Belém – November 14, 2025
IETA’s Business Partnership for Market Implementation (B-PMI) today published a white paper setting out options for a Malaysia carbon pricing system
The white paper, titled Effective Carbon Pricing and Markets in Malaysia: Private Sector Perspectives, considers the options available to the country in the formulation of a carbon pricing system and recommends specific principles that should govern the development of a carbon tax and eventually an emissions trading system (ETS) .
Developed by IETA’s Business Partnership for Market Implementation (B-PMI), supported by global energy and solutions partner PETRONAS, and in consultation with local industry stakeholders, the white paper also offers a study into the various models of carbon pricing employed around the world, that can be considered when crafting Malaysia’s own system.
The authors conclude that “Malaysia's commitment to achieve net zero by 2050 and to peak emissions by 2030 underscores the urgency of adopting an effective and credible carbon pricing framework.
“The choice and design of CPI will determine not only the environmental outcomes but also the competitiveness, resilience, and equity of Malaysia’s economic transition.”
The paper identifies some key considerations for lawmakers when crafting a carbon pricing system for the country, including:
- Predictability and adaptability: Any pricing system should establish a clear, multi-year roadmap for carbon price progression and expansion, to give businesses the certainty they need to make long term investments;
- National alignment: There should be close coordination between federal and state authorities, preventing any regulatory overlap or double pricing;
- Private sector engagement: Engaging with industry at the early stages of policy development will ensure that the private sector's views are taken into consideration, and that industry support is secured
- Revenue neutrality and transparency: Revenue collected through a CPI should be reinvested in supporting decarbonisation in covered sectors. Recent studies have found that revenue neutrality minimises the negative economic impact arising from carbon pricing;
- Use of high-integrity offsets: Permitting the use of high-integrity carbon credits allows covered entities to reduce their compliance costs by sourcing carbon credits which cost less than the compliance carbon price. Allowing use of offsets will also drive financing to decarbonisation measures in sectors and/or geographies not covered by the CPI.
