn).
A major electricity blackout paralyzed large parts of the Czech Republic, interrupting transport and essential networks, raising immediate economic concerns, and highlighting the vulnerability of energy infrastructures to unforeseen technical incidents.
French greenhouse gas emissions are expected to rise by 0.2% in the first quarter of 2025, indicating a global slowdown in reductions forecast for the full year, according to Citepa, an independent organisation responsible for national monitoring.
The Republican budget bill passed by the U.S. Senate accelerates the phase-out of tax credits for renewable energies, favoring fossil fuels and raising economic concerns among solar and wind industry professionals.
Rapid growth in solar and wind capacities will lead to a significant rise in electricity curtailment in Brazil, as existing transmission infrastructure remains inadequate to handle this massive influx of energy, according to a recent study by consulting firm Wood Mackenzie.
In April 2025, fossil fuels represented 49.5% of South Korea's electricity mix, dropping below the symbolic threshold of 50% for the first time, primarily due to a historic decline in coal-generated electricity production.
The US Senate Finance Committee modifies the '45Z' tax credit to standardize the tax treatment of renewable fuels, thereby encouraging advanced biofuel production starting October 2025.
According to the 2025 report on global energy access, despite notable progress in renewable energy, insufficient targeted financing continues to hinder electricity and clean cooking access, particularly in sub-Saharan Africa.
While advanced economies maintain global energy leadership, China and the United States have significantly progressed in the security and sustainability of their energy systems, according to the World Economic Forum's annual report.
On the sidelines of the US–Africa summit in Luanda, Algiers and Luanda consolidate their energy collaboration to better exploit their oil, gas, and mining potential, targeting a common strategy in regional and international markets.
The UK's Climate Change Committee is urging the government to quickly reduce electricity costs to facilitate the adoption of heat pumps and electric vehicles, judged too slow to achieve the set climate targets.
The European Commission will extend until the end of 2030 an expanded state-aid framework, allowing capitals to fund low-carbon technologies and nuclear power to preserve competitiveness against China and the United States.
Japan's grid operator forecasts an energy shortfall of up to 89 GW by 2050 due to rising demand from semiconductor manufacturing, electric vehicles, and artificial intelligence technologies.
Energy-intensive European industries will be eligible for temporary state aid to mitigate high electricity prices, according to a new regulatory framework proposed by the European Commission under the "Clean Industrial Deal."
Mauritius seeks international investors to swiftly build a floating power plant of around 100 MW, aiming to secure the national energy supply by January 2026 and address current production shortfalls.
Madrid announces immediate energy storage measures while Lisbon secures its electrical grid, responding to the historic outage that affected the entire Iberian Peninsula in late April.
Indonesia has unveiled its new national energy plan, projecting an increase of 69.5 GW in electricity capacity over ten years, largely funded by independent producers, to address rapidly rising domestic demand.
French Minister Agnès Pannier-Runacher condemns the parliamentary moratorium on new renewable energy installations, warning of the potential loss of 150,000 industrial jobs and increased energy dependence on foreign countries.