PETALING JAYA: While the environmental, social and governance (ESG) related measures and incentives doled out in Budget 2025 are promising, experts say it is still not comprehensive enough.
Some of the notable ESG-related measures that were outlined in Budget 2025 include an increase in the seed fund for the National Energy Transition Roadmap (NETR) from RM100mil to RM300mil.
Moreover, the Net Energy Metering (NEM) programme will be extended to June 30, 2025 and the implementation of the Green Technology Financing Scheme will continue with a total financing of RM1bil until 2026.
In order to encourage the purchase of energy-efficient electrical equipment, e-Rebates of up to RM70mil are also provided.
Asia School of Business senior research associate Ganesha Pillai said while Budget 2025 addresses some critical areas in ESG, it still lacks the transformative measures needed to significantly accelerate the country’s sustainability goals.
“It could have been better with more aggressive goals and funding for renewable energy and sustainable practices which would have further enhanced the effectiveness.
“However, some of the decisions in Budget 2025 such as the extension of NEM 3.0, incentives for electric vehicles (EVs), additional funding for energy efficiency, the NETR as well as adaptation and climate risk preparedness, along with the procurement of 250 EV buses are positive,” he told StarBiz.
Pillai added that there needs to be increasing public awareness and education around climate issues to empower community involvement and support for government initiatives.
“Malaysia needs to commit to a strong policy such as the Climate Change Act to get a whole of nation approach towards tackling climate change. A comprehensive circular economy framework is also required. The recently launched Circular Economy Blueprint for Solid Waste in Malaysia (2025-2035) is a good first step but more efforts are needed to make a meaningful impact,” he said.
Meanwhile, ClimatEra Consulting Sdn Bhd director and founder Komathi Mariyappan said measures like the allocation of RM1.4bil for the Sustainable Development and Transition Scheme for companies along with the expansion of the scope of tax relief to include the purchase of food waste composting machines for household use were commendable.
“Most of the measures in the budget were focusing on the environment and energy aspect. For the social aspect, increased investment in technologies and cultivating more talents, particularly local subject matter experts, are needed.
“Public awareness and education is also important especially for small and medium enterprises (SMEs). It is crucial for SMEs to understand sustainability requirements as new regulations are introduced. They also need to know how to access the funds and incentives that have been announced by the government in various budgets,” she said.
The imposition of carbon tax for the iron and steel industries by 2026 was also announced in Budget 2025, to encourage the adoption of low-carbon technologies.
The government stated that the tax proceeds will be used for research and programmes related to green technology.
To this end, Asia School of Business senior lecturer Dr Pieter E. Stek said the introduction of carbon tax is a positive step.
He noted that the question at the moment is how high will the tax be, and if there will be any emission allowances given to businesses before they are taxed, as well as whether businesses can trade any of their excess emissions.
“I think the main driver for the introduction of such a carbon tax would have to do with the European Union’s Carbon Border Adjustment Mechanism that is targeted to be launched in 2026.
“What we see in many countries like Indonesia, China, and Singapore, is that businesses can offset around 5% of their carbon tax liabilities using voluntary credits.
“Hence, I think it is likely that Malaysia will follow that example, which will also provide a boost to Bursa Malaysia by creating an automatic demand for carbon credits,” he said.
Stek said the impact of the carbon tax on the economy would depend on the tax rate and if the carbon tax on steel is high, then it may lead to a one-off adjustment likely in the price of steel, which affects automakers and construction companies.
However, there are ways that the government can do to make it less painful for certain producers, so that the actual effect from the carbon tax will be smaller, he noted.
“The government could provide free emissions allowance based on a firm’s steel production, and only impose tax on emissions that are in excess of that amount.
“On the buyer’s side, the government could provide a rebate for low-emissions steel, for example.
“The purpose of the tax should be to encourage firms to lower emissions. It does not have to be a major source of tax revenue, which may raise prices for consumers,” Stek said.
