Deputy minister: Malaysia must implement carbon pricing and tax before EU’s carbon border tax begins in 2026

KUALA LUMPUR, July 1 — Malaysia will have to start implementing carbon pricing to facilitate carbon trading and look into carbon taxing as the European Union (EU) prepares to commence its Carbon Border Adjustment Mechanism (CBAM) in 2026.

Investment, Trade and Industry Deputy Minister Liew Chin Tong said the collections should then be channelled into green investment, including the investment into green steel.

“Carbon pricing, trading, and taxing are crucial aspects of the decarbonisation agenda.

“Under CBAM, the export of steel and the other five listed items from Malaysia will be taxed by the EU, unless Malaysia collects the tax,” he said.

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He said this in his speech at the launch of the Malaysian Iron and Steel Industry Federation’s (MISIF) 15th report on the status and outlook of the Malaysian iron and steel industry.

Meanwhile, Liew said the Investment, Trade and Industry Ministry is committed to working with the industry to overcome the scrap metal challenge, finding ways to deal with the shortages and create a better ecosystem.

He also noted that the iron and steel industry is heavily influenced by global factors, thus policy changes or market trends in China or the United States would have a huge ‘butterfly effect’ on the profitability or even survival of the Malaysian steel industry.

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“I am of the view that the construction industry and the real estate sector in China is undergoing an unprecedented structural shift. Global demand for long products or construction steel will therefore be affected for an extended time, maybe for years.

“Global steel demand declined for the second consecutive year to 1,763 million tonnes in 2023. Therefore, the regional analysis provided by the MISIF Report is very important for policymakers and for the industry to make decisions,” he said.

Liew pointed out that Malaysia’s capacity utilisation of crude steel products (billets, blooms, slabs) for 2023 stood at 39.1 per cent, significantly lower than the global level of 75.7 per cent and the Asean-6 level of 60.1 per cent.

However, flat products may have a brighter prospect, given that there is a once-in-a-generation relocation of the supply chain from China into Sout-heast Asia.

“With more manufacturing activities in Southeast Asia, flat products commonly used in the automotive, heavy machinery and appliances industries should have a better prospect,” he said. — Bernama