Carbon Pricing Should Be Viewed As Emerging Transition Risk - Kenanga IB

KUALA LUMPUR, March 11 (Bernama) -- The introduction of carbon pricing should be viewed not only as a compliance requirement but also as an emerging signal of transition risk that will increasingly need to be incorporated into portfolio analysis, said Kenanga Investment Bank Bhd (Kenanga IB).

It said that as the policy framework evolves, companies will need stronger emissions governance, improved data management and clearer decarbonisation strategies to manage potential cost pressures and regulatory expectations.

“Malaysia’s planned carbon tax marks a significant step in the country’s evolving climate policy framework.

“The government has signalled that carbon pricing could be introduced from 2026, initially targeting iron, steel and energy sectors,” it said in a note today.

This will be supported by the forthcoming Climate Change Bill (RUUPIN), which will provide the legal and regulatory foundation for the mechanism, it said.

Kenanga IB noted that although the final policy design -- including the carbon tax rate, sector coverage and compliance thresholds -- has yet to be announced, the direction is becoming clearer as Malaysia aligns with global decarbonisation trends and the European Union’s Carbon Border Adjustment Mechanism. 

“Carbon pricing effectively introduces an additional cost factor for carbon-intensive industries, which may place gradual pressure on margins and profitability over time.

“Viewed positively, it could create valuation differentiation across companies, depending on emissions intensity, decarbonisation readiness and their ability to manage transition risks,” it said.

It said that while details are still fluid, it conducted a scenario analysis of the potential impact of a carbon tax on financials and found that, at RM15 per tonne, the majority of companies would see profitability affected by at least five per cent or more.

-- BERNAMA