KUALA LUMPUR (Aug 19): The government would not introduce carbon tax in the upcoming Budget 2025, said Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.

The Ministry of Finance as well as the Ministry of Energy Transition and Water Transformation are still in the process of discussing the mechanism to implement the tax, Tengku Zafrul said. Carbon tax measures would require at least one year of preparation, he said.

Carbon tax would “definitely” not make it into Budget 2025, he said. “They need more time… at least one year,” Tengku Zafrul told reporters after presenting Malaysia's green investment strategy on Monday.

Budget 2025 is expected to be tabled in Parliament on Oct 18.

Implemented in over three dozen countries to date, carbon tax is a type of levy based on the emissions of environmentally polluting gasses from consumption of fossil fuels such as coal and diesel. The goal is to drive businesses and consumers to alter their behaviour to avoid paying the tax.

The National Investment Council initially proposed a two-year timeframe for the carbon tax to be ready; however, Prime Minister Datuk Seri Anwar Ibrahim rejected it for taking “too long”, Tengku Zafrul said.

Malaysia has been providing green programmes and incentives for years to reduce its carbon footprint and emissions, though the country has yet to have a carbon tax mechanism — which will serve as a new source of government's revenue as well as to achieve Malaysia's carbon neutrality by 2050.

Minister of Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad recently told Bloomberg TV that Malaysia needs to address its fuel subsidies before it introduces a carbon tax.

To help achieve its net-zero target by 2050, Malaysia has recently removed a blanket subsidy on diesel and the rationalisation for RON95, the most widely used petrol variant currently capped at RM2.05 per litre, is also expected to follow suit.