This article first appeared in The Edge Malaysia Weekly on June 15, 2026 - June 21, 2026

Malaysia has set a target of achieving net zero emissions by 2050 and laid out a road map to get there. But financing constraints, technology readiness and the challenge of scaling up deployment continue to slow progress, and there is a call to support more domestic innovation of clean technology (cleantech) solutions to achieve the goal.

The National Energy Transition Roadmap (NETR) currently serves as the country’s main blueprint for decarbonisation. Its catalyst projects span renewable energy (RE), energy efficiency, hydrogen, bioenergy, green mobility, and carbon capture, utilisation and storage (CCUS), providing pathways to test and scale different technologies needed for the energy transition.

The projects are supposed to attract more than RM25 billion in investments, create 23,000 jobs and reduce greenhouse gas emissions by over 10,000 gigagram CO2 equivalent annually, according to the road map (see graphic).

Another recently launched document, the National Carbon Market Policy, comes with the Marginal Abatement Cost Curve, which visually plots the cost per tonne of abating greenhouse gases by various solutions against the total emission reduction potential, which allows stakeholders to target the cheap, high-impact domestic interventions first.

Hazami Habib, CEO of Academy of Sciences Malaysia (ASM), argues that while the NETR sets clear targets and incentives, stronger policy measures are needed to unlock financing, build local industrial capabilities, reduce import dependence and support the large-scale deployment of clean energy projects.

“Policy-wise, everything is on paper. We have a target. We know what we want to achieve, but there is no urgency. [Although] the war and geopolitical tensions have [hastened] the need to transition to low-carbon alternatives, [relying on this type of motivation] is a low-hanging-fruit kind of approach and it is not sustainable,” says Hazami.

Many of the technologies needed to reduce emissions are already commercially available today, including solar photovoltaic (PV) systems, battery storage, energy-efficient cooling systems, waste-to-energy systems, electric vehicles and biomass.

However, relying heavily on mature technologies comes with its own set of challenges. For instance, relying on imported technologies exposes projects to supply chain disruptions, currency fluctuations and higher costs. In some cases, these technologies are developed primarily for export markets and may not be optimised for local operating conditions.

Emerging technologies, on the other hand, offer opportunities for local researchers and companies to develop solutions tailored to Malaysia’s needs, resources and supply chain realities, while beefing up domestic industrial capabilities in the process.

“ASM identified 95 emerging technologies under Emerging Science, Engineering and Technology (ESET) study and 21 technologies under the 10-10 Malaysian Science, Technology, Innovation & Economy (MySTIE) framework to help the nation innovate. These are categorised under five core technology pillars,” says Hazami.

The five core technology pillars are biotechnology, nanotechnology, green technology, digital technology and neurotechnology.

The ESET study was done by ASM in 2017 to expand emerging technologies to foster innovation. Meanwhile, the MySTIE framework — developed by ASM together with the Ministry of Science, Technology and Innovation in 2020 — was guided by the foundations of the ESET study.

One emerging technology identified under the green technology pillar is the Ocean Thermal Energy Conversion (OTEC), which is an RE that generates electricity by harnessing the temperature difference between warm surface ocean water and cold deep ocean water and usually takes place in tropical or equatorial regions, including coastal areas near Malaysia.

“From our [Port Dickson] pilot testing plant, we found out that OTEC has good performance, it can work. It has a technological readiness level of five. But it is still in the lab, and to bring it for large-scale commercialisation, we do not have the funding nor the support mechanism to implement this,” says Dr Sathiabama Thirugnana, director at the Universiti Teknologi Malaysia’s (UTM) Ocean Thermal Energy Centre.

Sathiabama says Malaysia is an ideal place for the development of OTEC and hybrid OTEC (H-OTEC) as it can generate steady baseload power, thanks to the relatively stable temperature difference in tropical oceans.

In 2024, UTM, alongside other research universities such as Universiti Putra Malaysia (UPM), Saga University and the Japanese government, developed a 3kW H-OTEC pilot plant at the International Institute of Aquaculture and Aquatic Sciences of UPM in Teluk Kemang, Port Dickson, Negeri Sembilan.

“The pilot plant was a success, but the water was from the Strait of Malacca. While it is an appropriate place for a pilot, it is not ideal for a large-scale OTEC plant. Sabah, however, from our research and observation, has much more potential. We could gradually phase it from 250kW to 1mw and then 10mw,” she says.

In April 2024, the Sabah State Legislative Assembly approved the new OTEC Enactment 2024 and Energy Commission of Sabah Enactment (Amendment No 2) 2024. Chief Minister Datuk Seri Hajiji Noor said this will pave the way for the development of OTEC as a new source of RE and as one of the main initiatives under the blue economy.

Unfortunately, there is no proper funding, policies and ecosystem to support this technology currently in Malaysia, says Sathiabama.

Echoing a similar sentiment, Hazami says industry players need to place greater trust in local experts to mainstream home-grown cleantech.

While local innovations often result in academic achievements, publications, intellectual property and patents, she notes that the challenge lies in translating these innovations into industry adoption. She describes this gap between research and commercialisation as the “valley of death” within the ecosystem.

“We have that knowledge, maybe some breakthrough in the labs, but there are no takers. Our local large companies want to decarbonise or adopt clean technologies, [but] they look outside because they want fast solutions,” she says.

“We buy from companies from China because they are fast. The adoption of our local technology is only at 5% and commercialisation of our local technologies and local products is only at 10%. It’s very low.”

