This article first appeared in The Edge Malaysia Weekly on September 29, 2025 - October 5, 2025
Despite the ambition to reach net-zero carbon emissions by 2050 with 70% of its energy mix coming from renewables, Malaysia still relies heavily on fossil fuels for electricity generation today.
According to the latest data from the Energy Commission Malaysia, coal represented 23% of the total primary energy supply in 2022, after natural gas and crude oil and petroleum. For electricity generation, coal supplied 42%, followed by natural gas at 36%. As Malaysia increases the number of power-intensive projects such as data centres, which require a stable load of energy, these numbers might increase.
ESG spoke with experts in the field to discuss the barriers holding back Malaysia’s energy transition journey, and what systemic changes are required for the country to meet its long-term goals.
Unwillingness to leave fossil fuels behind
Air pollution is costing Malaysia an estimated RM303 billion annually, far exceeding Petronas’ yearly dividends to the government. The toll is not only financial, with an estimated 32,000 avoidable deaths occurring each year due to pollution linked to fossil fuel combustion, according to a 2021 report by Greenpeace and the Centre for Research on Energy and Clean Air.
Against this backdrop, the country’s continued investment in oil and gas raises a difficult question: can Malaysia afford to continue with its fossil fuel addiction?
While policymakers tout the National Energy Transition Roadmap (NETR) as a blueprint for low-carbon growth, civil society groups argue that weak governance, over-reliance on fossil gas, and fragmented policies risk locking Malaysia into a high-emissions pathway, undermining both climate goals and social equity.
“The transition will happen sooner or later. The question is whether Malaysia plans for it or is forced into it unprepared,” says Adam Farhan, co-founder and director of RimbaWatch.
Farhan says for decades, natural gas has been marketed as a cleaner alternative to coal, a “transition fuel” that he argues is a misleading narrative.
The Intergovernmental Panel on Climate Change (IPCC) ranks natural gas as the third most carbon-intensive energy source, with life-cycle emissions more than 10 times that of solar. Worse, studies show that if methane leakage rates exceed just 0.2%, a common reality in gas pipelines and flaring, the climate impact of gas overtakes coal.
Despite these statistics, Malaysia is expanding gas exploration. Farhan estimates that these projects will emit 4.15 billion tonnes of CO equivalent, consuming 13% of the world’s remaining carbon budget to keep global warming below 1.5°C.
“There is simply no climate justification for continued reliance on fossil gas, and any expansion in fossil gas capacity will be disastrous for the climate,” he warns.
Other countries are already leapfrogging gas altogether, Farhan notes. China, for example, has bypassed gas in some provinces, moving directly from coal to renewable energy to avoid costly import dependency.
Malaysia, by contrast, risks becoming a net gas importer by 2035, exposing consumers to price volatility and stranded assets as global markets pivot to clean energy.
Proponents often point to carbon capture, utilisation and storage (CCUS) as a solution, but Farhan argues that CCUS in Malaysia is more about monetising unextractable sour gas than about removing excess carbon.
Energy transition can succeed only with good governance
Malaysia has no shortage of plans. The NETR, the New Industrial Master Plan 2030 (NIMP) and the Nationally Determined Contributions (NDC) Roadmap all signal intent to decarbonise. Yet, civil society organisations such as the Centre to Combat Corruption & Cronyism (C4) say these frameworks lack coherence and depth.
“Civil society organisations in Malaysia have consistently emphasised the importance of adopting a Just Transition framework as a core component of Malaysia’s energy shift,” says C4 CEO Pushpan Murugiah.
So, while Malaysia has many plans in place, Pushpan says a systemic shift in the nation’s approach is needed to reach these goals in a just manner.
“Although the NETR outlines a few initiatives related to a Just Energy Transition (JET) on reskilling and upskilling workers, as well as supporting communities and enterprises, this policy, along with others, lacks a comprehensive focus on JET implementation as a whole and does not provide in-depth guidance or a clear mechanism for integrating it,” says Pushpan.
This omission matters, as rising power bills are already squeezing households, while renewable technologies such as rooftop solar, electric vehicles and efficient appliances remain out of reach for many B40 families (households with an income threshold of RM5,249 and below).
Highlighting this gap, Pushpan cites data from the International Renewable Energy Agency (IRENA), which reported that Malaysia’s energy mix is still 95% fossil fuels, dominated by natural gas (44.8%) and coal (24.3%).
Renewables contribute to just 4.2%, largely from hydropower. While solar farms and mega hydro projects are being rolled out, access remains uneven, with many indigenous and rural communities still facing energy poverty, even as Sarawak pursues electricity exports to Singapore and Indonesia.
“Implementing systemic change in Malaysia’s energy sector faces interconnected challenges across political, economic and social dimensions. One of the most significant obstacles is weak governance,” says Pushpan.
He adds that a successful energy transition requires a comprehensive, inclusive and transparent framework. Without strong, accountable governance, policies risk becoming fragmented, poorly coordinated and thus susceptible to corruption risks.
This is already happening, as Pushpan highlights the RM1.25 billion Sarawak solar hybrid scandal involving Datin Seri Rosmah Mansor, where the procurement processes in the scandal reportedly involved misuse of authority and favouritism, resulting in inflated costs and poor outcomes.
Consistent policies needed to shift solar perception
While solar adoption throughout Malaysia has been on the rise, many barriers are preventing it from becoming more mainstream.
“The main barriers are short policy cycles, financing gaps and public mistrust. Many Malaysians still believe solar is complicated or out of reach. The July tariff reform, with its new line items like ‘AFA’ and ‘ToU,’ has also made bills harder to understand,” says Jaran Walia, deputy CEO of SOLS Energy Sdn Bhd, a solar energy provider.
Following the end of the Net Energy Metering (NEM) 3.0 programme in June and July’s tariff reform that introduced the Automatic Fuel Adjustment (AFA) and Time of Use (ToU) rates, the economics of electricity consumption have changed significantly.
The AFA causes electricity tariffs to update every month based on fuel prices and foreign exchange rates, while the ToU provides Malaysians with an option to pay different rates depending on peak and off-peak hours.
While this was meant to provide increased transparency and options to reduce electricity bills for certain users, it also caused bills to become more volatile and harder to read, pushing more households to explore solar as a hedge against rising costs, says Jaran.
Yet, adoption remains hindered by perception. Jaran notes that solar energy is often seen as a premium electricity option — a misconception that needs to be changed.
“Solar should no longer be seen as a ‘premium’ option; it needs to become the default standard. To achieve that, Malaysia needs policy stability beyond quotas, faster and simpler grid approvals, and affordable green financing for both residential and commercial users,” he says.
He adds that the upcoming Solar Accelerated Transition Action Programme (Solar ATAP), to be launched in December, could provide that stability. This programme is designed to offer clearer offsets and market-based pricing, picking up where NEM 3.0 left off.
Skip Ng, commercial director of solar player AmSolar Sdn Bhd, agrees that more consistent policies are needed to maintain the momentum of renewables adoption. He argues that many Malaysians are ready to embrace solar energy, but inconsistent policies create confusion and hesitation.
“The recent requirement of RM12 per kWp per month and the need for a 1kWp PV to 1kWh battery has become a big barrier for more installations. Malaysia has many roofs, but government policies have been shifting the installations to good land throughout Malaysia,” he says.
Ng adds that while battery storage is crucial to dampening volatility and maximising solar use, policies should not penalise adopters with added costs that reduce returns.
Solar players agree, however, that for Malaysia to accelerate adoption and reach a just transition, solar must move beyond being seen as an elite choice for urban rooftops.
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