Malaysia's fresh carbon bill might significantly reshape its energy setting, according to recent publications.
Malaysia Enacts Carbon Capture, Utilisation and Storage (CCUS) Act
The Malaysian parliament has passed the Carbon Capture, Utilisation and Storage Bill 2025 (CCUS Act) on March 25, marking a significant step towards a low-carbon future. The new legislation establishes a regulatory framework for a potential $200 billion sector over the next three decades.
The central authority responsible for overseeing all CCUS activities in Malaysia is the CO2 Storage Regulatory Authority. This agency will administer and ensure effective implementation of the CCUS Act and any regulations made under it. The agency will also require mandatory registration for entities involved in operating carbon capture installations, transporting captured CO2, and utilizing CO2 within Malaysia.
The regulatory framework introduces a sophisticated permitting system that requires Onshore/Offshore Assessment Permit and Onshore/Offshore Storage Licence for various CCUS activities. Foreign investors must carefully consider local requirements and foreign equity restrictions that may be imposed under permit/licensing criteria when planning CCUS investments. The agency retains discretion to grant or refuse to issue permits or licenses.
The act addresses cross-border carbon management by requiring an import permit to import CO2 obtained through carbon capture outside of Malaysia. The CO2 imported into Malaysia for permanent storage must comply with the CO2 stream acceptance criteria specified in Section 28 of the CCUS Act.
Significant implementation details, such as the timeline and fees for the application of the permit/license, remain unclear. However, it is known that substantial penalties are imposed for failure to comply with certain provisions of the CCUS Act. These penalties include fines ranging from MYR 1 million ($236,200) to MYR 2 million ($472,400) and imprisonment of up to five years.
Specific offences under the act include failure to obtain offshore/onshore assessment permits, storage licences, or import permits; failure to comply with stream acceptance criteria; and unauthorised utilisation of imported CO2 for permanent storage. For industry players operating CCUS storage sites, the act establishes comprehensive operational requirements.
The act creates compelling incentives for high-emission industries to participate voluntarily in CCUS activities, in view of the government's plan to introduce carbon tax on certain industries by 2026. The sector could create 200,000 new jobs across the region.
Interested or potentially affected parties should align their legal, commercial, and operational strategies to gain long-term competitive advantage in the emerging CCUS market in Malaysia. The regulatory framework for CCUS activities presents an opportunity for high emitters to reduce their carbon emissions and contribute to Malaysia's commitment to combat climate change. The financing structure for CCUS projects is another critical factor for foreign investors to consider.
In conclusion, the enactment of the CCUS Act is a significant milestone in Malaysia's efforts to transition towards a low-carbon economy. The new regulatory framework sets the stage for the development of a thriving CCUS sector, offering opportunities for job creation, carbon emission reduction, and sustainable economic growth.
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