KUALA LUMPUR: The government is looking at the possibility of introducing carbon pricing solely for the iron and steel sector.
Pro vice-chancellor for external engagement at Taylor’s University professor Ong Kian Ming said one of the issues that is of great concern in Malaysia is the potential introduction of a carbon tax or carbon pricing.
“I am a part of an independent committee that was set up by the Investment, Trade and Industry Ministry (Miti) to advise Miti on the future of the iron and steel sector.
“One of the robust discussions that we have been having is the possibility of introducing a carbon price just for the iron and steel sector.
“This is something that, if let’s say we can do, will set the pathway for the possible introduction of carbon pricing for other sectors of the economy as well. This is also linked to some of the discussions on the Carbon Border Adjustment Mechanism (CBAM),” he said during Hong Leong Bank’s 11th Sustainability Roundtable.
Scheduled to commence on Jan 1, 2026, the European Union’s (EU) CBAM will cover goods from six sectors, namely, cement, electricity, fertilisers, aluminium, iron, steel and hydrogen in the first phase.
Subsequently, this scope will be expanded to all sectors subject to EU emissions trading by 2030. Notably, steel remains known as one of the hard-to-abate sectors of the world, responsible for around 8% of global emissions.
Institute for Democracy and Economic Affairs associate professor Dr Renato Lima de Oliveira said in terms of average emissions per tonne of steel, Malaysia used to be one of the lower emitters, at 4.5% in 2020.
However, he noted that the country is slated to record higher levels than global average emissions for steel production.
“There is a process of structural transformation where production with higher emissions has migrated to Malaysia. Hence, the volume and profile of production in Malaysia is changing fast. While the Malaysian government has imposed a moratorium on new steel capacity, it still lacks a comprehensive emissions policy.
“Further, carbon pricing is recognised as an effective emissions reduction tool but it has not yet been implemented in Malaysia.”
De Oliveira added this means the total amount of emissions in Malaysia is going to be dominated by a single industry and additional emissions opportunities from other industries might be even more constrained.
“This raises the question about investment decisions, including rules of investment. In today’s world, these decisions need to take into account the quality of investment, the attraction of foreign direct investment as well as the emissions per capita and per production technology,” he said.
He said in the country’s move towards adopting carbon pricing, it could pilot in the steel sector.
“However, carbon pricing without a CBAM is an issue, because the CBAM serves to prevent carbon leakage. As such, not only should Malaysia think about adopting a carbon tax or carbon pricing more broadly, but also consider adopting its own Malaysian CBAM. This would prevent investments from the country going to other countries that have yet to adopt it.
“CBAM is something that requires a lot of capability, but as the country starts measuring it and the companies comply with all the necessary procedures to export to the European market, it will become more viable to adopt it locally as well,” he said.
In general, Ong said businesses should not view environmental, social and governance as a cost centre or purely as a compliance mechanism, but rather as a means to improve business processes, optimise cost and gain market share.
