The National Energy Transition Roadmap (NETR) is expected to uplift the gross domestic product by 10-15 per cent, besides creating 350,000 jobs whereby 70 per cent of the income gains will flow to the low- and medium-income households.
Minister of Economy Rafizi Ramli recently said, in respect of the economy, the government expects a 10-15 per cent uplift in GDP value from market-creating products that are high-growth and high-value (HGHV). There will also be a 32 per cent reduction in emissions in the energy sector, besides bringing in a higher volume of green FDIs into the country.
For businesses, infrastructure and technology would become the impetus for investments to flow through.
BusinessToday engaged with Rafizi Ramli on the impact of the National Energy Transition Roadmap (NETR) towards the development of the nation’s economy and the people’s wellbeing. Rafizi’s views are as follows:
Scene-setting
● Malaysia is one of the world’s megadiverse countries (terrestrial biodiversity). We are a small open economy, with a population of 32.7 million and GDP of RM1.79 trillion. Economic and population growth is expected to drive a rise in energy demand (2% annually until 2050).
● During the UN climate summit COP26 in Glasgow in 2021, Malaysia announced its aspiration to achieve net-zero GHG emission target by 2050. We have also committed to reduce carbon intensity against GDP by 45% by 2030 compared to 2005 levels, maintain forest cover of at least 50% and support the Global Methane Pledge, of which Malaysia is a member.
● The National Energy Transition Roadmap (NETR) was launched on 29 August 2023 aimed at steering Malaysia’s shift from traditional fossil fuels-based economy to a high-value green economy through the whole-of-nation approach. NETR Part 1 launched on 27 July 2023 introduced 10 flagship catalyst projects across six energy transition levers i.e. energy efficiency (EE), renewable energy (RE), hydrogen, bioenergy, green mobility, and carbon capture, utilisation and storage (CCUS).
● The final NETR launched on 29 August 2023 features 50 initiatives under the six energy transition levers and five enablers namely financing and investment; policy and regulation; human capital and just transition; technology and infrastructure; and governance and implementation.
● NETR has developed the Responsible Transition (RT) Pathway 2050 that outlines the energy sector’s low carbon pathway to reduce 32% GHG emission from 259 MtCO2eq. (2019) to 175 MtCO2eq (2050). The pathway is designed to accelerate Malaysia’s energy transition journey while balancing the energy trilemma. Towards this, the RT pathway will achieve the following by 2050:
□ Increase use of RE in the power generation mix;
□ Phase-out coal from the power generation mix;
□ Broad based energy efficiency initiatives pursued, particularly from the demand side management that include optimising energy consumption across key sectors, namely residential, commercial, industrial, and transport to prevent wastage and indirectly prolong the lifespan of indigenous resources;and
□ The shift to electrification and biofuels expedited in the transport sector.
● RT Pathway reinforces Malaysia’s commitment to net-zero emission as early as 2050 through the shift from traditional, fossil fuel-based energy systems to a greener, low-carbon energy framework. The Total Primary Energy Supply (TPES) Modelling indicated that by 2050 natural gas will account for 56% of TPES. RE share will increase from 4% in 2023 to 22% in 2050. The successful implementation of NETR will uplift GDP value from RM25 billion in 2023 to RM220 billion and generate 310,000 jobs in 2050.
In looking towards implementing the NETR, the impact of the energy trilemma is still present, namely; balancing the security, affordability, and sustainability issues within an economy. With the energy transition gaining momentum – which directly affects the economy of Malaysia – what are the implications of the trilemma seen today and what measures are being taken to reduce these issues? In improving energy transition, though very plausible, how is it economically viable to Malaysia?
Malaysia has earned recognition as the best country in Southeast Asia on the Energy Transition Index by the World Economic Forum (WEF). This acknowledgement is attributed to our diverse and reliable energy supply. We have high electricity accessibility in both rural and urban regions, and our household electricity rates rank among the lowest globally. Furthermore, production from our oil and gas reserves have reduced our dependence on energy imports.
