How Malaysia’s Carbon Tax Can Redefine Industry Leadership

Feature article of CCIFM Member Wong Yin Kee, Managing Director of ENGIE Services Malaysia.

Over my last decade in the energy industry, almost every time I speak with business leaders, the trade-off between sustainability and profitability is a recurring theme. Until recently, it seems like a valid concern.

For many, it has long felt like an impossible trade-off — pursue profitability at the expense of the planet or prioritise sustainability and risk competitiveness? But the landscape has shifted, and the old mindset must evolve.

Today, with increasing energy costs and new innovative technologies, business leaders can confidently invest into energy efficiency projects to reduce their carbon footprints, and at the same time improve business profitability.

I’ve seen firsthand how more businesses are turning green initiatives into a business advantage, discovering new market opportunities, improving their competitiveness and creating enduring value.

Sustainability has become one of the foundations for growth. Clients and investors today increasingly see sustainable companies not just as a suppliers but as forward-thinking partners prepared for the future.

Supporting such organisation had become a value proposition in itself. This really sends an important truth: Sustainability isn’t just about cutting emissions — it’s about staying competitive and relevant in the transition to a sustainable future.

As Malaysia readies itself to introduce its Carbon Tax in 2026, in its commitment to achieve net zero emissions by 2050, I see similar opportunities for our industries. This policy is more than a regulatory requirement — it is a chance and paradigm shift to redefine operations, build resilience, and lead in a carbon-conscious global economy.

But the question remains: Will Malaysian industries embrace this opportunity to shape their future, or will they let it pass them by?

The Carbon Tax: Catalyst or Conundrum?

When news of the Carbon Tax first broke, I spoke with several industry leaders who shared a common concern: How will this affect our costs and competitiveness? It is an understandable reaction. For energy-intensive industries like manufacturing transportation and logistics and construction, the tax represents an immediate financial burden. Increased costs could potentially squeeze margins or even lead to higher prices for customers.

But here’s where perspective matters. In countries like Singapore, the Carbon Tax which was introduced in 2019, has acted as a catalyst for transformation. It compels businesses to scrutinise operations, uncover inefficiencies, and innovate. For many, it’s been the nudge they needed to adopt sustainable practices that not only cut emissions but also enhance profitability.

But let’s be honest: The transition won’t be easy. Common issues like high upfront costs and resistance to change within organisations must be tackled.

Hence, clear policies, targeted incentives and strong collaboration between industry players and policymakers will be critical. In my experience, the businesses that thrive are those that see challenges as opportunities to innovate and lead.

The Carbon Tax may appear daunting now, but with the right mindset, it has the potential to become a powerful catalyst for a sustainable and competitive future.

Decarbonisation, the Blueprint for Resilience

The decision many business leaders now face is: Where do we start? In my conversations with industry peers, this consideration often comes up when grappling with the Carbon Tax’s implications. The answer, I believe, lies in decarbonisation — a path that not only addresses regulatory requirements but also positions businesses for long-term growth.

Early action is key. Developing a comprehensive decarbonisation roadmap enables businesses to establish internal benchmarks and proactively prepare for future regulations. Partnering with a reliable energy expert can help identify areas for improvement, implement energy-efficient solutions, and optimise operations — all of which are critical steps toward staying competitive in a rapidly changing market.

Now is the best time to adopt renewable energy (RE). While solar energy requires careful management to ensure a consistent supply, it offers long-term energy cost stability by reducing exposure to volatile fossil fuel prices.

Consider STMicroelectronics’ assembly and test facility in Muar, Johor. Through a 21-year solar Power Purchase Agreement (PPA), the facility will receive about 50 GWh of RE annually from a solar farm in Bukit Kayu Hitam, Kedah. This initiative significantly reduces the facility’s carbon footprint while ensuring predictable energy costs — a win-win for both sustainability and the company’s bottom line.

But decarbonisation doesn’t stop at renewables. Advanced energy efficiency technologies are equally critical. Energy monitoring systems and artificial intelligence-driven platforms can pinpoint inefficiencies and optimise energy use in real time, unlocking savings that often go unnoticed.

In fact, the Malaysian government is stepping up its efforts to promote energy efficiency with the Energy Efficiency and Conservation Act 2024, which took effect on Jan 1, 2025.

This legislation, which mandates energy audits and sets performance standards across industrial and commercial sectors that meet specific energy consumption criteria, is a clear call for industries to act now.

In an increasingly competitive landscape, embracing energy efficiency now is not just responsible but strategic, offering a clear advantage over less-prepared competitors.

Just look at Sunway Property’s use of district cooling systems at its development which is expected to save close to 20% of energy and reduce CO2 emissions from air conditioning needs. This project highlights how commercial urbanisation can successfully integrate energy-efficient technologies to achieve sustainability targets while optimising operational efficiency.

Similarly, Mölnlycke, a global medical products company, exemplifies how industries can go further by combining manufacturing processes with energy efficient utilities (such as chillers, compressed air systems, thermal oil heaters) and RE adoption. With our support, Mölnlycke is on track to implement a global RE roadmap, aiming for 100% renewable electricity sourcing by the end of 2024 across all of its operations in 14 plants.

These examples are just the beginning — real progress will require industries, policymakers, and technology providers to work together towards a shared vision.

Collaboration, the Cornerstone of Progress

Real progress requires more than individual action — it demands collaboration. Being in this industry for many years, I’ve witnessed how industries that work together with policymakers and the right technology partners achieve faster, more impactful results.

By aligning efforts, we can overcome challenges, scale innovative solutions, and pave the way for a resilient and sustainable industrial future in Malaysia.

Collaboration lays the foundation. But the real test lies in how industries transform these efforts into lasting impact. This is where leadership plays a pivotal role — not just in navigating challenges, but in turning them into strengths.

This is why I strongly urge decision-makers to begin factoring carbon pricing and decarbonisation into their investment plans and operational strategies today. Early preparation will future-proof businesses against rising compliance demands and evolving environmental regulations.

Turning Challenges into Strengths

The Carbon Tax is more than a policy. It is a stress test for how industries approach resilience, innovation, and growth.

For Malaysian industries, the answer lies in shifting from incremental change to transformative action. This is about rethinking systems, investing in future-ready solutions, and partnering with a reliable energy partner with global expertise creates value not just for today but for decades to come.

While the initial implementation of Carbon Tax 2026 may target fewer sectors and have a limited impact now, its scope will undoubtedly expand in the coming years. Starting early is not just about preparation — it is about seizing an opportunity to lead and outpace the competition.

The next move is yours — will you lead the change or be led by it?

Source: Business Today