This article first appeared in Forum, The Edge Malaysia Weekly on October 30, 2023 - November 5, 2023

Budget 2024 was recently announced and as we digest its provisions, it is also interesting to look at where we are as a nation on climate change initiatives.

While the budget gets the country started down the road of fighting climate change on a broad front, the task is very urgent. Therefore, I respectfully recommend that our government tackles climate change with greater urgency and, in particular, the speed of moving our energy reliance to being principally from renewables, earlier than 2050.

Scientists have been telling us for years that despite the international consensus in 2015 (culminating in the Paris Agreement) to keep the global planet to within 1.5°C of pre-industrial temperatures, we are unlikely to achieve this.

Worse, this year is the hottest on record. At least a third of days were over the 1.5°C threshold. Also, there is consensus we are more likely to be over 2°C above benchmarks by the end of 2030 with much worse to come.

UN secretary-general António Guterres has said at a recent climate summit that “humanity has opened the gates to hell” by allowing the climate crisis to worsen. He went on to say that the world is “decades behind” in the transition to clean energy. “We must make up time lost to foot-dragging, arm-twisting and the naked greed of entrenched interests raking in billions from fossil fuels”.

These strong words are backed up by statistics. Oil, gas and coal made up 81.8% of the global energy mix last year, as reported by the Energy Institute. It was 85% in 2015 when the Paris climate agreement was struck and was 86% in 1995 when the first UN climate Conference of Parties (COP) was held. Progress is slow.

Pope Francis has also recently weighed in on the matter. “Our responses have not been adequate, while the world in which we live is collapsing and may be nearing the breaking point,” the pontiff wrote recently. He went on to say, “Some effects of the climate crisis are already irreversible.”

It is somewhat perplexing then to see that some countries, such as the UK, are watering down their transition plans, how even the mention of climate change is politicised as woke in the US and even Russia has come out and said it would not be following others in reducing its oil and gas production.

There are many reasons why many countries and businesses are dragging their feet, but the key one in my view is that the cost of weaning economies and people off of cheap fossil fuels as a source of energy, to renewable ones, is high and politically difficult to push with all the current pressing needs.

We saw an example of this problem recently with the minor unrest in parts of London when Mayor Sadiq Khan brought in daily ultra-low emission zone (ULEZ) fees, penalising cars with high emissions. The cost of buying a new electric vehicle (EV), on top of the cost-of-living crisis and slow wage increases, was too much for Londoners to bear and is publicly quoted as the reason why the UK government decided later to water down its targets in view of the UK election next year.

Against that global backdrop, where are we in Malaysia? As part of the National Determined Contribution (NDC) pledge under the Paris Agreement, we made pledges at COP26, and reaffirmed them at COP27, to see net-zero greenhouse gas (GHG) emissions by 2050 and reduce carbon intensity against gross domestic product by 45% by 2030, using 2005 as a benchmark.

These pledges are made publicly to the UN and are welcome, so we know what the government intends to do. It is also more aggressive than our Southeast Asian neighbours.

Our fourth Biennial Update report (BUR4), issued to the UN in December 2022, shows that we were net zero GHG emissions in 2004. Essentially our GHG emissions from 1994 to 2004 were largely absorbed by the carbon sink provided by our huge tracts of forest. With increasing industrialisation, it would be inevitable that the net amount of emissions would grow. As at 2019, we were at 116MtCO2 equivalent, which is less than 1% of global emissions.

In 2019, the bulk of our emissions from the energy sector constituted 79% of total emissions. Digging further, the two biggest components of the energy sector are emissions from the creation of power and heat industries and transport. In terms of electricity power production, per the National Energy Transition Roadmap (NETR) issued in August 2023, the current energy mix is about 4% renewable energy (RE) and 96% fossil fuel-based. The ambition is to increase the installed RE capacity to 40% in 2040 and to 70% by 2050. Given the concerns expressed by our world leaders, our ambition may be too little too late.

Overall, I would commend the government for putting more granular incentives in this budget that are climate related.

The government has shown leadership in requiring all government buildings to use solar power and government departments to move towards using EVs. The former point being one of Climate Governance Malaysia’s (CGM) recommendations from our 2022 report to the government on what could be done, derived from 40 roundtables with NGOs and the private sector.

For the states, there is more central help to mitigate floods, with RM11.3 billion being allocated. Also, RM1.1 billion has been set aside to help some states with their water management. The central biodiversity fund is now RM200 million and there is more money for disaster and flood relief management. These are all excellent initiatives, but the question remains whether the government can continue to bear the cost into the future without new sources of funds.

For companies, there is encouragement to move away from fossil fuel to renewables and financial institutions have pledged to provide funding of up to RM2 billion to acceptable projects. There are also some tax exemptions available for those companies wanting to do carbon credit projects. Also, there are new tax deductions for planting and rehabilitating trees for entities.

For the rakyat, there are incentives for the rental of EVs, rebates for electric motorcycles, extending the current subsidy for having an EV charging station and financing 150 new electric buses in the Klang Valley. The good news also is that while energy subsidies will continue, it will be more focused on the deserving.

There is even now a biodiversity conflict compensation fund, set up with RM10 million, to help those who suffer damage from wildlife. For those in rural communities, there is more help to rice farmers, palm oil smallholders and fishermen, recognising the role they play in food security.

