KUALA LUMPUR (April 21): The Ministry of Natural Resources and Environmental Sustainability (NRES) launched the National Carbon Market Policy (NCMP) today to introduce a framework for the trading of carbon credits before a carbon tax is introduced in Malaysia.

NRES Minister Datuk Seri Arthur Joseph Kurup said a carbon tax could be seen as a form of penalty on polluters and that it would be unfair to impose one in the absence of a working carbon market, which would enable companies to purchase carbon credits to offset part of the carbon tax requirements.

The implementation of the carbon tax itself may need to be reviewed due to the current geopolitical crisis, the minister said. It had originally been planned for introduction this year, targeting sectors such as iron, steel and energy.

"As a government, we have to be in touch with reality and also take into account the economic and geopolitical situation. We don't want to put any extra burden on industries or even on the rakyat or the consumers at this time. So, we may review the implementation of the carbon tax," he said.

NRES is responsible for building the carbon trading framework while carbon tax falls under the jurisdiction of the Ministry of Finance.

The NCMP, which was approved by the Cabinet on 1 April 2026, will provide the framework for voluntary and compliance carbon markets, and aims to position Malaysia as a credible participant in international carbon trading markets.

"We need to set up the framework for carbon credits so that we have the credits in place before we put in the penalty tax. It will focus first on making sure that our carbon credits are measurable and verifiable so that they can be backed by data and proper integrity,” he said at a press conference held at the Climate Change and Sustainability Conference 2026, organised by the Forest Research Institute Malaysia (FRIM).

The NCMP was launched during the opening ceremony of the conference.

“After that, we will bring in the other acts, which will be the teeth that give enforceability to our carbon market policy, namely the Climate Change Bill or Rang Undang-Undang Perubahan Iklim Negara (RUUPIN). Through that, we can then set up our carbon registry and, with the carbon registry, we will have a holistic dataset of all the carbon we have in the country, including how it can be measured, priced and eventually traded internationally. That will be the framework moving forward."

He added that RUUPIN is being finalised and will make the NCMP and Malaysia's climate commitments not only aspirational but enforceable.

The NCMP itself is built around four strategic pillars. The first is the implementation of a high-integrity carbon market, which will facilitate the operation of compliance carbon markets under Article 6 of the Paris Agreement and the Carbon Offsetting and Reduction Scheme for International Aviation, while also stimulating further activity in the voluntary market.

The second pillar focuses on the development of a national carbon registry, together with the harmonisation of monitoring, reporting and verification systems, so that issued carbon credits can be tracked and double-counting avoided.

On how the NCMP will align with state-level carbon registries already in place in Sabah and Sarawak, the minister said the federal government acknowledged that both states had passed their own ordinances and that the role of Putrajaya is to ensure harmonisation.

"Our role at the central government is to make sure there is harmonisation. So, I had a visit with the Premier of Sarawak last week and we've agreed to set up a special committee to discuss how we can harmonise. Because the most important thing is, even if they set up their own carbon [system], it still has to be verified and also measured at the right price to make sure that we have it in sync,” said Arthur. 

“Because ultimately, it is the central government that has to report our international commitments to the United Nations Framework Convention on Climate Change and under the Paris Agreement. We will work together on this and the feedback has been very positive."

The third pillar looks at strengthening international cooperation through Memoranda of Understanding and driving the transition of clean development mechanism projects to the Paris Agreement crediting mechanism through the implementation of national arrangements for the transfer of carbon credits abroad.

The fourth pillar positions the NCMP as the basis for the design of national carbon pricing instruments, such as a carbon tax or emissions trading scheme.