Malaysia to Introduce Climate Change Law and Carbon Tax to Support Green Transition

Malaysia is set to table its first National Climate Change Bill in Parliament this year, marking a significant milestone in the country's efforts to strengthen climate governance and accelerate its transition towards a low-carbon economy. Once enacted, the legislation will make Malaysia the second ASEAN country and approximately the 60th country globally to introduce a dedicated climate change law.

Natural Resources and Environmental Sustainability Minister Arthur Joseph Kurup said the Bill will establish a legal framework to guide Malaysia's climate action and reinforce its commitment to sustainable development. The legislation is expected to support the country's long-term climate objectives by enhancing policy coordination and providing a structured approach to addressing climate change.

Following the implementation of the Bill, the ministry also plans to introduce a carbon tax aimed at encouraging industries to adopt cleaner technologies and more environmentally friendly operations. The government emphasised that the tax is intended to serve as an incentive for businesses to transition towards sustainable production processes rather than as a punitive measure.

Highlighting Malaysia's environmental strengths, Arthur noted that Sabah has around 63% forest cover, contributing to the country's overall forest cover of 54.4%, which exceeds the minimum 50% forest cover commitment agreed upon during the 1992 Earth Summit in Rio de Janeiro. The proposed legislation and accompanying carbon pricing measures reflect Malaysia's continued efforts to strengthen climate action while supporting sustainable economic growth.

A formal climate-change law plus carbon tax gives Malaysian corporates the regulatory clarity they've been waiting for - it converts optional transition planning into required capex sequencing. Our climate-action and ESG-strategy teams help clients build scenarios that stay robust across tax phase-in schedules and evolving disclosure obligations.