However, we face challenges in environmental sustainability. Although Malaysia contributes a mere 0.8% to global GHG emissions, our current CO2 emissions intensity in the energy sector remains significant at 7.5 MtCO2eq per capita. Notably, the energy sector is the primary source of greenhouse gas (GHG) emissions in the country, accounting for 78.5% of Malaysia’s total emissions.
Implication of this can be felt by Malaysia’s corporations and enterprises, where they confront a rapidly changing market landscape with carbon costs reshaping business dynamics and potentially straining competitiveness. It is estimated that the EU’s Carbon Border Adjustment Mechanism (CBAM), aimed at reducing carbon leakages in trade, will affect 57% of Malaysia’s total exports. Additionally, the USA’s Inflation Reduction Act (IRA) introduced in 2022 emphasises the production and demand for domestically produced clean energy products and services over foreign imports.
NETR is the main policy document to accelerate Malaysia’s energy transition efforts. This roadmap is vital for steering Malaysia’s shift from traditional fossil fuels-based economy to a high-value green economy. By 2050, NETR initiatives are expected to deliver 32% reduction in GHG emissions for the energy sector compared to the 2019 baseline – reaching 4.3 MtCO2eq emission per capita.
To make it economically viable, the NETR was designed to leverage on Malaysia’s various advantages such as a strategic location, diverse RE sources and a high level of skills to become a regional leader in energy transition. This can be seen embedded in the NETR’s six energy transition levers. For example, bioenergy lever leverages Malaysia’s abundant biomass resources, particularly from agriculture, offering both economic value and a cleaner energy source.
The NETR not only charts a sustainable energy future for Malaysia but also presents significant economic opportunities. Through strategic investments, diversification of energy sources, and effective governance, the energy transition can be both environmentally beneficial and economically viable for Malaysia.
NETR aims to power Malaysia’s future by unlocking potential in new growth areas and delivering progress and prosperity to Malaysian households and businesses. The successful implementation of NETR will uplift GDP value from RM25 billion in 2023 to RM220 billion and generate 310,000 jobs in 2050.
Question: Could the ministry shed some light in terms of these projections, in terms of which sectors will improve? How can household incomes rise? Could you also break down the actual values for the expected rise of the GDP? What are also the actual reasons as to why would the GDP rise, solely due to energy transition? (this is to explain to the reader the actual economic viability of NTER and for them not to view it as just another government policy.) Also, what are the specific sectors that are expected to employ 310,000 jobs? In your view, do Malaysians meet the exact skill sets required with energy transition now at the forefront and what needs to be done to ensure there are no shortfalls in the economy as it progresses? Does the NETR offer commercial prospects for organisations that fit Malaysia’s RE vision, and how?
● Beyond the energy sector, the investments in energy transition are expected to significantly benefit several sectors, with the services industry leading the way, followed by manufacturing and construction. The services sector stands to gain primarily from projects in CCUS, biofuels, and RE generation. Concurrently, the manufacturing sector will see a boost, particularly from the emphasis on EV production, public transport, and green hydrogen plants. The construction sector will not only benefit from these projects but will also see growth opportunities from the development of EV charging infrastructure, the integration of smart grids, and advancements in energy storage solutions.
● These sectors are also expected to see growth in job opportunities catalysed by projects as mentioned above, contributing to increased household incomes as well.
● Household incomes are expected to directly benefit from income gains arising from investment opportunities across all six energy transition levers which requires a highly skilled workforce. This is expected to be realised through the generation of 310,000 jobs in these pivotal sectors, subsequently elevating household incomes across the nation.
● The projected rise in NETR’s contribution to GDP is driven by investments in the energy sector. The NETR highlights potential investment avenues in government co-funded facilities dedicated to energy transition, with projections reaching RM1.2-1.3 trillion by 2050, further bolstering the nation’s GDP.
