Malaysia’s Climate Change Bill to Enable Carbon Tax Introduction from 2026
KUALA LUMPUR, March 13 — Malaysia’s National Climate Change Bill (RUU PIN) is expected to establish the legal foundation for carbon pricing policies, including the introduction of a carbon tax beginning in 2026, according to the Ministry of Natural Resources and Environmental Sustainability (NRES).
The ministry said the proposed legislation will introduce a Monitoring, Reporting and Verification (MRV) system, which will serve as the primary framework for implementing carbon pricing mechanisms and supporting Malaysia’s transition toward a low-carbon economy.
According to NRES, the MRV system will apply a standardised methodology to measure greenhouse gas (GHG) emissions across various sectors of the economy.
This approach is intended to ensure transparency and accuracy in emissions reporting while enabling the development of a credible national carbon registry.
The ministry provided the clarification in a written response to a question raised by Senator Tan Sri Low Kian Chuan in the Dewan Negara, which was later published on the Parliament website.
MRV System Forms the Basis of Carbon Pricing
NRES explained that the MRV framework will play a central role in determining Malaysia’s carbon pricing mechanisms.
Through the system, emissions data from different sectors will be monitored, reported and verified in a structured manner.
The verified data will then be used to determine carbon pricing levels, ensuring that policies are based on actual emissions data.
Such an approach is crucial to maintaining transparency and credibility in climate policy implementation.
Carbon Tax to Focus on High-Emission Sectors
Based on the MRV framework, the government plans to implement a carbon tax beginning in 2026, initially targeting sectors with high levels of emissions.
The first phase is expected to focus on the energy sector as well as the iron and steel industries, which are among the most carbon-intensive sectors.
NRES said the carbon tax will be aligned with the National Carbon Market Policy and provisions under the National Climate Change Bill to ensure consistent policy implementation.
The ministry noted that introducing the tax will send a clear signal to industries with high emissions to improve efficiency and adopt lower-carbon technologies.
Future Emissions Trading Scheme
The National Climate Change Bill will also provide the legal basis for implementing an Emissions Trading Scheme (ETS) in a later phase.
The ETS will be introduced once the MRV system and the domestic carbon market ecosystem have matured sufficiently.
Under this system, emission limits can be established for certain industries, while companies will have flexibility to comply through trading emission allowances.
This mechanism allows industries to manage emissions reductions in a cost-effective way while maintaining national climate targets.
Carbon Credits and Market Regulation
The bill will also regulate Malaysia’s domestic carbon market, including the use of carbon credits to meet emission reduction obligations.
According to NRES, carbon credits provide an alternative solution for sectors that face challenges in reducing emissions directly.
Through this mechanism, industries can still comply with emission reduction requirements while supporting Malaysia’s overall greenhouse gas reduction targets.
Phased Implementation Strategy
The ministry emphasised that carbon pricing policies will be implemented in a phased and structured manner.
The process will begin with the establishment of the MRV system before other mechanisms such as carbon taxes and carbon trading are introduced.
This approach will allow industries adequate time to adjust while ensuring smooth implementation of climate policies.
Bill Under Final Legal Review
NRES also confirmed that the National Climate Change Bill is currently undergoing final legal review by the Attorney General’s Chambers (AGC).
The review aims to ensure the legislation is legally sound and consistent with policy decisions approved by the Cabinet on June 11, 2025.
The ministry said the government intends to table the bill during the Second Sitting of the Fifth Term of the 15th Parliament.
Once enacted, the legislation is expected to strengthen Malaysia’s climate governance framework and accelerate the country’s transition toward a sustainable low-carbon economy.
-wilayah.com.my
