“Malaysia’s steel sector moved from a lower-than-average carbon intensity to higher than the world’s average.

“In contrast, leading economies are investing in low-carbon or zero-emissions steel production.

“Urgent policy adjustments are needed to align Malaysia’s steel industry with national emission reduction targets,” said Renato Lima, IDEAS senior fellow and co-author of the policy report released today: “Asserting Climate Change Leadership in Asean: Carbon Pricing for the Malaysian Steel Industry”.

In a statement, IDEAS said the report covered the country’s need to maintain its commitments to the 2015 Paris Agreement. Accordingly, Malaysia has pledged to achieve net-zero emissions by 2050.

IDEAS said that for the past decade, Malaysia’s increased production capacity has been mainly driven by Chinese investments, as Beijing’s surplus capacity and declining demand – coupled with tightened environmental regulations and taxes – have prompted a shift towards Asean nations.

IDEAS said this would be an opportunity for technology transfer and an increase in employment, but would pose harm to the environment and local producers.

“The absence of a carbon pricing framework and binding laws inhibit the government’s ability to address GHG emissions effectively.

“While carbon pricing is referenced in the 12th Malaysia Plan, immediate plans are lacking,” IDEAS added.

It also suggested imposing a temporary tax on coking coal, developing regulatory infrastructure and introducing a carbon border adjustment mechanism to prevent carbon leakage.