Unlocking a Low-Carbon Future for Malaysia

Malaysia has set ambitious targets to increase the share of renewable energy (RE) in its energy mix. In 2021, the Ministry of Energy and Natural Resources of Malaysia (KeTSA) established an aspirational target for national installed RE capacity of 3 1% by 2025.1 This aspiration was recently reaffirmed by the National Energy Policy 2022 – 20402, which lays out a long-term plan for Malaysia’s green future. Although the country has abundant solar, biomass, and hydro resources for clean energy production, a number of barriers are slowing the energy transition. With its economy heavily reliant on fossil fuels, Malaysia risks a carbon lock-in that would perpetuate existing pathdependencies, infrastructure, technologies, institutions and behaviours that are embedded in and intertwined with the carbon economy. State revenues derive to a large extent from fossil fuels and previous reforms to support the growth of renewables have been hampered by the fact that the state is both responsible for shaping energy policy and is also the largest stakeholder in Malaysia’s highly centralised fossil-based energy system. Structural changes in both the energy system and decision-making processes are needed to support a timely transition to a sustainable, low-carbon economy. Post-pandemic recovery packages and policy changes can lend critical momentum to this process if they are properly targeted. In this policy brief we identify three key opportunities for action to advance the Malaysian energy transition:

Recommendation 1: Broaden the range of actors in the electricity sector Efforts to liberalise Malaysia’s highly concentrated electricity sector, increase competition, and improve market efficiency should be strengthened. Existing reform plans should be extended to the areas of transmission and distribution. Recommendation 2: Involve stakeholders in policy design processes The government should facilitate the participation of stakeholders in all stages of the policy process by formalising participation processes and establishing permanent, independent bodies to vet government decisions as well as regular forums for stakeholder dialogue. The decentralisation of decision processes should be promoted. Recommendation 3: Prioritise green growth in post-pandemic recovery programmes Recovery programmes should prioritise investment in sustainable energy infrastructure, clean technology industries, capacity-building, and research and development. Targeted social investment is needed to cushion the social impacts of decarbonisation and harness co-benefits.