Sarawak rejects inclusion in Malaysia's Carbon Capture Bill. Pictured is Kuching, the capital of Sarawak. (Photo: iStock)
Malaysian government officially unveiled the Carbon Capture, Utilization, and Storage (CCUS) Bill 2025 on March 4, establishing a legal framework for the development of the industry.
The bill is expected to create a dedicated agency to oversee the carbon capture market. However, opposition from Sabah and Sarawak, East Malaysian states that refused to participate, significantly reduces the bill’s economic potential.
CCUS Bill introduced with plans to establish a regulatory body
According to the bill submitted by the Ministry of Economy, the government plans to establish the "Malaysia Carbon Capture, Utilization, and Storage Agency" to review and issue permits. All activities and facilities related to CCUS, including importation and transportation, will be regulated to monitor industry development and prevent environmental damage from CO2 leakage from storage sites.
Since the storage sites will require long-term monitoring, responsibility for management will eventually be transferred to the government, which will charge operators to establish a Post-Closure Monitoring Fund to cover ongoing operational costs.
The bill also stipulates that individuals or organizations that engage in carbon storage without a permit or fail to comply with safety regulations will face fines of up to 2 million ringgit (about 1.48 million USD) and a sentence of five years in prison.
Malaysian government has officially launched the "Carbon Capture, Utilization, and Storage (CCUS) Bill 2025," providing a legal framework for industrial development. The image shows an offshore drilling platform in Malaysia. (Image: iStock)
Sabah, Sarawak reject participation in Malaysia’s plans
However, the bill will only apply to Peninsular Malaysia and the federal territory of Labuan. The state governments of Sabah and Sarawak, in East Malaysia, have declined to participate, citing the potential for significant profits from CCUS due to their vast tropical rainforests and offshore oil fields. Notably, the Kasawari Project, one of the world's largest carbon storage initiatives, led by Petronas, is in waters near Sarawak.
The Malaysian government had initially projected that CCUS could contribute an additional 250 billion USD to the economy over the next 30 years, but excluding Sabah and Sarawak could result in a downward revision of this estimate.
Despite this setback, Malaysia, which aims to achieve net-zero emissions by 2050, hopes to solidify its leadership in low-carbon technology through the bill. Minister of Economy Rafizi Ramli stated in a press release that a feasibility study on offshore carbon storage will begin this year, with the potential to create even greater business opportunities in the future.
Source: Malay Mail, Bloomberg(1), (2)
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