Buckle up for a transformative move in Malaysia’s climate strategy! The Carbon Capture, Utilisation, and Storage (“CCUS”) Bill 2025, swiftly passed by the Dewan Rakyat on March 6, 2025, and the Dewan Negara on March 25, 2025, is ready to ignite a low-carbon revolution. Awaiting gazettement, this trailblazing legislation is poised to slash emissions, turbocharge green industries, and cement Malaysia’s status as a regional powerhouse for innovative CCUS solutions. Let’s explore what this Bill delivers, how it’s driving a sustainable tomorrow, and who’s set to thrive in this exciting new era.
Scope of the CCUS Bill 2025
The Bill provides a comprehensive regulatory framework for the entire CCUS value chain, including the capture, transportation, utilisation, and permanent storage of carbon dioxide (CO₂).
1. Coverage and Jurisdiction:
- Applies to Peninsular Malaysia and the Federal Territory of Labuan, excluding Sabah and Sarawak.
- Sarawak has previously enacted its own regulations governing CCUS activities within its state boundaries. For instance, it has introduced land, forest, and carbon-related legislation, including the Sarawak Land Code (Amendment), which addresses carbon storage activities, and the Land Code (Carbon Storage) Rules 2022, which extend the legal framework to cover airspace, surface and subsurface land, as well as the seabed of the state’s continental shelf to facilitate CCUS activities.
2. Regulated Activities:
- Carbon Capture: Requires registration with the Malaysia Carbon Capture, Utilization and Storage Agency (“Agency”) for entities owning or operating carbon capture installations.
- Transportation: Encompasses the transport of CO₂ by road, rail, water, pipeline, or any other means, all of which must be registered with the Agency.
- Utilisation: Encourages innovative uses of domestically captured CO₂, subject to prior registration with the Agency, such as in CO₂-cured concrete or e-fuels, but prohibits utilisation of imported CO₂ through carbon capture outside of Malaysia particularly for permanent storage. Nonetheless, imported CO₂ may still be authorised under an import permit to ensure it is designated solely for permanent storage.
- Storage: Mandates licenses for operating storage sites for onshore and offshore areas in Malaysia.
3. CO₂ Acceptance Criteria:
- The Bill sets out strict acceptance criteria for CO₂ streams for the acceptance and injection of carbon dioxide into storage sites, applicable to both offshore and onshore operators. This is to ensure CO₂ streams adhere to international best practices, consisting predominantly of CO₂ with no added waste. Incidental substances for monitoring must pose no significant risk to human health or the environment.
4. Post-Closure Responsibilities:
- Following the closure of a storage site, the operators remain responsible for monitoring, corrective measures, and remediation during a transition period after site closure until a certificate is issued and the obligations is properly transferred to the government. However, the operators may retain perpetual liability due to any breach, negligence, or fraud on its part prior to the site closure.
5. Institutional Framework:
- The Malaysia Carbon Capture, Utilisation and Storage Agency has been established to advise the government, to administer and ensure effective implementation, oversee CCUS activities, manage storage resources, administer the Post-Closure Stewardship Fund, and promote CCUS initiatives.
- Allows the Minister responsible to establish an additional technical entity and issue further regulations, standards, or exemptions.
6. Enforcement and Compliance:
- Grants enforcement powers to agencies like the Royal Malaysia Police and Royal Malaysian Customs Department.
- Includes provisions for appeals, corporate liability, legal protections, and penalties for non-compliance.
7. Cross-Border Provisions:
- Enables cross-border CO₂ transportation for permanent storage in Malaysia, subject to compliance with the requirements set out in the Bill, thereby positioning the country as a regional CCUS hub.
Purpose of the CCUS Bill 2025
The Bill serves multiple objectives, balancing environmental, economic, and strategic goals:
1. Climate Change Mitigation:
- Aims to reduce CO₂ emissions to meet Malaysia’s Nationally Determined Contribution (NDC) target of reducing emission intensity (against GDP) by 45% by 2030 compared to 2005 levels and achieving net-zero greenhouse gas (GHG) emissions by 2050.[1]
- Supports abatement of emissions from hard-to-abate sectors like iron, steel, cement, and power generation.
2. Economic Growth:
- Catalyses the development of the CCUS industry as a new economic driver, with estimated investments of over US$200-250 billion and the creation of 150,000–250,000 jobs by 2050.[2]
- Positions Malaysia as a regional CCUS hub for storing CO₂, enhancing its role in Asia’s decarbonisation pathway.
3. Regulatory Clarity:
- Provides a clear legal framework to attract domestic and international investment, addressing gaps in previous regulations.
- Aligns with global standards, such as the International Energy Agency (IEA) Model Regulatory Framework and the EU’s CCS Directive, adapted to Malaysia’s context.
4. Support for National Policies:
- Aligns with the National Energy Transition Roadmap (NETR), New Industrial Master Plan 2030 (NIMP), and the anticipated National Climate Change Act, reinforcing Malaysia’s commitment to a low-carbon economy.
Contribution to Energy Transition and Climate Concerns
The CCUS Bill 2025 is a critical component of Malaysia’s energy transition and climate strategy, contributing in the following ways:
1. Energy Transition:
- Decarbonizing Hard-to-Abate Sectors: CCUS is one of six energy transition levers in the NETR, targeting emissions from industries like iron, steel, cement, and power generation, which are challenging to electrify or transition to renewables.
