Adaptation measure: The SMART tunnel is a good example of using public infrastructure to divert rainwater from the city to a storage reservoir or holding pond. — Filepic
HOW is Malaysia faring in its battle against climate change? There are three stories to tell: the “OK” news (on mitigation); the “good” news (on green finance); and the “not-so-OK” news (on adaptation).
But first, Malaysia’s commitment to the global climate agenda needs to be appreciated. Despite its low share of total global greenhouse gas (GHG) emissions, of less than 1%, and its status as a developing nation, Malaysia was a signatory to the United Nations Framework Convention on Climate Change all the way back in 1993, ratifying it a year later. And since the late 2000s, Malaysia has taken several steps to address climate change at the federal level, most recently, through to its newly launched National Energy Policy.
Moreover, last year, Malaysia strengthened its “climate ambition” by announcing its strongest Nationally Determined Contri-butions (NDCs) to date. NDCs are non-binding commitments by countries to reduce national emissions and adapt to the impacts of climate change. Relative to 2005 levels, Malaysia’s now aims for an unconditional reduction in the economy-wide carbon intensity of GDP by 45% by 2030, a step up from the previous target of a 35% reduction. The updated NDCs also feature expanded coverage of GHGs: from three gases to seven.
Finally, Malaysia’s 12th Malaysia Plan (2021-2025) articulates a desire to implement economic instruments that can further the nation’s climate and environmental efforts, including through carbon pricing, payments for eco- system services, and others.
While Malaysia’s commitment to the global multilateral effort to address climate change is clear, Malaysia’s record of outcomes at the domestic level remains mixed.
Let’s start with the “OK” news on mitigation.
Roughly 80% of Malaysia’s GHG emissions come from its use of energy. That a high proportion of national emissions are from a single sector should make Malaysia’s targets more achievable – in principle anyway. This is because it is usually much more difficult to reduce emissions from, say, agriculture, industrial processes, or waste.
A recent World Bank analysis finds that Malaysia more than doubled its spending on mitigation, in real terms, between the 10th (2011-2015) and 11th Malaysia (2016-2020) Plans. This is higher than regional counterparts such as the Philippines and Vietnam.
Adequate financing for renewables and energy efficiency measures has also played a role in Malaysia exceeding its targets – despite Malaysia’s energy efficiency targets being higher than most other Asean countries.
Malaysia has seemingly set the right wheels in motion with regard to mitigation – but what has worked well in the past may not work as well in the future. For example, Malaysia’s revised renewable energy targets for 2025 and 2035 fall below the aspirational objectives set out by Asean.
Moreover, hydro and solar power are location-dependent, a factor which constrains the ability to continue scaling-up clean power generation, at least, at historical rates. It is striking that even though Malaysia is the third-largest producer of solar panels globally, and despite falling costs of solar technology globally, adoption rates in Malaysia remain low.
One technical reason is that while Malaysia is hot, it does not receive enough solar irradiance, or sunlight. Indeed, Malaysia’s sunlight intensity is only slightly higher than the seasonal average in the United States, while high temperatures also adversely affect the efficiency of solar panels. There are likely other non-technical reasons further hindering their mass deployment, including a lack of awareness, costs and challenges in land acquisition, and high upfront installation costs including those of battery storage used to manage the intermittency of energy production.
One concern is the transport sector – over 40% of Malaysia’s total energy consumption comes from transport (followed by industrial at 28% and residential at 14%). Malaysia also has among the highest rates of per-capita private vehicle ownership in the region, largely due to inadequate public transport and subsidised petrol and diesel.
As the former Mayor of Bogotá and current President of Colombia, Gustavo Petro famously said in 2013, “A developed country is not a place where the poor have cars. It is where the rich use public transportation”.
“Soft” policies, such as measures limiting parking spaces and imposing higher parking fees in city centres, can serve as effective means of reducing congestion and increasing public transport use, while reducing emissions – and air pollution – in the process.
And of course, “hard” policies, such as increasing the quality and quantity of public transportation would help too. It is telling that the 2020 target of achieving a 40%:60% public-private transport modal split in Kuala Lumpur has not been met, despite the introduction of the Klang Valley MRT lines and the extension of existing LRT services (the modal share of public transport is currently between 20% and 25%).
Another potential solution involves using land-use policies to encourage greater population density in close proximity to transit corridors and hubs, which has been shown to have positive effects on public transport ridership.
