Finance Ministry Clarifies Stance on Imposing Carbon Tax
The Finance Ministry (MOF) in Malaysia has unequivocally denied recent reports circulating that the rate for the country’s anticipated carbon tax has already been set at RM15 per tonne of emissions, effective next year.
Finance Minister II Datuk Seri Amir Hamzah Azizan addressed the speculation, clarifying that the proposed tax mechanism cannot be finalized or determined until the prerequisite Climate Change Bill (RUUPIN) has been properly tabled and enacted by Parliament.
He stressed that the foundational step involves establishing a clear and measurable baseline for emissions.
“We need to know how to measure the baseline first,” he stated, emphasizing that at this juncture, the MOF has not yet conducted the necessary in-depth study required to accurately determine an appropriate carbon tax rate, as the baseline must be firmly established beforehand.
This critical preparatory work, specifically the determination of the baseline, will be primarily led and managed by the Ministry of Natural Resources and Environmental Sustainability (NRES).
Amir Hamzah was responding directly to a Bloomberg report that had claimed Malaysia was contemplating a starting carbon tax of RM15 per tonne, targeting high-emission industries as part of a broader strategy to significantly curb its national carbon footprint.
He firmly dismissed the reported figure as premature, indicating his ministry was unsure of its origin, and reiterated the necessity of waiting for the official Climate Change Act before establishing any taxation benchmark.
The Mechanism and Purpose of Carbon Pricing
The implementation of the carbon tax is intrinsically linked to the successful establishment of the Climate Change Bill, which Acting NRES Minister Datuk Seri Johari Abdul Ghani previously announced is scheduled to be tabled during the first parliamentary meeting of 2026.
This legislative timetable confirms that any specific tax rate, including the erroneous RM15 figure, could not possibly be finalized until at least next year.
Amir Hamzah explained the underlying principle of the carbon pricing system: once the baseline, or benchmark for emissions, is clearly defined, companies that emit above this predetermined level will become subject to the tax.
Conversely, companies managing to keep their emissions within the established baseline will not be taxed.
He detailed the government’s plan for utilizing the revenue generated from this taxation mechanism.
The collected funds from the carbon tax will be strategically reinvested into adaptation measures and various carbon reduction initiatives across the country, ensuring that the financial burden placed on high emitters directly contributes to Malaysia’s broader environmental goals.
This approach frames the carbon tax not merely as a revenue-generating measure, but as a critical fiscal tool designed to incentivize cleaner operations and fund necessary climate resilience efforts, ensuring the revenue is explicitly reinvested to reduce Malaysia’s overall carbon footprint and promote sustainable development.
Identifying Target Industries and Institutional Readiness
Once the emissions baseline is definitively finalized by the Ministry of Natural Resources and Environmental Sustainability, the government intends to proceed with assessing the targeted industries that will fall under the initial scope of the carbon tax.
The Finance Minister indicated that the focus would be placed on major sectors identified as key carbon emitters within the country, specifically naming industries such as iron production and utilities.
The decision to target these high-emission sectors first is a logical step toward achieving the greatest initial impact on the national carbon footprint.
The Bloomberg report had also mentioned that the government was reportedly in discussions about forming a new dedicated agency responsible for the implementation and coordination of climate initiatives.
While the Minister did not directly confirm the creation of this agency, the complexity of establishing a clear emissions baseline, implementing a fair taxation system, and managing the resulting revenue stream suggests that new institutional structures or significant capacity building within existing ministries will be necessary.
The clear communication from the MOF aims to manage expectations and assure both the market and the public that the process for implementing the carbon tax will be methodical, transparent, and preceded by essential legislative and technical groundwork.
The process emphasizes that environmental policy precedes fiscal implementation, ensuring the tax serves its core purpose of emission reduction rather than becoming a purely arbitrary levy.
