Carbon emissions in Malaysia paint a stark picture. Recent data shows CO2 output reached 277,530 kilotons in 2022, rising from 260,590 kilotons in 2021. Energy-related emissions hit 285 million metric tons in 2023 – the highest level in ten years.
These numbers spell urgency for all Malaysians – but for the most savvy business leaders, they also spell opportunity. The government’s pledge to cut carbon emission intensity by 45% by 2030 versus 2005 levels opens new, wide and prosperous paths for growth and market leadership.
Consider this as just one example: renewable energy makes up just 3.9% of Malaysia’s total energy consumption. Companies moving quickly to adopt sustainable practices stand to gain substantial advantages – from preferential financing and regulatory compliance to increased market share and stronger customer relationships.
The economics make a clear and compelling case. Bain and Company predicts the green economy will be worth over $2 trillion in new investments for Southeast Asia while ensuring every citizen has access to electricity, a quarter of which is renewable – all while creating 5 million local jobs in the process.
Businesses taking action now on sustainability are securing valuable partnerships, attracting top talent, and establishing themselves as leaders in Malaysia’s emerging green economy. Their competitors risk falling behind as markets increasingly reward envir`onmental performance.
Malaysian companies have a clear choice: lead the transition and prosper, or delay and struggle to catch up. This article maps out the key government programmes, practical approaches, and specific openings for businesses to reduce emissions while driving growth and long-term success.
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Understanding Carbon Emissions and Their Impact
The energy sector bears primary responsibility for Malaysia’s carbon footprint, generating 78.5% of the country’s total emissions. This acute concentration creates both risks and opportunities for Malaysian businesses.
International regulations now directly affect Malaysian companies’ bottom lines. The European Union’s Carbon Border Adjustment Mechanism (CBAM) designed to reduce carbon leakage in supply chains, will impact an estimated 57% of Malaysia’s total exports. Key affected sectors include iron, steel, aluminium, fertiliser, electricity and hydrogen production.
The financial stakes extend beyond exports. Malaysian businesses currently benefit from significant fossil fuel subsidies – covering 21.7% of emissions in 2021. As the government moves toward market-based energy pricing, companies that haven’t invested in energy efficiency face rising operational costs.
Yet market pressures also create competitive advantages. Global investors increasingly prioritise companies with strong environmental performance. The International Energy Agency says that clean energy investments have already reached $2 trillion, with institutional investors actively seeking opportunities in Southeast Asian markets. It’s also worth noting that for every dollar being invested in fossil fuels, $1.80 is being invested in to clean energy. It’s clear that for Malaysian business leaders, it’s time to catch up.
For Malaysian businesses, especially those in manufacturing and heavy industry, carbon emissions represent a growing financial liability. A company’s carbon profile now affects its:
- Access to capital and cost of borrowing
- Ability to participate in global supply chains
- Energy costs and operational efficiency
- Brand value and customer relationships
- Regulatory compliance requirements
Companies that measure, manage and reduce their emissions position themselves to capture market share as sustainability becomes a key differentiator. Those that delay risk losing ground to competitors who recognise carbon management as a strategic imperative.
Government Initiatives and Programmes
National Energy Policy 2022-2040 (DTN)
The DTN sets Malaysia’s strategic vision for energy sector transformation through 2040. Beyond its goal to boost the sector’s 28% GDP contribution, the policy establishes the Low Carbon Nation Aspiration 2040. This includes targets for:
- 50% urban public transport modal share (up from 20%)
- 38% electric vehicle adoption (up from <1%)
- B30 alternative fuel standard for heavy transport (from B5 standard)
- 25% LNG use in marine transport (up from 0%)
- 11% industrial and commercial energy efficiency savings (up from <1%)
- 18,431 MW total installed renewable energy capacity(up from 7,597 MW)
National Energy Transition Roadmap (NETR)
The NETR provides practical steps to accelerate Malaysia’s green transition. It outlines six key energy transition levers:
- Energy efficiency
- Renewable energy
- Hydrogen development
- Bioenergy expansion
- Green mobility solutions
- Carbon capture and storage
The 10 flagship catalyst projects announced in July 2023 are expected to:
- Generate investment of more than RM25 billion
- Create 23,000 job opportunities
- Reduce GHG emissions by more than 10,000 Gg CO2 equivalent per year
Green Investment Tax Incentives (GITA/GITE)
These programmes provide substantial financial support for green technology adoption:
- GITA offers tax allowances for companies acquiring qualifying green assets
- GITE provides income tax exemptions for certified green technology service providers
- Eligibility spans energy efficiency, renewable energy, green building, and waste management projects
Low Carbon Cities Framework (LCCF)
The LCCF helps local authorities and organisations reduce urban emissions across:
- Urban environment management
- Infrastructure development
- Transportation systems
- Building efficiency
SEDA Renewable Energy Programmes
As Malaysia’s sustainable energy authority, SEDA drives renewable adoption through:
- Feed-in tariff management for renewable energy producers
- Net energy metering to support solar installation
- Technical standards development
- Promotion of renewable energy investment
- Research support for sustainable energy solutions
These complementary initiatives provide Malaysian businesses multiple entry points into the green economy. Companies can combine different programmes to maximise benefits while supporting national sustainability targets. With such an abundance of onramps to these opportunities, of course, it’s recommended to work with a trusted local advisor like InCorp to provide a tailored roadmap for your requirements.
