Malaysia is set to introduce a carbon pricing mechanism from 2026, initially focusing on the iron, steel, and energy sectors, as part of the government’s evolving climate policy framework. The move is aligned with global decarbonisation trends and mirrors mechanisms such as the European Union’s Carbon Border Adjustment Mechanism (EU CBAM).
The initiative will be supported by the upcoming Climate Change Bill (RUUPIN), which will provide the legal and regulatory foundation for the carbon tax. While the final details—such as the tax rate, sector coverage, and compliance thresholds—have yet to be formally announced, the direction of the policy is becoming increasingly clear.
According to analysts at Kenanga Research, carbon pricing will effectively introduce additional cost pressures for carbon-intensive industries, which could gradually affect margins and profitability. Scenario analysis suggests that at a proposed rate of RM15 per tonne of carbon, most companies in the affected sectors may see profitability decline by at least 5% or more.
However, the move also presents opportunities for investors to differentiate companies based on emissions intensity, decarbonisation readiness, and ability to manage transition risks. Analysts note that companies with stronger emissions governance, improved data management, and clear decarbonisation strategies will be better positioned to navigate regulatory expectations and potential cost pressures.
“Carbon pricing should be viewed not only as a compliance requirement but also as an emerging signal of transition risk that investors will increasingly need to factor into portfolio analysis,” Kenanga said.
The government’s carbon tax plan marks a significant step in Malaysia’s climate agenda, reflecting growing pressure to align with international sustainability standards and reduce greenhouse gas emissions from key industrial sectors.
