Environment minister’s resignation could delay Malaysia’s carbon policies: experts

The recent resignation of Malaysia's Natural Resources and Environment Minister, Nik Nazmi Nik Ahmad, could cause delays and increase uncertainties regarding the country's carbon policies, including the overarching climate legislation, national carbon market policies, carbon tax, and Article 6 implementation, experts said at Asia Carbon Conference in Kuching during May 29-30.

The resignation of the minister was widely seen as a surprise by many private sector players in the local carbon industry. Given that the ministry is the key authority responsible for most carbon market-related policies and development, industry participants called for the upcoming new minister to ensure consistency and efficiency while maintaining the confidence of buyers and investors in Malaysia's carbon market.

The initial timeline for Malaysia's overarching national Climate Change Act (RUUPIN), was to complete the first review by June and the second review by August, with the aim of endorsing it as a formal act by the end of 2025, provided there are no strong objections. However, this timeline may change due to the change of minister, Renard Siew, the president of Malaysia Carbon Market Association (MCMA), told Platts, part of S&P Global Commodity Insights, on the sidelines of the conference.

National carbon market policies

Alongside the launch of this overarching climate act, a set of national carbon market policies is expected to be established, which now also faces potential delays and uncertainties, Siew said.

"This national carbon market policy is quite important, because it's a signal to the international market of how Malaysia is actually very serious, and it gives some policy certainty for project developers and investors," Siew said.

"The new minister, when he comes in, we are hoping that he will be the champion to continue to push this forward, because we do think that it's very important," he highlighted.

Carbon tax and ETS

Siew added that there could also be delays and uncertainties surrounding the country's development and implementation of its carbon tax policy, which is expected to start from the country's iron and steel and energy sectors.

He shared that there have also been discussions about implementing an emission trading scheme, but it is currently uncertain whether it will be pushed through.

Article 6 implementation

Siew also highlighted the increasing challenges surrounding Article 6 implementation, noting that Article 6 trading requires the government's support to establish a proper national registry and relies on government-to-government negotiations to formulate partnerships.

He explained that the Ministry of Natural Resources and Environmental Sustainability is the anchor ministry for these Article 6 agendas, so the change in minister could have a significant impact.

REDD+ projects

In November 2024, Verra launched its latest REDD+ (Reducing Emissions from Deforestation and Forest Degradation) carbon crediting methodology. Migrating to this new methodology is crucial for REDD+ projects to justify their environmental integrity, attract more buyers, and get better prices, local project developers told Platts.

Malaysia's regulatory framework for carbon markets is currently very shaky, especially following the minister's resignation, a local project developer said, adding that the timeline for countries to compile historical jurisdictional forestry data for the transition to VM0048 would be delayed.

Win Sim Tan, Verra's Regional Representative for East and Southeast Asia, echoed the project developer's concerns at the conference.

Tan said Malaysia's pilot projects have focused more on avoided planned deforestation, but Verra is still in the process of enabling the consolidation of jurisdictional forest data for such projects, which is the premise of migrating to the new REDD+ methodology. He emphasized that this process requires government engagement and has faced increasing uncertainties due to the minister's resignation

"Many of the policies, well, please expect a further delay. So, not good news, but we'll see how things pan out," Tan said, commenting about the minister's resignation.

"The resignation of Nik Nazmi will cause an overall slowdown in the energy transition efforts throughout Malaysia that had been initially planned," said a Kuala Lumpur-based banker looking at carbon projects within the region.

Platts assessed nature-based avoidance credit price at $6.4/mtCO2e on May 29.