Climate Series 4: Malaysia’s energy supply is still dominated by fossil fuels, but the government is fast-tracking its energy transition

Insights

3 minutes

02 April 2026

Malaysia’s energy transition opportunity

In 2024, Malaysia relied on fossil fuels to meet 81% of its electricity demand1, with only 19% from low-carbon sources. This number is in stark contrast to the government’s target of reaching 40% renewable capacity by 20355. 

To accelerate growth in its renewable capacity and keep this target within reach, the Malaysian government is seeking to course correct via boosted investments in its 2023 National Energy Transition Roadmap (NETR)2. The 2025 budget tripled the amount of funding allocated to NETR from RM100 to RM3003; the recently announced 2026 budget maintains commitment to the NETR and additionally confirmed the introduction of a carbon tax5. Not only does this signal the Malaysian government’s growing ambition and ongoing commitment to the energy transition, but it incentivises and expands the funding available for organisations seeking to enter the transition space.

The NETR aims to foster innovation under them by removing barriers and providing a supportive regulatory context for progress (e.g. streamlining permit processes, catalysing demand, establishing mandatory standards in support of the transition). It is focused on six key transition levers6: Energy Efficiency, Renewable Energy, Hydrogen (also supported by the Hydrogen Economy and Technology Roadmap (HETR))4, Bioenergy, Green Mobility, Carbon capture, utilisation and storage (CCUS).

How are companies seizing the opportunities presented by Malaysia’s focus on the energy transition?

Sarawak’s Green Hydrogen Hub

  • Sarawak state intends to become a commercial producer of hydrogen by 20277.
  • Partnerships and projects worth a total of US$4.2 billion7 have been enabled in the state, including the establishment of multiple hydrogen plants, hydrogen derivative facilities, and pipeline infrastructure.
  • Companies involved span the public and private sector, e.g. SEDC Energy, Gentari, PETRONAS, Samsung Engineering, Posco, Lotte Chemical.

PETRONAS’ CCS projects

  • PETRONAS is actively seeking to speed up its transition to net-zero emissions by supplementing its decarbonisation efforts with CCS, allowing them to abate emissions across their operations.
  • PETRONAS is developing carbon storage facilities (geological storage) and LCO2 shipping services, infrastructure across Malaysia’s three CCS hubs8.
  • The revenue opportunity for carbon capture in Southeast Asia overall has been estimated to be US$5-10 billion per year between 2030 and 20409.

1 Ember, 19% of Malaysia’s electricity was generated from low-carbon sources in 2024, below the global average of 41%.
2 MIDA, National Energy Transition Roadmap (NETR): Charting a Path to a Sustainable Energy Landscape
3 AHK, Budget 2025 : A quick glance
4MASTIC, Hydrogen Economy & Technology Roadmap
5PRNewswire, Moving forward on climate change: Malaysia's commitment to a just and accelerated transition towards a sustainable future
6PwC, Summary of the National Energy Transition Roadmap Navigating the transient stage
7ChemAnalyst, Sarawak Nears Completion of $4.2 Billion Green Hydrogen Venture
8Petronas, Carbon Management
9McKinsey & Company, CCS in Southeast Asia: An opportunity or distant reality?
 

gavel

How the Howden team can help you

To navigate the risks of greenwashing and avoid greenhushing, you need assurance. With our expertise, we can help you gain that confidence. Whether you need a quick review of your claims, insights on upcoming legislation, a thorough legal assessment of your green claims, training for your MarComms teams, or insurance options, we provide comprehensive support in sustainability, and risk management tailored to your needs.

Contact Us