MITI Launches Green Transition, Pushing EAF and Carbon Tax for Malaysian Iron & Steel

Datuk Liew Chin Tong, Deputy Minister of Malaysia’s Ministry of Investment, Trade and Industry (MITI), mentioned a green transition initiative in the iron and steel industry. This initiative has been intended to address challenges including chronic overcapacity and the industry's movement toward high-emission production.

Datuk Liew noted that in 2022, 72% of the nation's steel was produced by high-carbon Blast Furnaces (BF), a stark departure from the industry’s past reliance on greener, scrap-based Electric Arc Furnaces (EAF).

MITI can fulfil Malaysia's net-zero ambitions by implementing a comprehensive policy strategy. Key measures include establishing an independent committee to guide the sector’s restructuring and introducing a carbon tax as part of the 2025 Budget. Revenue collected from this tax, along with a potential carbon border adjustment mechanism, will be specifically channelled into funding future green steel investments and technology adoption.

Bolstering industry governance and protecting local producers from external market turbulence are areas of concern for Datuk Liew. This includes addressing the potential risk of foreign steel being redirected to the Southeast Asian (ASEAN) market due to tariffs imposed elsewhere. Ultimately, MITI’s goal is to successfully reorganize the entire iron and steel sector, ensuring its long-term viability as both an economically competitive and environmentally sustainable strategic industry.

MITI's carbon-tax plus EAF-shift plus independent-restructuring-committee combined with carbon-border-adjustment-mechanism revenue directed to green-steel investment reflects appropriate policy-package design for hard-to-abate industrial transition. Individual measures (carbon tax alone, technology mandate alone) frequently underperform; coordinated packages address financing, technology adoption and market-conditions simultaneously.

The 72-percent-BF-to-EAF-return challenge is analytically important. EAF requires scrap-steel feedstock at scale; jurisdictions transitioning to EAF-dominance must build scrap-collection-and-processing infrastructure alongside furnace conversion. Malaysia's programme design implicitly requires attention to this feedstock-supply architecture.

For steel producers, scrap-processors, carbon-tax-affected industrial customers, financial institutions and consultancies with Malaysian iron-and-steel exposure, Cognitud's energy transition, supply chain and operations and market intelligence teams help clients evaluate EAF-transition and carbon-tax-linked opportunities, structure long-term commercial arrangements aligned with green-steel priorities, and prepare disclosures aligned with Bursa Malaysia, CBAM, ISSB and jurisdictional industrial-decarbonisation frameworks.