The Malaysian government is exploring the possibility of introducing carbon pricing specifically for the iron and steel sector. This initiative is being discussed as part of a broader strategy to address carbon emissions and prepare for the European Union's Carbon Border Adjustment Mechanism (CBAM), set to begin in 2026.

Professor Ong Kian Ming, pro vice-chancellor for external engagement at Taylor's University and member of an independent committee advising the Ministry of Investment, Trade and Industry (MITI), revealed that robust discussions are taking place regarding the potential implementation of a carbon price for the iron and steel industry. This move could pave the way for carbon pricing in other sectors of the economy.

The steel industry is a significant contributor to global greenhouse gas emissions, accounting for about 8% of the total. In Malaysia, the sector's emissions are expected to grow rapidly due to recent investments in emissions-intensive blast furnace technology.

Dr. Renato Lima de Oliveira, an associate professor at the Institute for Democracy and Economic Affairs, noted that while Malaysia was previously a lower emitter in terms of average emissions per tonne of steel, the country is now projected to exceed the global average. This shift is attributed to a structural transformation where higher-emission production has migrated to Malaysia.

The government is considering carbon pricing as an effective tool for reducing emissions, although it has not yet been implemented in the country. Experts suggest that introducing carbon pricing exclusively for the steel sector could serve as a pilot program before expanding to other industries.

However, implementing carbon pricing without a complementary Carbon Border Adjustment Mechanism (CBAM) could lead to carbon leakage. As such, Malaysia is also considering adopting its own version of CBAM to prevent investments from moving to countries without similar measures.

As Malaysia moves towards adopting carbon pricing and potentially its own CBAM, businesses are encouraged to view environmental, social, and governance (ESG) initiatives not just as compliance mechanisms, but as opportunities to improve business processes, optimize costs, and gain market share.