SINGAPORE (Nov 5): Malaysia is considering setting its planned carbon tax on polluting industries at an initial rate of RM15 per tonne of emissions, as it aims to curb the nation’s climate footprint.

The government has held consultations on its proposals, which also include establishing a new agency to implement climate change initiatives, according to people familiar with the details, who requested anonymity because the deliberations are private. Discussions are ongoing and plans could still change, they said.

Malaysia’s Natural Resources and Environmental Sustainability Ministry didn’t immediately respond to a request for comment. Acting minister Datuk Seri Johari Abdul Ghani told lawmakers this month that legislation will be presented to parliament next year. 

Prime Minister Datuk Seri Anwar Ibrahim indicated in an October budget speech that iron, steel and energy companies will be subject to the carbon tax from 2026. 

The proposals follow the introduction of Southeast Asia’s first similar carbon-pricing system by Singapore in 2019. That levy is currently S$25 (US$19.13 or RM104.81) a tonne of carbon dioxide equivalent, and was initially set at S$5 for the first five years, to give time for emitters to adjust. 

Malaysia’s policy — part of the country’s plans to peak its emissions between 2029 and 2034 — could generate about RM1 billion for the government annually, BIMB Securities said in a July note. 

Under the mechanism, companies would be allocated specific pollution quotas, and those exceeding their limit would need to pay the tax based on their emissions, purchase credits from Malaysia’s carbon exchange, or buy unused quotas from other firms, according to one of the people.

Malaysia’s proposed reforms will require the government to legislate through three separate bills, the person said. 

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