● Addressing the workforce, the NETR underscores the importance of strengthening energy literacy and awareness to all levels of society. Concurrently, there’s an emphasis on refining the skill sets of the workforce through green skilling programs, especially in capitalising nascent technologies such as CCUS, green hydrogen and energy storage. This indicates a proactive approach to equip Malaysians with the necessary skills, acknowledging the need for continuous learning and adaptation in the face of the energy transition.
● On the commercial front, the NETR presents investment opportunities for businesses interested to pursue green growth across the energy transition value chain. Investments in RE power generation, along with grid enhancements, are categorised as commercially viable or with market-rate returns. These projects typically possess the capacity to secure funding from capital markets and domestic financial institutions but require robust policy support to accelerate adoption.
Question: This NETR roadmap is vital for steering Malaysia’s shift from traditional fossil fuels-based economy to a high-value green economy. The NETR requires a whole-of-nation approach, encompassing federal and state governments, industry, general public, and international community. From the perspective of the Ministry of Economy, what are the payoffs to be seen within the economy and how can these results be forecasted to be attained quicker? What are the present risks within the economy with the implementation of NETR and how can the government address these issues? (with the rise of ‘greener’ fuel sources, traditional O&G companies will eventually see a declining business, firstly, is this true? With a decline of business, this sector alone will see some negative issues like job retrenchment, falling FDIs into the sector and reduction in tax revenue for the government)
● One of the tenets of Ekonomi MADANI launched by YAB Prime Minister on 27 July 2023 is spurring Malaysia’s green growth for climate resilience in line with Malaysia’s commitment to become a net-zero GHG emissions nation as early as 2050.
● We are operating in an environment in which both the government and businesses must articulate clear GHG emissions reduction targets along with our plans to develop the economy. We must be able to turn the carbon intensive and hard-to-abate industries (iron, steel, aluminium) into green investments and comply with the Economic, Social and Governance (ESG) reporting.
● At the same time, we are mindful that SMEs form approximately 97% of business establishments in Malaysia. It is encouraging to see many of our companies are really striving to reduce the environmental impact of business activities, ensure fair labour practices throughout the supply chain and distribute the economic benefits to all stakeholders. However, as in many other countries,
Malaysian enterprises grapple with resource limitations (e.g. funding, skills, talents). Drastic transition without clear direction on the path forward could threaten our social safeguards, especially given the low share of CE to GDP.
● In mitigating the risks of transition, the entire Government network has put into action the necessary tools to help our businesses which in return will help the households. For instance, MITI has launched the National ESG Industry Framework to support Malaysia’s manufacturing sector towards embracing ESG and strengthen Malaysia’s economic resilience.
● In the oil and gas realm, the Malaysian Petroleum Resources Corporation (MPRC) is developing the National OGSE Sustainable Roadmap for OGSE players. It is intended to facilitate their transition towards sustainable practices and clean energy and have better adoption of ESG reporting. Given that NETR modelling points to natural gas making up 56% of our total primary energy supply (TPES) in 2050, oil and gas industry too needs to step up efforts to continue producing responsibly and sustainably.
● However, Malaysia welcomes all the support we can get to build the whole-of-society capacity right down to the households as a means to future-proof our talent pipeline. We need to develop energy knowledge platforms tailored for SMEs and businesses to tackle Scope 1, 2 and 3 reporting capacity and capability.
● Furthermore, investment for green education and training programmes could be lengthy and expensive which might be discouraging to our local industries. I would like to call on the potential investors, perhaps among the philanthropies, to come forward and support Malaysia’s efforts in producing and developing the pipeline of productive talents to implement NETR projects and initiatives.
Question: Ten flagship catalyst projects of the NETR, which cover six energy transition levers namely, energy efficiency (EE), renewable energy (RE), hydrogen, bioenergy, green mobility, and carbon capture, utilisation and storage (CCUS) were launched on July 27th 2023. How do they relate to Malaysia’s GDP?
