# Malaysia's Incoming Carbon Tax on Iron, Steel and Energy

> Malaysia plans to price carbon for the first time, starting with its iron, steel and energy sectors. No official rate has been confirmed, and roll-out is tied to a new carbon market policy and a pending Climate Change Bill.

- Category: taxation
- Language: en
- Status: published
- Updated: 2026-08-07
- Canonical: https://negaraku.md/en/taxation/carbon-tax-malaysia

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Malaysia is preparing to put a price on carbon for the first time, and it is starting with the industries that emit the most.

The plan, first announced in Budget 2025 and reaffirmed in Budget 2026, is to tax carbon emissions from the iron, steel and energy sectors by 2026. It is a modest first step, but it signals a policy shift: emissions that have not been priced would begin to carry a cost.

## Who will pay Malaysia's carbon tax first?

Three sectors are in scope at the outset: **iron, steel and energy**. These are high-emitting, hard-to-abate industries, and steel exporters in particular face growing pressure from carbon border levies such as the EU's CBAM. Taxing them domestically is partly a way to keep that revenue — and the incentive to decarbonise — inside Malaysia.

According to MIDA, the tax is aimed at promoting low-carbon technologies, with proceeds directed to fund green technology programmes and research.

## How much is the carbon tax per tonne?

**No official rate has been set.**

Official sources are explicit on this. MIDA's announcement did not state a rate, and the International Carbon Action Partnership's tracker records the measure without specifying an amount. What circulates publicly is a *reported estimate*, not a legislated figure:

| Figure | Source type | Status |
| --- | --- | --- |
| RM35-45 (US$8-11) / tonne | Media / advisory coverage (e.g. ASEAN Briefing) | Reported, not officially confirmed |
| No rate stated | MIDA, ICAP tracker | Official position |

Treat the RM35-45 range as an unconfirmed planning assumption rather than a legislated figure. Some later reporting has pointed to different — and in places lower — figures, which reinforces that the rate is not yet settled.

## When does it start — and why the caution?

The measure was announced when Budget 2025 was tabled on 18 October 2024, and reaffirmed when Budget 2026 was tabled on 10 October 2025, both times for introduction "by 2026."

But the timeline is not locked. Officials have signalled that implementation may be reviewed amid geopolitical and economic headwinds. The consistent message from the Ministry of Natural Resources and Environmental Sustainability (NRES) is that a functioning carbon market and reliable emissions data should come *before* a penalty tax.

## How does it fit Malaysia's wider climate plan?

The tax is one piece of a larger architecture being built in parallel:

- **National Carbon Market Policy (NCMP)** — launched by NRES to establish a framework for trading carbon credits ahead of the tax.
- **Climate Change Bill (RUU PIN)** — advancing toward tabling in Parliament; it is intended to set up a monitoring, reporting and verification (MRV) system and the legal basis for a future emissions trading scheme.
- **National Energy Transition Fund (NETF)** — allocated RM150 million under Budget 2026 to support the National Energy Transition Roadmap, into which carbon revenue is expected to flow.

Together these support Malaysia's targets of a 45% cut in economy-wide carbon intensity by 2030 (against 2005) and net-zero by 2050, per the ICAP tracker.

## What's next

Watch three things: the Climate Change Bill reaching Parliament, an official rate finally being published, and confirmation of the start date. Until the rate is gazetted, any specific ringgit figure — including RM35-45 — remains unconfirmed. This page will be updated as the policy is confirmed.

## Sources

- Budget 2025: Govt to introduce carbon tax on iron, steel and energy industries by 2026 — https://www.mida.gov.my/mida-news/budget-2025-govt-to-introduce-carbon-tax-on-iron-steel-and-energy-industries-by-2026/ (Malaysian Investment Development Authority (MIDA))
- Malaysia — Emissions Trading & Carbon Pricing — https://icapcarbonaction.com/en/ets/malaysia (International Carbon Action Partnership (ICAP))
- Malaysia to introduce carbon tax for select industries by 2026 — PM — https://theedgemalaysia.com/node/730766 (The Edge Malaysia)
- Budget 2026 to be tabled in Parliament on Oct 10 — MOF — https://www.mof.gov.my/portal/en/news/press-citations/budget-2026-to-be-tabled-in-parliament-on-oct-10-mof (Ministry of Finance Malaysia (MOF))
- Malaysia unveils 2026 budget, to implement carbon tax — https://www.argusmedia.com/en/news-and-insights/latest-market-news/2741520-malaysia-unveils-2026-budget-to-implement-carbon-tax (Argus Media)
- Malaysia's 2026 Budget: What It Means for Foreign Investors — https://www.aseanbriefing.com/news/malaysias-2026-budget-what-it-means-for-foreign-investors/ (ASEAN Briefing (Dezan Shira & Associates))
- Highlights of Budget 2026 — https://businessnews.com.my/highlights-budget-2026/ (Business News Malaysia)
- Malaysia's Climate Change Bill to pave way for carbon tax from 2026, says ministry — https://www.malaymail.com/news/malaysia/2026/03/13/malaysias-climate-change-bill-to-pave-way-for-carbon-tax-from-2026-says-ministry/212564 (Malay Mail)
- National Carbon Market Policy launched to guide Malaysia's carbon market ecosystem — https://theedgemalaysia.com/node/800680 (The Edge Malaysia)

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