PETALING JAYA: Malaysia’s planned carbon tax is moving from being just a plan to becoming an imminent reality for many industries.
While policies and rates are yet to be announced, it’s obvious carbon pricing will become a central component for companies here.
As it stands, mandatory sustainability disclosures for large-cap Main Market issuers went into effect on Jan 1, 2025.
Kenanga Research said the tax, however, introduces an additional cost factor into the operating structure of carbon-intensive industries, which could place pressure on margins and profitability over time.
In a webinar, the research house said there was an indication that carbon pricing could lead to medium to very high earnings impacts for certain carbon-intensive sectors.
After conducting an analysis, Kenanga Research said at lower carbon price levels, most companies experience relatively limited earnings impact, generally within the 5% to 10% range.
Companies with larger direct emissions bases see earnings pressures move into the 10% to 20% and higher than 20% impact bands under higher carbon price scenarios.
“Carbon prices above RM50 per tonne of emissions may begin to materially affect corporate profitability, especially for industries with high emissions intensity and limited short-term mitigation options,” it said.
The research house explained carbon pricing will be noticeable through direct and indirect channels.
Companies that are taxed on their own operational emissions will see a direct impact, while indirect exposure arises from energy costs through power producers since the country’s electricity generation mix still includes coal and natural gas.
“For instance, a utility emitting approximately 200,000 tonnes of carbon dioxide annually could face carbon tax liabilities of around RM5mil under a tax rate of RM25 per tonne, with the figures possibly increasing over time.”
One thing is clear though, different industries will see different impacts from the carbon tax.
Kenanga Research told StarBiz the initial impact will be felt at an industrial level first.
He said as seen in countries that already use carbon taxes, governments have been able to manage the transition carefully including the aspect of living cost concerns.
“In the beginning, companies may view carbon pricing as a cost pressure because it places a monetary value on direct emissions. However, the policy is also designed to push firms toward better emissions management, stronger data systems and improved energy efficiency,” he noted.
As for industries, the tax will see an early implementation on carbon-intensive sectors, particularly iron and steel production, and energy generation, as these industries account for a large share of industrial emissions. Alongside that, industries like cement producers give out emissions during the calcination of limestone, making decarbonisation particularly challenging.
“By contrast, sectors such as power generation and transportation are primarily exposed through fuel combustion, so the financial impact of carbon pricing will depend largely on factors such as fuel mix, energy efficiency and regulatory mechanisms governing tariff structures,” the report noted.
Williams Business Consultancy Sdn Bhd founder and economist Geoffrey Williams said industries with high emissions like energy, steel, cement, aluminium, oil and gas, and electricity generation companies are among those to be most affected.
According to Williams, data centres too, need to be taxed for the sheer amount of electricity they use. He, however, questioned the need for a carbon tax at all.
“The carbon tax is clearly a burden to companies and the costs will be passed on to consumers. It makes no sense to tax carbon on one hand while subsidising petrol, oil, gas and electricity from hydrocarbons on the other,” he told StarBiz.
