As Malaysia steps into a new era of economic and environmental transformation, the concept of a carbon economy is no longer a far-off idea — it’s becoming one of the most important conversations for every citizen and business.
Few months ago, a former MNC oil and gas was sharing of his initiative into carbon trading venture with a state authority. It was inspiring to finally hear a concept first heard 45 years ago from friends taking up elective in environmental economics back in the US 45 years and years later from an engineering student is now operationalise.
A recent article, “Decoding Key Pillars of the Carbon Economy” in The Star explored how carbon is shifting from being simply a waste product to becoming a tradable asset, a tax base and a new frontier for growth.
It is especially timely in light of several major shifts here in Malaysia. Under the leadership of Najib Razak, Petronas began re-imagining its role – moving away from purely fossil-fuel extraction toward investments in renewables such as solar, hydrogen and other lower-carbon pathways. Its 2013 Annual Report was entitled re-imagining energy.
At the same time, the administration of Anwar Ibrahim has launched a fresh economic push, signaling that Malaysia’s next chapter must be driven not just by extraction of raw materials but by clean tech, innovation, and sustainability.
This matter to all because the carbon economy isn’t just for big companies or scientists: it has real implications for jobs, industries, and the way we all live. When carbon emissions are measured, valued, taxed or traded, that changes the rules of the game.
The article shows how Malaysia already has clear advantages — from forests and coastal ecosystems that can store carbon, to industries ready to evolve — but how the speed of change will determine whether we lead the region or fall behind.
It is important to understand that the “carbon economy” is not a vague future promise — it’s happening now, right here in Malaysia. Whether you’re a business owner, a worker, a student or just someone who cares about our country’s future, recognising the shift from fossil fuel dominion toward renewable, low-carbon growth matters.
Lets unpack what the carbon economy means, why now is the moment for Malaysia to act, and how we all fit into this transition — because the age of treating carbon as a burden is shifting into one where carbon becomes currency, opportunity and responsibility.
Decoding key pillars of the carbon economy
By JOSEPH TEK CHOON YEE
INSIGHT
Wednesday, 15 Oct 2025
THE Carbon Tax announced in Budget 2026 marks a key step in Malaysia’s low-carbon transition, linking fiscal policy with climate goals.
I hope this layman’s take makes carbon a little more understandable – because when climate talk gets too complex, we lose believers and create sceptics.
Once upon a carbon-heavy world, the rule was simple: the more you burned, the more you earned.
Now irony reigns – the smartest money is on the carbon that never leaves the ground. Air has become currency. Carbon, once the invisible villain of climate change, has reinvented itself as a tradable asset, a taxable pollutant, and even a farmable crop.
Messy and full of acronyms though it is, this could be one of the biggest economic transformations of our time.
Before we go further, let’s clear the air - literally.
When we say “carbon,” we don’t just mean carbon itself. It’s shorthand for all greenhouse gases – CO², methane, nitrous oxide and their fiery cousins – bundled into one unit called carbon dioxide equivalent (CO²e).
In short, “carbon” is the celebrity nickname for the entire cast of climate offenders, starring in the world’s most lucrative redemption story.
From Kyoto to carbon karaoke
Carbon trading began with the Kyoto Protocol (1997), when pollution became a commodity and richer nations could pay others to sing part of their climate tune.
Kyoto’s three acts – Emissions Trading, Joint Implementation and the Clean Development Mechanism – built the first global carbon marketplace.
But enthusiasm faded: too many cheap credits, too little credibility and some countries merely lip-synced their commitments.
Then came the Paris Agreement (2015), where every nation wrote its own pledge under clearer rules.
Kyoto’s rigid markets evolved into today’s hybrid of voluntary and compliance trading, powered by transparency and digital ledgers. The melody has changed from “pay someone else to cut” to “prove you really did”.
To navigate this new world, imagine a house built on four pillars – credits, taxes, capture and farming – each taming emissions differently but together forming a trillion-dollar structure redefining both profit and planet.
Trading Air: The curious case of carbon credits
Think of carbon credits as financial alchemy: each represents a tonne of carbon dioxide kept out of the air.
Companies that overshoot their limits must buy them; those protecting forests or generating renewable energy can sell them.
If that sounds like trading clean air, that’s because it is. And business is booming.
The carbon-credit market, worth about US$2bil in 2022, could soar to US$250bil by 2030 –- even US$1 trillion under net-zero scenarios. But credibility is king: a recent review found only 16% of offsets deliver genuine emission cuts.
Malaysia is not idle. The Kuamut Rainforest Project in Sabah – 80,000 ha of protected forest - is certified under Verra’s Verified Carbon Standard and holds Gold-level status for climate, community and biodiversity impact.
When Bursa Malaysia’s Carbon Exchange auctioned 150,000 credits in 2023, demand outstripped supply.
Beyond forests, Malaysia’s mangroves, peatlands and seagrass meadows are fast becoming the next frontier of blue carbon, where even mud earns its keep. These coastal lungs store several times more carbon than tropical forests.
In Matang, Setiu and Kota Marudu, scientists are mapping this hidden wealth while regulators figure out how to monetise it without muddying the waters.
Heavy industries are venturing into carbon capture and storage. Petroliam Nasional Bhd is developing projects in Kasawari (Sarawak) and offshore Sabah – a pivot from wells to vaults, showing even oil can bury its past.
Sarawak’s Land (CO² Storage) Rules 2022 and Forest (Carbon Activity) Rules 2022 give carbon trading legal homes.
Sabah has its Climate Change and Carbon Governance Enactment 2025, defining carbon rights, licensing and benefit-sharing.
Together they hint at a Malaysian chapter where carbon becomes both currency and conscience – where natural assets, from forest to seabed, finally pay their way without burning the house down.
