PETALING JAYA: While the National Energy Transition Roadmap (NETR) is seen as a positive step for Malaysia’s low-carbon future, OCBC Treasury Research suggests greater investments and government mandates are needed to support the necessary capabilities and infrastructure for energy transition projects.
OCBC environmental, social and governance analyst Ong Shu Yi highlighted this approach aims to expedite sectoral growth by leveraging the energy transition levers outlined in the NETR, which encompass energy efficiency, renewable energy, hydrogen, bioenergy, green mobility, and carbon capture, utilisation, and storage (CCUS).
“The NETR is a good step towards setting the direction for Malaysia’s low carbon transition, and can spur further growth of technical capabilities and job creation in Malaysia’s green economy.
“It also bolsters the country’s energy security, as well as signals to other countries the opportunities and potential areas for collaboration such as CCUS and hydrogen,” she said in a report.
However, Ong pointed out that like many countries globally, transitioning towards a low-carbon future will be challenging for Malaysia.
She noted the main challenge is that Malaysia is highly dependent on coal for power generation, as coal is a relatively cheaper energy source.
Ong stressed the importance of aggressively expanding cleaner energy sources, such as renewable energy, and developing the necessary infrastructure to facilitate the transition away from coal.
“While Malaysia has committed to reaching net-zero emissions by 2050, its existing climate policies are fragmented, and climate-related legislations are underway. Other South-East Asian countries have already implemented climate-related legislations such as Singapore’s Carbon Pricing Act and Indonesia’s Law No 32/2009 on Environmental Protection and Management,” Ong noted.
Ong emphasised that Malaysia was currently in the process of drafting its national Climate Change Bill, highlighting that the approval of this legislation would be crucial for enabling mandated climate actions.
Moreover, the financial aspect is of significant concern. According to NETR estimates, Malaysia is expected to require an investment ranging from RM1.2 trillion to RM1.3 trillion by 2050.
“In this decade, 18% of funding is required primarily in renewable energy power generation and green mobility, eg, strengthening grid infrastructure and domestic electric vehicle production capacities,” Ong added.
According to the report, the energy sector constituted 78.5% of Malaysia’s annual greenhouse gas emissions, presenting huge potential for emissions reduction in this sector through energy transition levers.
Furthermore, as the world moves towards adopting low-carbon policies and regulations, Ong believes these global developments could encourage countries like Malaysia to accelerate efforts towards decarbonisation
One notable example, she pointed out, is the Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union (EU) as a part of its Fit for 55 package.
The EU’s goal with this mechanism is to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, she said.
The CBAM functions as a carbon leakage instrument, working in conjunction with the EU Emissions Trading System or EU ETS.