KUALA LUMPUR (Oct 24): Malaysia's steel industry needs both the carbon tax and carbon tariff to remain competitive, said Deputy Investment, Trade and Industry Minister Liew Chin Tong.

A carbon tax is crucial to ensure steel imports are taxed similarly, and to provide a level playing field for local producers, together with the Carbon Border Adjustment Mechanism (CBAM), he said during an iron-and-steel industry conference.

“We have to collect the carbon tax to create a level playing field for Malaysian steel operations,” Liew said. “Since Malaysian steel producers have to pay the tax, imports from other countries should also pay the tax to ensure fair competition.”

The CBAM, which imposes a carbon price on goods imported into the European Union (EU), will tack on additional costs for exports from Malaysia unless the country implements its own carbon pricing system. Malaysia imports most of the iron and steel it consumes from Southeast Asia, China and Taiwan.

Revenue from the carbon tax, which was mentioned in Budget 2025, will be channelled into Malaysia’s green transition fund, in line with global trends where transitions are partially funded through carbon tax collection, Liew said.

“Why should we allow potential tax revenues to be given to Europe through the CBAM, when we could tax and retain the revenues for funding the industry's transition?” he added.

The immediate impact of the EU’s carbon tariff on Malaysia’s steel exports is limited, though it has wider implications for how the world views sustainability, said Yeoh Wee Jin, the secretary general of the South East Asia Iron and Steel Institute.  

“The CBAM is driving a shift toward green technologies, even if its direct impact on our steel exports is minimal,” Wee said during a panel discussion at the conference organised by the Malaysian Iron and Steel Industry Federation.

The potential tax revenues would not only support local businesses, but also encourage a faster shift towards sustainable practices in the steel sector, he said.

"The carbon tax is necessary, but it can hurt the competitiveness of the industry in terms of imports and exports,” Wee noted. “That's why the CBAM is essential," Wee said, urging the government to establish the right framework before rolling out the carbon tax.

He also called for a clear timeline for the implementation of the tax, with a phased or progressive rollout to avoid industry disruptions, and asked for government financial support in the form of grants and incentives to help steel companies adapt to the new requirements.

“Without these measures, the carbon tax could make our steel industry less competitive globally,” he warned.