This update is vital for multinational corporations, large enterprises, and SMEs, as it highlights the new regulatory landscape surrounding energy efficiency and conservation in Malaysia.
With the Energy Efficiency and Conservation Act (“EECA”) receiving royal assent on 14 November 2024, it will come into force on 1 January 2024 and be applied throughout Peninsular Malaysia and Labuan only.
The primary objectives of the EECA are to enhance energy efficiency measures, promote conservation practices, and support Malaysia’s commitment to sustainable development and climate change mitigation through the regulation of energy-efficient practices.
Key Components of the EECA
- Categories under the EECA:
– Energy Consumers: Companies with energy consumption exceeding 21,600 gigajoules over 12 consecutive months.
– Large Office Buildings: Offices exceeding 8,000 square feet.
– Energy-Using Products: Domestic appliances and other energy-consuming products. - Obligations for Energy Consumers: Energy consumers must appoint a registered energy manager, implement an energy management system, conduct regular mandatory energy audits through a registered auditor, and submit reports to the Energy Commission (EC). They are also required to submit an annual energy efficiency report detailing the management system, energy consumption, and proposed efficiency improvements.
- Compliance for Large Office Spaces: The person in charge of an office building larger than 8,000 square feet must display an energy intensity label prominently and ensure the building meets the prescribed energy efficiency rating. In cases of non-compliance, an energy audit must be conducted, and the audit report, along with an energy efficiency improvement plan, must be submitted to the EC for approval. These regulations also apply to SMEs owning entire buildings exceeding the stipulated size.
- Requirements for Energy-Using Products: Manufacturers and importers of energy-consuming products must apply for and affix an energy efficiency rating label before each sale, offer, display, advertisement, or lease. They must register with the EC and obtain a certificate of energy efficiency for their products, ensuring they meet the minimum energy performance standards set by the EC. Compliance is critical for both large companies and SMEs involved in manufacturing or importing energy-consuming products.
- Notification of Status: The EC will issue notices to individuals or companies identified as energy consumers under the Act, as well as to those in charge of buildings subject to its provisions, informing them of their classifications and compliance responsibilities.
Implications for Businesses
With the EECA now coming into force in 2025, businesses that fall under the three categories should prepare for the new regulations that will influence their operational practices:
- Reporting and Compliance Requirements: Companies must conduct regular energy audits and submit detailed reports on energy consumption while meeting strict efficiency targets. Compliance with changing regulations may present administrative challenges, potentially increasing operational workloads.
- Upfront Compliance Costs: The necessity of conducting energy audits, appointing energy managers, and installing energy-efficient systems may entail significant initial investments. Energy-intensive companies may find it costly to upgrade machinery or infrastructure to meet new energy regulations.
- Penalties for Non-Compliance: The first energy audit must be completed within 12 months of the EECA being gazetted. After the second audit, consumers will have five years to comply with the standards, facing penalties for non-compliance ranging from RM20,000 to RM100,000.
With Malaysia’s goal of achieving a 22% reduction in energy consumption by 2050, the EECA aligns with the National Energy Transition Roadmap. It holds industrial energy users accountable for prioritizing energy efficiency, emphasizing the need for businesses to comply to avoid penalties. Understanding the EECA will be crucial once it goes into effect, although the entire regulatory landscape will largely be dependent on future guidelines to be issued by the Energy Commission for adherence.
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This article was written by George Teng (Associate) from Donovan & Ho’s corporate and commercial practice group.
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.
