A Regional Leader in Green Energy Policy

Malaysian authorities have implemented an evolving policy framework that is both highly conducive to the growth of green forms of energy in the country, and a potential model for the wider region.

Fuelling Malaysian growth

Malaysia has experienced rapid growth in recent years in pursuit of its goal to become a developed nation by 2020. Significantly, this growth has given rise to notable socioeconomic advancements along the way. Nevertheless, the country has also been consuming increasing quantities of fossil fuels to feed its rapid rates of urbanisation and industrialisation over the same period. As more fossil fuels have been burned, carbon dioxide (CO2) emissions have almost doubled from 126 million metric tonnes in 2000 to 237 million metric tonnes by 2013.

While this emissions trend is not unique to Malaysia in the regional context (see fig. 1), the ongoing economic and environmental impacts of rising rates of fossil fuel consumption have become increasingly difficult to ignore.



Mandating green initiatives

In recognition of the need to counter rising emissions, Malaysian authorities have undertaken a series of steps to reverse the trend. One of the most significant of these has involved increasing the amount of energy being produced from renewable resources, which includes all green sources of energy, as an alternative to fossil fuels.

Accordingly, and to regulate the usage of green sources of energy such as solar photovoltaic (PV), biomass, biogas and mini-hydro, the National Renewable Energy Policy and Action Plan was devised in 2009 to entrench the role of clean energy in the country. This Plan included increasing the contribution of renewables to the national power genera­tion mix, among other measures.

Similarly, the State has set the target of achieving 2,080 megawatts of installed capacity generated from green sources by 2020 (see fig. 2). It should be noted that this figure does not include energy generated from large hydro, which is widely considered renewable rather than green. Accordingly, a separate national target is for large hydro to contribute 15 per cent of the overall energy mix by 2020.



The Feed-in Tariff

To accelerate the deployment of green energy nationwide, Malaysia adopted a renewable energy feed-in tariff (FiT) mechanism under the 2011 Renewable Energy Act, which is administered by the Sustainable Energy Development Authority (SEDA). The primary goal of the FiT is to achieve grid parity, which will occur when the cost of generating green energy is equivalent to or lower than the cost of generating electricity from conventional fossil fuels.

More broadly, the FiT has been designed to increase investment in the fields of solar PV, bioenergy, small hydro and geothermal by offering long-term contracts and guaranteed pricing to green energy producers. It also aims to enhance energy security and address general threats posed by climate challenges.

Through the FiT, individuals or businesses are able to generate and sell renewably sourced electricity to power distribution companies, known as Distribution Licensees (DLs). The price of the electricity is based on a fixed premium, the FiT tariff, which is calculated depending on the type of energy being generated. The DLs pay for power generated for a set period of time, which varies according to the energy source. The objective of this approach is to ensure that green energy becomes a viable long-term investment for companies, industries and individuals.


Emissions and the transport sector

In addition to increasing the amount of green energy being generated via the FiT mechanism, the Malaysian Government is also emphasising the reduction of carbon emissions via carbon dioxide avoidance (see fig. 3). These efforts are in line with the country’s commitment to reduce greenhouse gas (GHG) emissions by 40 per cent from 2005 levels by 2020, as agreed under the 2015 United Nations’ Paris Climate Change Conference (COP 21).



To meet its COP 21 GHG reduction target, Malaysia is having to address CO2 emissions across multiple industries, particularly in the transport sector, which accounts for the majority of national emissions and represents the largest single share of energy demand: approximately 43 per cent in 2013.

Central to this challenge is addressing the widespread culture of car ownership in the country, which is one of the three highest in the world according to market research firm Nielsen.

To reduce emissions in the transport sector, useful examples are afforded by the European Commission’s Low-emission Mobility Strategy, adopted in July 2016. This scheme promotes low-emission alternative energies and vehicles, including encouraging cycling and walking, public transport, and car-sharing initiatives. It is designed to benefit European citizens and consumers by delivering improvements in air quality, reductions in noise levels, lower congestion levels and improved safety.

Additional policy tools that may prove useful in reducing transport-related emissions include taxes, tolls and congestion charges, as well as designing fuel economy standards and promoting research and development in the field.


Final remarks

In recent years, Malaysia has taken important strides to reduce carbon emissions, including elevating its carbon avoidance figures and incentivising green energy generation. The wider policy ecosystem and, in particular, the FiT mechanism have significantly helped in this regard. As such, the Malaysian model affords neighbouring countries a potential example of how to boost green sector growth. With renewable energy generation and GHG reduction initiatives taking hold across the region, Malaysia’s FiT could be replicated across ASEAN to help countries combat climate change and meet their international emissions obligations.


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