This update is particularly relevant for businesses in energy production, manufacturing, chemical industries, and heavy industries with high CO2 emissions, as well as those involved in carbon capture technologies and sustainability initiatives.
The Dewan Negara earlier this year approved the Carbon Capture, Utilisation, and Storage Bill (“Bill”), marking an important step in Malaysia’s efforts to reduce carbon emissions. The Bill is now pending royal assent, which once obtained shall result in the enactment of the Carbon Capture, Utilization and Storage Act 2025 (“CCUSA“). This represents a key element of the country’s broader commitment to tackling climate change.
- What is CCUS?
The Carbon Capture, Utilisation, and Storage (CCUS) refers to a set of technologies designed to reduce carbon dioxide (CO2) emissions from major industrial sources and the atmosphere. CO2 is captured directly from large point sources such as power plants and industrial facilities. Once captured, the CO2 can be used on-site in various applications or compressed and transported via pipelines, ships, rails, or trucks to other locations. It can also be injected into deep geological formations, such as depleted oil fields or saline aquifers, for long-term storage.
- Why is Malaysia doing this?
Malaysia is uniquely positioned to benefit from CCUS technology due to its high CO2 storage capacity. A significant portion of this storage potential lies in depleted oil and gas fields, which are more cost-effective for CO2 storage compared to saline aquifers. Malaysia is estimated to have a storage capacity of 13.3 gigatonnes of CO2, mainly in these oil and gas fields, providing a distinct advantage in implementing CCUS solutions.
- What does the CCUS Bill Entail?
The Bill was first announced by Datuk Seri Rafizi Ramli, Malaysia’s Minister of Economy, and sets the stage for a more regulated and structured approach to CO2 management in Malaysia. By implementing these measures, the Bill aims to help Malaysia achieve its carbon reduction targets while promoting the responsible use of CCUS technology. The key provisions include:
- Establishment of the Malaysian Carbon Capture, Utilisation, and Storage Agency (MCCUSA): The agency will be responsible for licensing, compliance, and industry development, ensuring that CCUS projects are managed properly.
- Carbon Capture Facilities Registration: All carbon capture facilities must be registered with the relevant authorities.
- Permitting for Offshore and Onshore Storage Sites: Operators must obtain permits for both offshore and onshore CO2 storage sites.
- Strict Monitoring and Safety Protocols: The Bill mandates continuous monitoring and enforcement of safety standards to prevent CO2 leakage or any other environmental damage. Operators will need to ensure that the storage process remains safe and compliant with environmental regulations.
- What Should Businesses Do Now?
Those businesses involved in the CCUS sector, or has a high output of CO2 as part of its operations, or those looking to capitalize on this emerging opportunity, should consider the following:
- Review Compliance Obligations: Businesses involved in industries that produce significant CO2 emissions, such as energy production, manufacturing, and chemical industries, should begin assessing their involvement in CCUS projects, considering the new compliance obligations introduced by the Bill.
- Engage with MCCUSA: Companies should monitor the establishment of the Malaysian Carbon Capture, Utilisation, and Storage Agency and engage with the agency to understand future compliance requirements and opportunities within the CCUS space.
- Evaluate Investment Opportunities: The CCUS Bill opens up new opportunities for investment in sustainable technologies and the carbon capture sector. Companies should consider the potential benefits of participating in the carbon credit market or exploring partnerships for CO2 storage projects.
Summary
The passage of the CCUS Bill is a significant milestone for Malaysia’s transition to a low-carbon economy. Industries with high carbon output, such as oil and gas, energy, manufacturing, and chemicals production, need to assess their operations and prepare for the upcoming regulatory requirements. Now is the time to evaluate the feasibility of implementing carbon capture technologies, explore potential incentives, and business positioning to meet Malaysia’s climate goals while tapping into new growth opportunities in the green technology sector.
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This article was written by George Teng (Associate) from Donovan & Ho’s corporate practice group.
Donovan & Ho is a law firm in Malaysia, and our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