When pollution gets a price tag: The Carbon Tax
If carbon credits are the carrot, carbon taxes are the stick. Under Budget 2026, the tax will start with the high-emission iron, steel, and energy sectors.
The logic is simple: once pollution has a price, cleaner options suddenly make sense.
Globally, 75 carbon-pricing systems now cover nearly 30% of emissions, raising more than US$100bil in 2024.
The European Union’s (EU) Carbon Border Adjustment Mechanism adds urgency: from 2026, exporters of high-carbon goods will pay extra at EU ports if their home countries lack comparable carbon pricing.
By taxing emissions at home, Malaysia stays competitive abroad while funding its own net-zero transition.
Proceeds are expected to support renewable energy, green research and development and circular-economy projects. To date, beyond the initial sectors identified, little has been disclosed about the scope, rate or collection mechanism of Malaysia’s proposed carbon tax.
Carbon capture: The industrial vacuum cleaner
Carbon Capture, Utilisation and Storage (CCUS) tackles industry’s carbon. Think of it as a giant vacuum for smokestacks - trapping CO² before it escapes, compressing it and storing it underground.
Over a thousand CCUS projects have been announced worldwide – from Norway’s Sleipner to Canada’s Quest and Texas’s Petra Nova – each designed to store millions of tonnes annually.
China’s Huaneng Longdong targets 1.5 million tonnes a year. Not all are operating yet; many are still seeking the pipelines, permits and permanence.
Critics say CCUS gives fossil-fuel producers a free pass; supporters argue it’s the only realistic bridge for cement, steel and power sectors that can’t shut down tomorrow.
Both are partly right. Done well, CCUS cuts emissions while buying time for deeper transitions.
Malaysia’s newly enacted CCUS Act 2025 provides legal foundations for ownership, liability and safety – positioning the nation as a regional storage hub. In short, it turns industrial smoke into stored wealth beneath our own sea-beds.
Farming carbon: Turning palms into carbon gold
While governments trade policies, corporations trade credits, industry captures carbon, planters are now asked to farm carbon.
In Malaysia’s 5.6 million ha of oil palm, the idea is sprouting fast. The industry once bore a climate stigma; now it’s poised to turn guilt into gilt and palms into profit.
Palm oil mill effluent burps methane, 21 times nastier than CO². Capture it, convert it to biogas, and you’ve literally monetised hot air as Malaysia’s Langkap Biogas Plant proved with Bursa-certified credits.
Biochar, composting and smarter water management turn soils into carbon vaults; preserving forests, peatlands and mangroves earns “avoided-emission” or “blue carbon” credits. Even rewetting peat can plug CO² leaks.
Still, carbon farming isn’t business-as-usual. Without measurable, verifiable “additionalities,” there’s no credit to claim.
The carbon market rewards innovation, not routine. Done right, Malaysia’s plantations could one day yield not just oil but breathable profit.
Regulation, reputation and the counting game
If carbon is the new currency, credibility must be its central bank.
Without good accounting, the market risks turning into a climate casino where everyone claims to have gone green – twice.
Double counting is the industry’s counterfeit money: one tonne saved, two parties cashing it in.
It sneaks in through double issuance, double use or double claiming. The cure? Old-fashioned discipline in a green suit: verifiable measurement, auditable data and global registries.
Under the Paris Agreement, corresponding adjustments ensure every tonne has a single passport. Otherwise, we inflate the planet’s carbon balance sheet – proof that even in climate finance, creative accounting stays bad for the world.
Trumpism and the carbon crossroads
Trumpism in USA today views climate policy through economic nationalism – chanting “drill, baby, drill” while crooning to “clean, beautiful coal.”
It prizes energy independence and deregulation, treating fossil fuels as prosperity’s backbone.
Supporters call it realism; critics, nostalgia in a hard hat.
Yet while Washington hums that refrain, the world’s rhythm has shifted.
Europe taxes carbon, China expands its markets, and Asia – Malaysia included – trades the very air we breathe. Politics may stall, but profit never does. The carbon economy marches on from burning fuels to balancing ledgers.
Malaysia’s choice: Not whether, but how fast
Malaysia has the natural capital – vast forests, mangroves, and peatlands – and the industrial know-how from oil, gas and plantations.
We have the BCX and biodiversity few can rival. What remains uncertain is speed and coordination.
Those who move first will shape the rules and attract investors; the hesitant will end up buying credits instead of selling them. Our choice is stark: lead the region, or watch others drive away with both profits and prestige.
Because carbon is no longer just chemistry – it’s currency. And like all currencies, it rewards those who understand the market. The era of talking sustainability is over; this is the era of monetising it.
Counting carbon, counting blessings
Perhaps the best analogy to picture this new economy is to think of carbon like chocolate. A little is fine; too much, and you’re in trouble.
For decades, we gorged on it without counting the calories. Now the world charges us for every bar or pays us to eat less. Some farm the cocoa more sustainably; others invent machines to trap the aroma before it escapes.
Malaysia has both the cocoa farms and the vaults. The world is ready to pay for the sweetness we can produce responsibly.
The only question is whether we’ll seize the opportunity or stay debating the recipe while others bake the cake.
To survive the coming climate economy, Malaysia must treat carbon not as a constraint but as a currency.
That means mastering the art of measuring, verifying and valuing emissions – with scientists, planters/millers, engineers and policymakers speaking the same carbon language.
The winners won’t just emit less; they’ll understand how to trade, tax, store and grow their air wisely.
Joseph Tek Choon Yee has over 30 years experience in the plantation industry, with a strong background in oil palm research and development, C-suite leadership and industry advocacy. The views expressed here are the writer’s own.
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