Malaysia will introduce a carbon tax in 2026, starting with the energy, iron, and steel sectors.

The goal is to reduce carbon emissions and align with global standards like the EU’s CBAM.

Why now?

1. To protect exports under EU’s carbon rules
2. To attract ESG-conscious investors
3. To phase out fuel subsidies in a more balanced way

The tax rate is not fixed yet, but analysts expect a model similar to Singapore’s (around RM156 per tonne CO₂).

SMEs may not be directly taxed at first, but the knock-on effects …

1. higher electricity bills,
2. compliance reporting, and
3. customer demands.

If your business exports, uses energy, or supplies to large manufacturers, better be prepared.

Key incentives available:

1. Offset up to 5% emissions with Bursa Carbon Exchange (BCX) credits
2. Tax relief for carbon projects (up to RM300,000)
3. Tax perks for Carbon Capture, Utilisation and Storage (CCUS)
4. Green tech incentives: GITA & GITE
5. RM70mil rebate for energy-saving appliances (2025 Budget)

Carbon tax is coming, like SST and GST. SMEs must plan ahead—before it hits your bottom line.

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