According to ASM’s position paper on OTEC in 2023, OTEC has a national potential of 26,000mw with the capability to create over 1.5 million jobs and more than US$39 billion (RM156 billion) in annual economic value, as demonstrated by international pilots in Japan, the US, South Korea and France.

“What we would like to push is to create the ecosystem and start using our own technology and escalate it at a national level. We have a lot of research and development but it stays as R&D. I think the dilemma is that the government puts money in, but only at the pilot stage,” says Hazami.

“We need to form a consortium to strengthen collaboration among key industry players, government and academia in order to translate and transfer local technologies that can boost local industries.”

Compared with leading innovation economies, there are still opportunities to further strengthen commercialisation of research from universities and industry-driven innovation in Malaysia.

The problem is not a lack of research quality or manufacturing capabilities, but that clean energy projects require high upfront investments and long payback periods, says Dr Chong Wen Tong, professor of RE at the department of mechanical engineering and head of the Universiti Malaya Centre for Energy Sciences.

“Investors need long-term confidence [that the technology will work] and stable policies,” he says.

For example, incentives such as tax breaks, feed-in tariffs, carbon pricing or subsidies often determine whether a green technology project is commercially attractive. When governments introduce inconsistent regulations or suddenly withdraw support, it increases financial risk and can discourage investment, says Chong.

Thus, regulatory frameworks that remain stable across political or economic cycles are important for investors and businesses to see whether clean technologies are worth investing in. Policy consistency is crucial because investors need assurance that projects will remain commercially viable over decades, not just a few years.

According to a 2023 World Economic Forum report, titled “Mobilising investments for clean energy in Malaysia”, the associated investment required for a clean energy transition and rapid transformation of the country’s energy landscape to reach 70% of RE capacity in its energy mix, amounts to an estimated RM637 billion by 2050.

In comparison to global peers, Malaysia is still under-investing in clean technologies, says Matt van Leeuwen, chief innovation officer at Sunway Bhd (KL:SUNWAY).

“I have seen that over the years, Malaysia has made a lot of meaningful progress, but if we benchmark ourselves against the US or Europe, we are overall maybe still under-investing in the long-term R&D ecosystem that’s needed to build more globally competitive cleantech companies,” says Van Leeuwen, who is also CEO of Sunway Innovation Labs (iLabs).

He adds that the narrative in many innovation-leading countries has evolved from ESG-focused branding to a stronger emphasis on achieving measurable decarbonisation outcomes and investing in sustainable infrastructure.

According to a 2026 report titled “Tracking global clean technology investment” by US-based research house Rhodium Group and Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research, total global clean investment reached record levels of over US$1.96 trillion in 2025, tripling levels seen seven years ago at US$627 billion.

China takes the lion’s share of cleantech investments at US$849 billion in 2025, supported by its dominance in manufacturing and export capacity for mature technologies such as solar PV and electric vehicle batteries. This was followed by Europe at US$406 billion and the US at US$225 billion, driven by rising global demand and supportive industrial policies.

“I see that Europe continues to deploy quite significant capital in clean technologies, and I think that’s mainly because the governments, corporates and institutions view clean technologies as both an economic and a strategic priority,” says Van Leeuwen.

Meanwhile, Malaysia is still trying to connect university research with industry needs. Unlike software, artificial intelligence (AI) and other deep-tech ventures, sustainability, cleantech and climate technology start-ups often require specialised infrastructure, testing facilities and industry partnerships to commercialise and scale their innovations.

“They require labs, infrastructure and pilot facilities. I mean it is quite a complex industry. I must also point out that I do believe that Malaysia has a lot of strong engineering talents. We do have good industrial capability, but we just need more long-term funding mechanisms that can support technologies through that difficult transition from R&D to deployment,” says Van Leeuwen.

Additionally, Van Leeuwen points out that the challenge lies not only in the amount of investment being channelled into cleantech but also in patient capital.

“Investors must be willing to support projects over a much longer period, particularly in the cleantech sector, where commercialisation trajectories differ significantly from software, deep tech or AI start-ups,” he points out.

Venture capital is a source of funding for cleantech start-ups that have innovations that can address the current problems plaguing industries. Many venture capital firms in the region, in fact, already identify climate change and specific areas like the circular economy as investment themes.

Venture capital funding comes with its own challenges, however, as start-ups that take on such funding would need to justify that they are solving real problems instead of just selling ideas, says Van Leeuwen.

“The strongest founders that we see understand the technology as well as deployments and driving positive returns for their customers. They make sure they are not just selling sustainability narratives, but they are really helping companies to reduce energy costs,” he adds.

Other than capital, innovators and start-ups need demand for their solutions from the market.

“What cleantech and green tech founders need most is not just capital. They need serious pilot partners, access to buyers, patient funding, technical validation and clearer procurement pathways. They need government and corporate customers who are willing to test new solutions, not just talk about sustainability,” says Ahmad Azuar Zainuddin, CEO at Satu Creative.

Satu Creative is a social enterprise and consulting firm that works with early-stage businesses and entrepreneurs to grow and sustain their business through capacity building and helps facilitate funding.

He adds that cleantech companies often have different funding needs depending on the nature and stage of the business.

For instance, solutions in waste management, sustainable materials and circular economy that have demonstrated viability will be better positioned to attract investor attention.

“Proof may come from pilots, customer interest, early revenue or technical validation. The bigger question is, how do we shape the market so that important green innovations have a pathway to grow? That means there needs to be an alignment of public policy, corporate demand, patient capital, procurement, pilots and private investment in the same direction,” he says.

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