Posted on 25 Jun 2025
The government should give manufacturers sufficient time to prepare before introducing a carbon tax next year, said speakers at the launch ceremony for Eastern Steel Sdn Bhd’s crude steel product EPD (environmental product declaration) on Tuesday (June 24).
Eastern Steel is a joint venture between Hiap Teck Venture Bhd (KL:HIAPTEK) and Beijing Jianlong Heavy Industry Group Co Ltd of China, and specialises in in the manufacturing, selling and dealing in a range of steel products. EPDs are documents that provide quantified data on a product’s environmental impact, based on its life cycle assessment.
The company obtained an EPD for its crude steel product in collaboration with China-based carbon management firm E-C Digital, with verification by EPDItaly, which is an Italian programme operator that develops and issues EPDs.
Datuk Tee Choon Hock, executive director of Eastern Steel, said the decision to collaborate with E-C Digital, which is known for its partnerships with China’s biggest steel companies, came from a desire to comply with regulations and international banks’ demand for ESG reports.
“The regulatory requirements, mainly the CBAM (European Union’s Carbon Border Adjustment Mechanism), we have to meet. That is another pushing factor for me to do EPD. When you have the same standard, it provides a platform for us to communicate in a universal way,” said Tee.
According to Tee, the company reduced 326,056 tonnes of CO2eq per year by using waste gas and heat from its operations to generate energy, and exports up to 29.9MW to the grid. Its use of a conveyer belt to transport raw materials from the Kemaman port to the factory, instead of relying on trucks, reduced emissions by 72 tonnes of CO2eq per year.
The Malaysian government has plans to introduce a carbon tax on the iron, steel and energy sectors by 2026. On this, Tee said manufacturers need a sufficient transition period.
“We are not trying to run away from our responsibility to reduce our carbon footprint. We need sufficient time to transition because 30% of steel worldwide is produced by blast furnace, and currently a lot of studies are being done on carbon reduction and capture,” said Tee.
“Even if you want to start with carbon tax, start with high allowance for the industry so you do not burden the industry. If you burden our industry in Malaysia, while Asean countries are not imposing a carbon tax, then it is a disadvantage to us. We have to put the economy as an important factor while we are doing decarbonisation”.
This was a point emphasised by Federation of Malaysian Manufacturing (FMM) president Tan Sri Soh Thian Lai during his opening remarks.
“We contribute 23% to 24% of the GDP but more than 23% of the country’s total carbon emissions is from the manufacturing sector. Needless to say, the steel sector is one of them, and others like the cement sector have contributed [to the emissions],” said Soh.
“Sustainability itself is no longer optional, and fast becoming a key driver for future competitiveness, especially to comply with the CBAM, EUDR (European Union Deforestation Regulation), ESG and EPD. All these are just beginning in Malaysia.”
Many manufacturing companies are still unfamiliar with carbon emissions calculation and management, he added. Additionally, only two countries in Southeast Asia — Singapore and Indonesia — have carbon taxes currently.
“I proposed to our prime minister in 2024 to set up an Asean carbon tax framework, then only it’s fair… To me, I think the government should delay for a certain period of time [before introducing the carbon tax],” said Soh.
The carbon pricing mechanism is still being prepared by the Ministry of Finance (MOF) and Ministry of Natural Resource and Environmental Sustainability (NRES), explained Ahmad Farid Mohammed, undersecretary of the NRES climate change division at the event.
“The MOF is still considering the mechanism on how to regulate the carbon tax, and they will set the threshold on how much carbon [the facilities can emit], with advice from NRES,” said Ahmad Farid.
The Climate Change Bill (RUUPIN), which is expected to be tabled in Parliament later this year, will establish a measurement, reporting and verification (MRV) system, and introduce reporting obligations to facilities whose carbon emissions exceed a threshold, amongst other things. These facilities are those within the identified scheduled economic sectors under RUUPIN.
RUUPIN also enables the setup of an emissions trading scheme (ETS), whereby facilities whose emissions exceed a higher threshold have to participate. Those that emit beyond the threshold can buy allowances from those who emit less than the threshold, or pay a penalty if they exceed the maximum allowed emissions level.
The bill also proposes a climate change fund, comprising proceeds from the carbon pricing mechanisms.
“These funds will be channelled back to industry, like what Singapore is doing, to help industry [players] to do emissions reduction activities,” he said.
Source:The Edge