- Supporting Green Industries: Enables the production of low-carbon products like blue hydrogen and ammonia, fostering green manufacturing and aligning with NIMP 2030.
- Infrastructure Development: By 2030, three CCS hubs are expected to be onstream, capable of storing 15 MTPA of CO₂. An additional CCS hub will be developed by 2040 with a target to achieve a cumulative storage capacity of 40 MTPA. By 2050 additional two CCS hubs are projected to be onstream, making the accumulated storage capacity of CO₂ in the nation to reach 80 MTPA.[3]
- Complementary Policies: Works alongside initiatives like renewable energy expansion, energy efficiency measures, and the planned carbon tax by 2026 to create a holistic energy transition framework.
2. Climate Concerns:
- Emission Reduction: CCUS is projected to reduce GHG emissions by 5% by 2050, supporting Malaysia’s Paris Agreement commitments.[4]
- Carbon Storage Capacity: Malaysia’s estimated 13.3 gigatonnes of CO₂ storage capacity in depleted oil and gas fields provides a cost-effective solution compared to saline aquifers.[5]
- Global Reporting: Data from CCUS activities will support Malaysia’s reporting obligations under the United Nations Framework Convention on Climate Change (UNFCCC).
- Regional Leadership: By establishing Malaysia as a CCUS hub, the Bill contributes to ASEAN’s carbon neutrality goals, addressing a 2.6 gigaton CO₂ gap in key sectors.[6]
3. Addressing Criticisms:
- Critics argue that CCUS may prolong fossil fuel reliance, is energy-intensive, and risks Malaysia becoming a “carbon dumping ground” for imported CO₂.
- The Bill counters these concerns by enforcing strict CO₂ acceptance criteria, prohibiting utilisation of imported CO₂, and aligning with global best practices to ensure environmental and public safety. To meet urgent climate goals, the legislative process may have been expedited, with the Malaysia CCUS Agency tasked to oversee robust risk management and future stakeholder engagement as part of the Bill’s phased implementation.
Companies and Industries That Can Benefit
The CCUS Bill 2025 creates opportunities for various industries and companies, particularly those involved in high-emission sectors or CCUS technology development. Benefiting entities include:
1. Industries:
- Oil and Gas: Companies can leverage CCUS for enhanced oil recovery (EOR) and storage of CO₂ in depleted fields, simultaneously reducing emissions from upstream activities while enhancing oil recovery.[7]
- Power Generation: Coal and gas-fired power plants can adopt CCUS to meet emission reduction targets, especially with the planned carbon tax in 2026.
- Iron and Steel: Hard-to-abate sectors targeted by the carbon tax can use CCUS to decarbonize operations and comply with regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM).
- Cement and Chemicals: These industries can utilise captured CO₂ to produce value added products like CO₂-cured concrete or synthetic fuels, transforming emissions into new revenue streams.
- Green Technology: Companies involved in blue hydrogen, ammonia production, or carbon credit trading can benefit from CCUS-driven markets.
2. Companies:
- PETRONAS: Malaysia’s national oil and gas company is pioneering CCUS projects like the Kasawari offshore CCS project, expecting to capture an annual average of 3.3 million metric tonnes per annum of CO₂, making it among the largest CCS offshore projects in the world.[8] Collaborations with ExxonMobil, Shell, Samsung, POSCO, JAPEX, and Mitsui enhance its capabilities.
- Tenaga Nasional Berhad (TNB): Malaysia’s main utility company have signed an MoU with PETRONAS to drive innovative solutions towards decarbonisation.[9]
- U.S. Companies: Companies specialising in CCUS technology, carbon management infrastructure, or project development can tap into Malaysia’s emerging market.
- International Partners: Companies like Samsung Engineering, SK Energy, Lotte Chemical (South Korea), and Mitsui (Japan) are actively collaborating on feasibility studies and joint projects to develop integrated carbon capture, transport, and storage solutions in the Asia-Pacific region.[10]
- Local SMEs: Small and medium enterprises in green technology, engineering, or logistics (e.g., CO₂ transportation) can benefit from CCUS hub development through increased business opportunities and job creation.
3. Financial Incentives:
- The Bill builds on existing tax incentives, such as a 100% Investment Tax Allowance on qualifying capital expenditure for 10 years, full import duty and sales tax exemptions on CCUS equipment (until December 2027), and tax deductions for allowable pre-commencement expenses incurred within five years prior to operation commencement.[11]
- These incentives significantly reduce the financial barriers for companies venturing into the CCUS market.
Conclusion
The CCUS Bill 2025 positions Malaysia as a regional CCUS leader by regulating the regulating value chain, promoting offshore storage, and aligning with global standards to support GHG reduction by 2050[12] and UNFCCC reporting. It drives energy transition by decarbonizing key industries like oil, gas, and cement, fostering green markets, and leveraging 13.3 gigatonnes of CO₂ storage, with companies like PETRONAS and TNB benefiting from incentives and creating more job opportunities jobs by 2050.[13] Despite concerns over rushed legislation and environmental risks, the Bill aims to balance economic growth with climate action.