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Opportunities for Malaysian Businesses
Malaysian companies across sectors can benefit from carbon reduction initiatives in multiple ways:
Renewable Energy Generation and Trading
- Access to feed-in tariffs for solar, biomass, and small hydro projects
- Net energy metering profits from selling excess solar power back to the grid
- Virtual power purchase agreements to supply corporate renewable energy demand
- Investment in utility-scale solar parks with potential returns of 10-15%
Energy Efficiency Services
- Energy service company (ESCO) contracts for building retrofits
- Industrial efficiency consulting and implementation
- Smart building technology solutions
- Energy management system integration
- Green building certification services
Manufacturing Opportunities
- Electric vehicle components and charging infrastructure
- Solar panel and inverter production
- Energy storage systems and batteries
- Green hydrogen production equipment
- Energy-efficient appliances and industrial equipment
Supply Chain Benefits
- Lower operating costs through reduced energy consumption
- Premium pricing for low-carbon products
- Preferred supplier status with multinational companies
- Early compliance with emerging carbon regulations
- Reduced exposure to future carbon pricing
Financial Advantages
- GITA/GITE tax incentives on qualifying investments
- Preferential green financing rates from banks
- Access to growing ESG investment pools
- Carbon credit trading revenue potential
- Reduced exposure to rising energy costs
Read more: Malaysia’s Budget 2025: Navigating Economic Complexity with Visionary Strategy
Strategies for Malaysian Businesses to Access the Green Economy
As we just touched on, the shift to Malaysia’s green economy brings many moving parts. Companies will almost always need expert guidance to maximise opportunities while meeting regulatory standards. InCorp helps businesses succeed at each step of their carbon reduction journey.
Our work with companies across Asia points to these proven steps:
Setting Your Carbon Reduction Path
1. Assessment
- Complete energy audits for baseline emissions data
- Spot main carbon sources
- Track energy use patterns
- Pick reduction targets that match government goals
- Build simple, clear emissions reports
2. Smart Spending
- Start with energy projects that pay back fast
- Check which renewable options suit your business
- Pick green equipment that qualifies for tax breaks
- Map out long-term facility changes
- Look at carbon offset options in your sector
3. People Power
- Give staff practical energy-saving tools
- Add carbon goals to success metrics
- Form green project teams
- Keep everyone updated on wins
- Reward good ideas for cutting emissions
4. Building Connections
- Get suppliers on board with reduction plans
- Take part in sector groups
- Share what works with other businesses
- Bring customers into green programmes
- Link up with government teams
5. Checking Progress
- Check emissions each month
- Add up savings from green spending
- Keep clear records of carbon cuts
- Tell stakeholders how you’re doing
- Get outside experts to check results
As one would imagine, these steps only scratch the surface of a sophisticated transition process. Your business deserves specific strategies that reflect your market position, sector dynamics and growth plans. InCorp partners with companies to craft and execute carbon reduction plans that turn green economy requirements into competitive advantages.
Where to Next With InCorp
It should be clear that Malaysian businesses stand at the edge of a major economic shift. The green economy brings RM25 billion in near-term investments, 23,000 new jobs, and significant tax benefits through programmes like GITA and GITE. Companies moving quickly gain first-mover advantages in renewable energy, green manufacturing, and sustainable services.
To secure your first mover advantage, contact InCorp today to map your path into Malaysia’s green economy. Our specialists will help you spot opportunities, secure incentives, and build long-term value from carbon reduction.
FAQs
- CBAM impacts 57% of Malaysia's exports, particularly in iron, steel, aluminium, fertiliser, electricity and hydrogen sectors. Companies must adapt operations to maintain EU market access.
- GITA offers allowances for qualifying green asset purchases while GITE provides income tax exemptions for certified green technology service providers across energy, building and waste management sectors.
- Malaysia aims to cut carbon emission intensity 45% by 2030 versus 2005 levels and achieve net-zero emissions by 2050, driving major changes across energy, transport and industry.
- Companies can access incentives through programmes like GITA/GITE, SEDA renewable energy schemes and the Low Carbon Cities Framework by meeting qualification criteria.