Today, Malaysia’s emissions continue to grow quickly, in both absolute and per capita terms. Our analysis indicates that the adoption of carbon pricing instruments, through a carbon tax and/or an emissions trading scheme, can play an important role in lowering emissions, especially in tandem with existing instruments and initiatives such as Net Energy Metering and the Green Technology Finan-cing Scheme. But this will not be easy or quick.
Now, the “good” news.
On the part of green finance, central banks have, at the global level, taken on an increasingly active role. Investors are increasingly interested in understanding the vulnerabilities of their assets to climate-related risks. Here, having high quality, comparable data is key.
In Malaysia, Bank Negara, the Securities Commission and Bursa Malaysia have all come together to make Malaysia’s sustainable finance initiatives some of the best in the region, if not the world.
Malaysia has implemented a Climate Change and Principle-based Taxonomy, issued sustainable reporting guidelines for listed companies, and established a task force for climate-related financial disclosures. Looking forward, Bank Negara plans to conduct climate- related stress tests across the financial sector in 2024 and is involved in the development of a climate disclosure guide for the private sector. All these initiatives should play an important role in guiding market participants in a more sustainable direction. The important next step is now further developing the pipeline of projects that meet such criteria.
Finally, the “not-so-OK” news.
Last year, around 70,000 residents were displaced in some of the worst floods in Malaysian history, which resulted in devastating losses of over RM6bil (equivalent to about 0.4% of GDP). Households and manufacturing firms in Shah Alam and Klang were hardest hit. But as far as climate risks go in Malaysia, flooding is only the tip of the iceberg. Others include the increased risk of heatwaves due to urban heat island effects.
The agriculture and plantation sectors – which contribute over 7% of annual GDP – are heavily exposed to drought, which can result in crop loss and yield reductions.
Malaysia’s coastlines remain vulnerable to sea-level rise: storm surges, coastal erosion, and saline intrusion are significant and growing threats.
Managing these also requires deep national and subnational coordination on climate issues given that these detrimental effects will occur across both sectors and states.
These risks pose a clarion call for Malaysia to embrace better public adaptation measures. Unlike mitigation, which requires a concerted and coordinated global effort, the benefits of investment in adaptation are captured in full domestically. This makes the case for investment in adaptation even more compelling. However, Malaysia appears to be doing less than it could and should. Adapta-tion expenditure has remained virtually unchanged in real terms between the 10th and 11th Malaysia Plans.
The country still lacks a comprehensive, publicly-available National Adaptation Plan to guide future efforts at the initiative level as well as improve federal-state and inter-ministerial coordination in addressing the threats of climate change. To borrow from a popular saying, a failure to adapt will force us to adapt to failure. While Malay-sia has taken steps to address climate change and cope with its impacts, what it now needs is a big leap forward.
Now, Malaysia has done it before: Kuala Lumpur’s Storm-water Management and Road Tunnel (SMART) is an excellent example. With floods from heavy rains a significant hazard, the 9.7km long, US$514mil (RM2.4bil) tunnel has three levels, the lowest for drainage and the upper two for road traffic. The drainage tunnel allows large volumes of flood water to be diverted from the city’s financial district into a storage reservoir, holding pond, and bypass tunnel.
Combining the drain with the road has two advantages: it ensures maintenance of a drain that otherwise would be used only sporadically, and it costs less than building each separately. This is an excellent example of large, public- adaptive infrastructure that necessitates public leadership and execution, not least since it goes beyond the remit of individual Malaysians.
It is important to note that each adaptation measure has its advantages and limitations. Hard infrastructures such as SMART have a role to play but they cannot prevent every flood.
Smaller, less-visible measures are equally important, from the unglamorous job of keeping neighbourhood drains clear to better recognising the role of natural buffers that reduce runoffs and prevent floods. It is this combination of adaptive measures – from small to big, from natural to physical – that Malaysia needs to better act upon.
The draft Budget 2023 sets a strong foundation for smart solutions to enhance climate change adaptation. Within the RM15bil allocation towards flood mitigation is funding for a dual-purpose reservoir in Selangor designed to address floods and water shortages; just as important are the proactive initiatives the Budget introduces to enhance disaster preparedness.
The government is already showing that it is learning the lessons from recent climate-driven disasters. A future article may well tell of three equally positive stories on climate change in Malaysia.
Apurva Sanghi is the World Bank’s lead economist for Malaysia in Kuala Lumpur. A macroeconomist with environmental expertise, Sanghi is a lead author for the Intergovernmental Panel on Climate Change. The views expressed here are solely the writer’s own.
