Malaysia's carbon market: a national policy, a postponed tax, and state rules for forest carbon

The policy picture

Malaysia's federal carbon market framework arrived in April 2026, when Cabinet launched the National Carbon Market Policy. It covers both the domestic market and Article 6 trading and comes with a national abatement cost curve showing 56 million tonnes of potential, most of it low-cost. Critics note it sets no limits on credit use and no cross-border rules yet. The carbon tax on iron, steel and energy that was meant to start in 2026 was postponed the same week, with the minister citing geopolitics and energy prices. A Climate Change Bill, which would create a national registry and MRV system and later an ETS, was expected in Parliament around mid-2026; we have not confirmed it was tabled.

Forest carbon is largely a state matter. Sabah requires licences for carbon activities and in 2025 passed a Climate Change and Carbon Governance Enactment with its own council, registry and climate fund. Sarawak treats carbon as forest produce under its Forests Ordinance and regulates projects through its 2022 Forest Carbon Activity Rules. Any developer needs the state as well as the federal picture.

Internationally, Malaysia signed a carbon credit MoU with Singapore in January 2025 but no Implementation Agreement, so Malaysian projects are not eligible for Singapore's tender. Bursa Carbon Exchange runs auctions of voluntary credits.

What the registries show

Most of Malaysia's issued credits come from two Sabah forest projects, Kuamut and INFAPRO. Kuamut asked Verra for verification approval in September. The pipeline is a mix of peat swamp restoration in Pahang and Sarawak, forest management in Terengganu, and a large batch of biomass waste projects in validation from a single developer. Four older AES AgriVerde methane projects are flagged late to verify.

Where the credits have come from

Credits issued and retired to date, Berkeley Voluntary Registry Offsets Database (2026-06 release).

The largest projects not yet issuing

Claimed tonnes per year are the proponent's own estimate as filed with the registry, before validation.

Who is developing

Climate Quest dominates by project count with its biomass waste programme. The peatland and forest pipeline is led by Malaysian companies set up for one project each.

Developers grouped across registries and spellings by CarbonIntel. A project with several proponents counts for each.

Latest registry moves

• 2026-09-25KUAMUT RAINFOREST CONSERVATION PROJECTRegistered → Verification approval requested

What we are watching

• A new date for the carbon tax, and whether the Climate Change Bill is tabled.
• A Singapore Implementation Agreement.
• Kuamut's next verification and issuance.
• The Pahang and Marudi peatland projects through validation.