Malaysia

Implementation period: 2023-2025 Funding amount: US$2.4 million Window: Readiness

Malaysia has committed to introduce a carbon tax in 2026 as part of its pledge to achieve net-zero emissions by 2050. Carbon pricing is highlighted in the Twelfth and Thirteenth Malaysia Plans and the National Energy Transition Roadmap (NETR) as a key tool to meet the country’s climate commitments or Nationally Determined Contributions (NDC) target of reducing emissions intensity of gross domestic product by 45% below 2005 levels by 2030. The forthcoming Climate Change Bill will provide the legal basis for a Domestic Emissions Trading System (DETS), to be developed after the carbon tax. The Ministry of Finance leads carbon tax design, while the Ministry of Natural Resources and Environmental Sustainability is responsible for the DETS and the national Measurement, Reporting, and Verification (MRV) and registry system.

Objectives & Activities

PMI supports Malaysia in designing and implementing carbon pricing instruments by strengthening the analytical, institutional, and technical foundations for a carbon tax targeted for 2026 and a subsequent DETS.

Support under the Readiness Support Program:

• Analytical work on carbon tax and DETS design options, including scenario modeling and impact assessments
• Draft registry and MRV gap analysis, with recommendations for infrastructure development
• Strengthening inter-ministerial coordination through dedicated technical working groups and stakeholder engagement
• Capacity-building, communications, and just transition planning activities underway