Malaysia's Carbon Market: Carbon Pricing, Carbon Credits and the National Carbon Market Policy

Malaysia is building the plumbing of a carbon market before it decides to charge anyone for polluting. Today you can already buy and sell carbon credits on a national exchange — but the taxes and trading rules that would force big emitters to pay are still being drafted.

How does Malaysia price carbon today?

There is no economy-wide carbon price in Malaysia yet. What exists is a voluntary market: companies choose to buy carbon credits to offset emissions, mainly through the Bursa Carbon Exchange. Compliance instruments — a carbon tax and an emissions trading scheme that would make payment mandatory — are still on the drawing board.

That sequencing is deliberate. As the Natural Resources Minister put it when the new policy launched, the government wants “the credits in place before we put in the penalty tax.”

What is the National Carbon Market Policy?

The National Carbon Market Policy (NCMP) was launched by the Ministry of Natural Resources and Environmental Sustainability (NRES) on 21 April 2026, after Cabinet approval on 1 April 2026. It is the framework meant to knit the market together, resting on four strategic pillars:

1. Implementing a high-integrity carbon market.
2. Building a national carbon registry with harmonised monitoring, reporting and verification (MRV) systems.
3. International cooperation through memoranda of understanding.
4. Laying the foundation for national carbon pricing instruments — a carbon tax or an emissions trading scheme.

The NCMP is designed to be reinforced by a forthcoming Climate Change Bill, which is intended to make Malaysia’s climate commitments enforceable rather than aspirational.

How does the Bursa Carbon Exchange work?

The Bursa Carbon Exchange (BCX) is the operating heart of the voluntary market. It is run by Bursa Malaysia Carbon Market Sdn Bhd, a wholly owned subsidiary of Bursa Malaysia Berhad, and is described as the world’s first Shariah-compliant multi-environmental product exchange. It offers three trading modes: auction, continuous trading and off-market transactions.

Its inaugural auction, on 16 March 2023, sold 150,000 carbon credits:

Contract	Underlying project	Clearing price
Global Technology-Based Carbon Contract (GTC)	Linshu Biogas project, China	RM18.50
Global Nature-Based Plus Carbon Contract (GNC+)	Southern Cardamom project, Cambodia	RM68.00

Fifteen local corporate entities — financial institutions and government-linked companies — were successful bidders, with credits supplied by Vitol Asia.

What comes after the voluntary market?

Two compliance instruments are planned:

• Carbon tax. Announced for the iron, steel and energy sectors by 2026, but — according to The Edge Malaysia — its implementation was placed on hold due to geopolitical tensions and to avoid additional cost pressures on people and industries.
• Domestic Emissions Trading Scheme (DETS). The forthcoming Climate Change Bill is expected to provide the legal basis for a DETS, to be developed after the carbon tax. The 13th Malaysia Plan (2026–2030) commits to launching it.

Where does carbon capture fit in?

Storing carbon underground has its own law. The Carbon Capture, Utilization and Storage Act 2025 (Act 870) was enacted on 22 July 2025, applies to Peninsular Malaysia and the Federal Territory of Labuan, and establishes the Malaysia Carbon Capture, Utilization and Storage Agency (MCCA) to regulate the capture, transport, use and permanent storage of CO2.

What’s next

Watch for the Climate Change Bill, which will determine whether the carbon tax and the emissions trading scheme move from proposal to law, and for the national carbon registry to become operational. Businesses in hard-to-abate sectors — iron, steel and energy — should track how and when the paused carbon tax is revived, as it will define their compliance costs.