By Iskandar Shah Abd Rahman and Azizi Abu Bakar
In 2024, Malaysia emitted around 390 million tonnes of CO2-equivalent, according to Climate Change Tracker estimates drawn from the Global Carbon Project, and fossil CO2 emissions alone rose by almost 5 per cent from the year before, based on the European Commission’s EDGAR database. The country has also passed the Carbon Capture, Utilisation and Storage (CCUS) Act 2025, the first comprehensive law of its kind in Southeast Asia, while the carbon tax on iron, steel and energy confirmed in Budget 2026 is now under review. The law is in place. The next task is making it work.
Carbon capture matters because of chemistry. In cement kilns and steel furnaces, much of the CO2 comes from the process itself, as limestone becomes clinker and ore becomes metal, rather than from the fuel burned for power. Even if every factory ran on renewable electricity, these plants would still emit. For such sectors, capturing carbon and storing it underground is one of the few options available at scale, and central to the long-term sustainability of industries the economy still depends on.
From a policy analysis perspective, Malaysia has already assembled most of the pieces. The Act sits alongside the National Energy Transition Roadmap and the New Industrial Master Plan 2030, both of which name CCUS as central to the 2050 net-zero goal. What the framework needs now is the connective tissue that lets these pieces work together. That is a question of coordination, and it is a natural next stage for any young policy regime rather than a sign of failure. Bulat air kerana pembetung, bulat manusia kerana muafakat: water takes its shape from the channel, and people from consensus.
Carbon capture is not new to Malaysia. Those of us who have worked in the country’s oil and gas industry since the early 2000s have watched it learn to separate and handle CO2 from high-CO2 gas fields, building know-how project by project. Some of that CO2 has already found a use: in Enhanced Oil Recovery, gas separated from a producing well is compressed and reinjected into an injector well on the same field, boosting output while keeping part of the carbon underground.
That experience offers a useful model, and not only for the engineering. CCUS has progressed in oil and gas because PETRONAS brings subsurface expertise, offshore infrastructure, storage data and, in EOR, even the CO2 source and its point of use together within one institution. A steel mill in Selangor or a cement plant in Sarawak has no equivalent partner, no producing well of its own to draw CO2 from or inject it into, and would otherwise have to assemble capture, transport, storage, permits and financing on its own. The task is to extend that kind of alignment from a single company to the wider economy.
Federal–state cooperation is a natural place to begin. The Act covers Peninsular Malaysia and Labuan, while Sabah and Sarawak, home to much of the country’s best geological storage potential, manage land and carbon under their own laws. Projects that cross these boundaries will need shared understandings on permits, safety standards and long-term liability, and these are best agreed early and in good faith, before the first cross-border pipeline is proposed.
Alignment matters for the price signal too. Capture is usually the largest share of a project’s cost, because separating CO2 from exhaust gases takes heavy equipment and a great deal of energy, and the more diluted the CO2, as in cement and steel, the higher the bill. CCUS has advanced elsewhere only where governments made it worthwhile, as with the United States’ 45Q tax credit of up to US\$85 a tonne. Malaysia’s carbon tax and the National Carbon Market Policy are meant to operate within the proposed National Climate Change Bill, which has yet to be tabled in Parliament. Moving these instruments forward on a shared timeline would give industry a clearer signal than any one of them could alone.
Coordination should reach beyond government as well. Because CCUS grew up in the oil and gas industry, communities may be unsure whether it is a genuine climate tool. Norway built public confidence in offshore storage over two decades, partly by publishing monitoring data and engaging communities early. Malaysia has the opportunity to build that practice in from the outset.
Three steps would help. First, a federal–state platform with a clear mandate to harmonise permitting, safety, liability and benefit-sharing for storage projects. The proposed Climate Change Bill already envisages a National Climate Change Council chaired by the Prime Minister, with state governments including Sabah and Sarawak at the table, and once established it would be a natural home for this work. Second, a single published timeline linking the carbon tax and the carbon market to the Bill’s passage, paired with time-limited incentives for the sectors that must move first and tied to verified emission reductions. Third, shared CO2 pipelines and storage hubs that smaller cement, steel and chemical operators can use, with public reporting and community consultation built in from the start.
The CCUS Act 2025 is a genuine milestone in Malaysia’s sustainability journey. Its success will depend less on new legislation than on how well Putrajaya, the states, ministries, industry and communities work together. Malaysia has written the rules. The next chapter is muafakat.
Iskandar Shah Abd Rahman is a Master of Public Policy candidate at the International Institute of Public Policy and Management (INPUMA), Universiti Malaya, and Dr. Azizi Abu Bakar is a Research Officer at the UM Sustainable Development Centre (UMSDC) and Data Steward at Universiti Malaya Open Science (UMOS), Universiti Malaya.
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