In my view, there are a lot of good things in the budget that are calculated steps built on what was done previously, but more needs to be done, much sooner. However, to be fair, the urgency is only becoming more apparent now with flooding and other climate-related disasters. So, you could say the government is just warming up.

1. More renewables in the energy mix, much sooner

Reducing GHG emissions is not “nice to have” but a “must do”. As mentioned above in relation to the science, the real date to work to, in achieving our energy transition mix is by 2030, not 2050. It may well be too late by 2050.

Building on the NETR, a more granular energy transition plan should be determined and published quickly with verifiable targets and more aggressive time­tables. Critically, it should be costed out, so we know the true cost of this transition. It should build on the good work that has already been started, such as the FIT solar schemes, the national efficiency initiatives and the incentivising of more renewable energy facilities. We should continue to use electric-powered trains and buses for all our public transport needs.

The energy generation mix is key as there isn’t much point in all of us going out to buy new EVs when the electricity used to charge the cars is still based principally on fossil fuels. Investors too have expressed their concerns.

2. High emitters should pay

We should embrace the principle that those who wish to continue adding to the GHG emissions to the planet should finance these transition activities. It would also be a disincentive for them to continue their ways.

Steps the government could take include introducing carbon taxes, emission trading schemes, levies and carbon trading. We also need financial and legal penalties to be in place for those companies that choose to ignore their obligations to the people and planet and who focus on just profit.

I remember once having a discussion with a CEO about things his company could do to be less damaging to the environment. He replied that when he had made enough money, he would worry about the planet. Perhaps with carbon taxes, we could incentivise CEOs like him to do the right thing now, as if it is not reflected in the profit and loss account of the company, there is no financial incentive to try harder.

3. More publicly available data

Both the Joint Committee on Climate Change (JC3) of Bank Negara Malaysia and the Securities Commission, and our own Climate Governance Malaysia report, have highlighted that for the people and companies to plan ahead, more timely data is needed and should be made available to the public. Why, for example, are we still referring to 2019 data today?

I recall being scolded once by a chairman of a listed company for showing a coastal erosion prediction in 2050 that he said was alarmist even though I had pointed out that the chart was based on NASA data as there was none publicly available in Malaysia.

To further illustrate the point, there are many properties in the UK where their owners are made aware that they are subject to a high risk of flooding or to coastal erosion. As a homeowner, I would not have access to similar data in Malaysia and therefore cannot take steps to protect myself or family. Similarly, corporates need this information to plan their logistics and supply chain needs and be more resilient.

The government, states, federal agencies and local authorities have a lot of useful data paid for by the rakyat but we need a legal framework to be drawn up to allow the sharing of this information on a best efforts basis.

4. Stop wasting energy

We are quite wasteful as a nation as one downside of cheap energy is that we don’t value it as much. The budget preamble mentioned that our fuel prices are among the lowest in the world and cheaper than Saudi Arabia. We are also among the highest givers of energy subsidies.

The government should do more to set an example about the temperature in their buildings and for the private sector. Hopefully, with the move for government officials to wear more batik and not suits or jackets, now would be a good time to revisit this.

We should not be lighting up buildings and sites unnecessarily all through the night and we should teach energy and water conservation to our schoolchildren. Even our building codes need to be revisited to make solar panels mandatory, houses in areas prone to flooding safer and design homes that repel heat and keep cool air within. Apparently, in Florida, homes have hot water generated by their air conditioning.

5. More, not less, jungle

We need to recognise the contribution of our forests and jungle, not only in providing state and landowners produce but being part of the planetary ecosystem. It also reduces our net GHG emissions.

What we do to our forest has ramifications for the planet and so we need to consider changes to our business model that incentivise us to keep the forest intact and convert more, not less, of our land back to jungle. Some refer to this as rewilding, which also has benefits to our biodiversity.

We need to find another way to do business, by getting the emitters of GHG to finance our management of the trees. Essentially, we should be paid for keeping and growing more trees not just for our own NDCs but for everyone else.

6. Whole of society approach

We should encourage more, not less engagement, on all matters relating to the environment.

Leaders come in all forms — be they politicians, government, private sector or rakyat. The solutions also can be found from all of society, such as the private sector, non-governmental organisations (NGOs) like CGM and even our community leaders.

One such example of this whole of society approach is the leadership of the Crown Prince of Pahang and the menteri besar of Pahang, who came together this year, with the help and support of a number of NGOs, to establish a tiger reserve in Pahang. It took eight months from idea to gazettement.

This protection of our biodiversity was also supported in Budget 2024 by the provision of more community rangers, building up of a compensation fund for damage to property by wild animals and the general encouragement of carbon credit projects to finance such activities. Truly an example of a whole of society approach.

Budget 2024 has shown more focus on climate matters and a wider variety of incentives, funding and policy statements. This is an excellent start for the Madani Economy framework, but more needs to be done on our energy mix to make the changes sooner rather than later. We owe it to those who will come after us.

Datuk Mohammad Faiz Azmi is a retired Big Four partner and parent. This column is part of a series coordinated by Climate Governance Malaysia, the national chapter of the World Economic Forum’s Climate Governance Initiative (CGI). The CGI is an effort to support boards of directors in discharging their duty of care as long-term stewards of the companies they oversee, specifically to ensure that climate risks and opportunities are adequately addressed.

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