● The Mid-Term Review of the Twelfth Malaysia Plan is the main policy document in realising the aspiration of Ekonomi MADANI: Memperkasa Rakyat aimed at rebuilding the “House of Malaysia” by strengthening its foundation, raising its floor, increasing its ceiling and developing its pillars.
● To address Malaysia’s long-standing economic structural challenge and growth disparity, we must develop and establish new firms to enter the market, preferably in the High Growth and High Value (HGHV) industries such as energy transition to explore opportunities in the new supply chain.
● When we were developing NETR, we realised that it was important to set clear focus areas from the outset. Hence, the six energy transition levers were introduced namely energy efficiency, renewable energy, hydrogen, bioenergy, green mobility and carbon capture, utilisation and storage (CCUS).
● We hope that this will send a clear signal to the market and garner the interests of future investors. The 10 flagship projects demonstrated 19 different modalities to show their varied technological readiness, state of development as well as challenges surrounding Malaysia’s choices of projects and initiatives to reduce the energy sector GHG emissions. Each of the 10 flagship projects and 50 initiatives is designed to reach our ambitious targets of improving RE installed capacity to 70%, energy efficiency savings to 22% and EV penetration to 80%.
● In reaching these targets, we anticipate an estimated uplift of 10%-15% in GDP and a 32% reduction in GHG emissions in the energy sector. This will coincide with 350,000 jobs being created in HGHV industries and 70% of income gains being flown into low and medium-income households.
● An estimated inflow of investments of RM435 billion to RM1.85 trillion by 2050 will be a catalyst to jumpstart economic activities in line with the global transition to clean and renewable energy sources.
Question: Today’s policies (the DTN, NETR, NIMP, the 12th Malaysia Plan’s forecasts) must be seen to have consistency overtime in the aspect of measuring its results. How is this carried out and what are the pillars involved to ensure these initiatives adapt to existing and future economic challenges to remain relevant? (With advancing technology, please highlight the measures and results expected, for
e.g. government policies to reduce the impact and incentives for use and for producers).
● In terms of governance, YAB Prime Minister will chair the National Energy Council (MTN) to oversee Malaysia’s energy sector planning and development. The National Committee on Energy Transition (NCET) which I will chair will monitor the implementation of NETR and report to MTN.
● From a policy perspective, Malaysia needs to align our code of conduct and policies with trading partners’ expectations to maintain competitiveness. The ongoing Russia-Ukraine has disrupted the global supply chain, primarily in the energy sector. Uncertainties of stable and non-intermittent supply are growing at a time of steeper decarbonisation targets.
● Governments, including Malaysia must frequently evaluate policies on energy security to ensure that energy remains available, accessible, affordable, and acceptable to everyone. The crisis is not just a reflection of cyclical threats such as geopolitical tension, but also the structural factors undergirding it.
● Years of underinvestment have put the oil and gas production volumes in a volatile position. The increasing geographical distance between supply and demand locations had also exerted pressures on energy prices. Therefore, it is important to continue investing in large-scale initiatives to minimise the short-and long-term threats to energy security through several ways.
● We must ramp up investments into exploration and production. Having experienced a tight LNG supply in 2022, it is imperative for us to open more areas and access a wider range of operators that could provide not only more efficient solutions, but also catalyse the development of innovative skills and technologies, including CCUS.
● Energy pricing and public awareness must come hand in hand. NETR has identified the Malaysia Energy Literacy Programme (MELP) as one of the mechanisms to increase energy literacy of the people.
● Over time, market mechanisms such as TPA will be introduced to steer consumer behaviour in an environmentally responsible direction. Businesses should start introducing internal carbon price strategy to encourage behavioural changes in preparation for carbon trading on the voluntary markets.
● NETR is our commitment to a just energy transition that benefits the rakyat, creates business opportunities and supports innovation through a coordinated whole-of-nation approach. The Ministry welcomes industry players to be our partners in the journey aimed at achieving Malaysia’s Net Zero Aspiration as early as 2050.
