Carbon pricing ‘missing ingredient’ in energy transition, but trajectory needs to be managed

Thursday 09 May 2024

KUALA LUMPUR (June 26): Carbon pricing is the missing ingredient in the energy transition but industries must be nurtured in order to cope with it, said Petronas president and group CEO Tan Sri Tengku Muhammad Taufik.

Speaking at a press conference at the Energy Asia 2023 here on Monday (June 26), Muhammad Taufik said carbon pricing would enable “wholesale shifts” in energy systems, but the trajectory “needs to be managed and not done too fast, abruptly or steeply, to a point where it could suffocate economic activity”.

“A missing ingredient is carbon pricing. It is an effective tool to ensure right behaviour emerges… If there is a price on coal, there would be investments made to avert it. It does promote efficiency, and it shapes the way you use and invest in energy,” he said.

Pointing to Malaysia’s voluntary carbon exchange market set on Bursa Malaysia, he said “there needs to be a discovery of carbon price”.

“It requires policy shifts and the economy must be nurtured to cope with it. However, a timeline is needed, with carbon budgets (the amount of emissions that can be emitted globally) running down,” Muhammad Taufik said.

Implementation of carbon pricing has slowly emerged in Malaysia, with the Bursa Malaysia Carbon Exchange (BCX) having held its inaugural carbon credit auction in March this year.

Petronas, a major global gas player, is a proponent of carbon capture and storage technologies, and is setting up a carbon capture facility offshore East Malaysia, with hopes of becoming a hub for carbon capture services in this region, where fossil fuel is seen to remain as a key component of energy supply in the coming decades.

At the same time, discussions are still ongoing in relation to how smaller enterprises are going to deal with carbon pricing and related regulations, moving forward.

Sustainability disclosures are still voluntary at large, with international sustainability standards only published on Monday (June 26), with implementation effective in 2024.

In Europe, trading of carbon permits started in 2005. Amid a rising focus on the ESG (environmental, social, and governance) agenda globally, prices have climbed to a record €100 per metric tonne (MT) in February this year, from just around €25/MT pre-pandemic.

The European Union (EU) is also targeting to implement the Carbon Border Adjustment Mechanism come 2026, which is a tariff on carbon-intensive products sold by exporters such as in Malaysia into the EU. It will enter a reporting period from October this year.

Edited ByLam Jian Wyn

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