Malaysia's announced carbon tax

What it is

Malaysia’s carbon tax is, at the date of this article, an announcement rather than a law. It exists in one paragraph of one primary document: the Budget Speech for the Fourth MADANI Budget, delivered by the Prime Minister and Minister of Finance in the Dewan Rakyat on Friday, 10 October 2025, introducing the Supply Bill (2026).¹

That paragraph says the Carbon Tax will be introduced starting next year, with an initial focus on the iron, steel and energy sectors, and that to ensure efficient implementation of the Carbon Tax its mechanism will be aligned with the National Carbon Market Policy and the upcoming Climate Change Bill.¹

That is the whole of the primary record. The instrument is not yet law: no Act has been gazetted, and the speech itself describes the Climate Change Bill it would be aligned with as upcoming.¹ As of 17 August 2026 no gazetted carbon-tax legislation, rate, threshold or commencement date could be located from a Ministry of Finance or gazette source; reports that the tax and the Climate Change Bill are still being drafted are unconfirmed.¹

This page is therefore short on purpose. Publishing a rate, a covered-entity test or a compliance calendar for Malaysia’s carbon tax today would mean inventing them.

Who it binds

Nobody yet. There is no chargeable person, because there is no charging provision.

What the announcement indicates is direction of travel: an initial focus on the iron, steel and energy sectors.¹ The speech does not define those sectors, name a covered activity, set a capacity or emissions floor for an installation, or say whether the charge would fall on operators, importers or fuel suppliers. None of that can be read out of the sentence that exists.

Dates

The speech says the Carbon Tax will be introduced starting next year — that is, in the year following the 10 October 2025 speech.¹ It attaches no commencement date, no first reporting period and no first payment date.¹

No such date has since been fixed in a located primary source. As of 17 August 2026 no gazetted carbon-tax legislation, rate, threshold or commencement date could be located from a Ministry of Finance or gazette source, and reports that the tax and the Climate Change Bill are still being drafted are unconfirmed.¹ An organisation planning against a specific start date is planning against something that has not been published.

Thresholds

None published. The announcement carries no rate per tonne, no de minimis, no emissions or capacity threshold, and no free-allocation or exemption mechanism.¹

The one structural signal is the stated intent to align the mechanism with the National Carbon Market Policy and the Climate Change Bill.¹ What that alignment means in practice — whether the tax would price the same emissions those instruments measure, whether carbon credits could be surrendered against a liability, where the boundary between the two would sit — is not stated in the speech, and cannot be inferred from it.

Verification standard

None published. There is no measurement, reporting or verification requirement attached to the announced tax, no named standard, and no accreditation route for verifiers of a Malaysian carbon-tax submission.¹

The speech’s reference to alignment with the upcoming Climate Change Bill is the only pointer that a monitoring and verification apparatus may arrive with that Bill rather than with the tax itself.¹ That is a reading of an intention, not a requirement anyone can comply with.

What an organisation on ESGOS can do

• Treat this regime as announced, not in force. The ESGOS registry lists the regime; this article is the record of what has and has not been enacted.
• Where the organisation makes iron or steel, or operates in the energy sector, keep the underlying emissions data current. Carbon pricing schemes generally rest on emissions data an organisation has reason to hold anyway, whatever the eventual rate.
• Where the organisation already reports Scope 1 and Scope 2 GHG emissions under the National Sustainability Reporting Framework, that data set is, on our reading, the one a future domestic carbon price would most likely draw on. See the NSRF explainer for what it requires.
• Find the organisation’s listing in the directory and claim it from its profile page, or get listed and complete a compliance profile, so exposure can be reassessed when a Bill or an Act is published rather than reconstructed then.
• Check exposure to the regimes that are in force at /en/exposure-check, and find accredited verification bodies at /en/verifiers, which lists bodies drawn from national accreditation registers; verifiers accredited for CBAM are not yet published by the Commission, so they are not in the directory.

This page will be revised when a Bill, an Act or a subsidiary instrument is published. Until then, what is above is what a primary source supports.

Footnotes

1. Budget Speech (Fourth MADANI Budget), English translation, Ministry of Finance Malaysia. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹²