Think Tank Proposes Phased Carbon Pricing to Decarbonise Malaysia’s Steel Industry

Malaysia's steel biz, known for being a heavy hitter in carbon pollution, is feeling the heat to clean up its act. Global markets are clamping down with tougher climate rules and new trade blocks if you don't play ball. One smart think tank suggests a carbon pricing thing – like making polluters pay – to push Malaysian steelmakers to go green while staying in the game worldwide.

Right now, steel is a huge source of yuck in the air, and how they make it now is even worse. Back in the day, electric furnaces that made less pollution were the norm here. But now, about 70% of the steel comes from blast furnaces, which are way dirtier. This switcheroo has made the industry's carbon footprint huge, which is bad news for Malaysia hitting its climate goals. Plus, steel companies are in trouble because other countries are bringing in tough rules about climate stuff.

The eggheads are saying we need to do something because of the EU's Carbon Border thingy. Basically, Europe will tax imports of stuff like steel that makes a lot of pollution. This is supposed to get everyone to clean up their act. If Malaysia doesn't get its own carbon pricing sorted, our steel might get too pricey for Europe, since countries with carbon pricing will have cheaper, cleaner steel.

The think tank says we should start with a little carbon tax and slowly raise it to about RM200 per ton of carbon dioxide by 2030. They reckon that's enough to make cleaner steel-making tech worth it in Malaysia. Slowly adding the tax gives steelmakers and the businesses that use steel time to get used to the higher costs.

This carbon pricing will sting different parts of the industry in different ways. The blast furnace folks could see their costs go up by 11% . For construction and other industries that use a lot of steel, they might see a 3.5% to 4.6% jump. But if you make fancy steel with lower pollution already, it's only going up about 1%.

Sure, some businesses will have to cough up more dough, but the government could rake in about RM3 billion a year. That cash could go back into helping businesses and people deal with the change, like giving them a break on the higher costs. The government could also use the money to help steelmakers switch to cleaner tech, do some research, and make sure Malaysia stays competitive.

This idea comes as Malaysia is planning to tax other dirty industries like iron, steel, and energy. It's all part of the plan to cut pollution and hit our climate promises. Steel is a biggie, so cleaning up that sector would be a massive win for Malaysia. We can meet our targets and make sure our industries can still compete in a world that wants green stuff.

Instead of dropping a massive tax bomb right away, the idea is to take it slow so the economy doesn't freak out . A huge carbon price out of the blue could hurt steelmakers, make them less competitive, or even make them move shop. Adding the tax little by little gives businesses a chance to get ready and sends a clear message about going green, so they can start investing in cleaner ways of doing things.

The think tank is saying that blast furnaces are a dead end, for both the planet and the bank balance. They might have made sense when everyone wanted more steel, but now their pollution is a problem. If Malaysia doesn't act, we'll be left behind as other countries get with the times and switch to electric furnaces, hydrogen tech, and other cleaner ways to make steel.

A carbon price isn't just something we need here; it's also about keeping up with the rest of the world. The EU's carbon border thing is just the start. Other countries will probably do the same, so Malaysian exports could be in trouble if we don't get our act together.

Besides dodging trade problems, carbon pricing could also attract green investors to Malaysia. By making polluters pay and rewarding clean tech, Malaysia could become a hub for green steel in the region. This would protect our current industries and create all sorts of new jobs as the world demands cleaner materials.

That RM3 billion a year could also go beyond just helping the steel biz. It could fund other green projects, build better infrastructure, or help workers and communities that depend on dirty industries. If the government is open and smart about how they spend the money, they can get everyone on board with carbon pricing and make sure everyone benefits.

The report also points out that Malaysia used to be in a better spot with pollution when it used electric furnaces back in 2014. But since we switched to blast furnaces, the steel sector's pollution has quadrupled, which makes things way harder now. Turning things around will take more than just good policy; we'll also need to invest big in tech and infrastructure.

One media house quoted a senior fellow from the think tank saying it's super urgent to bring in a carbon price that's high enough to get people to invest in clean steel tech. He said it would protect Malaysia from trade blocks, give us access to green markets, and open doors for new tech.

The recommendation is timely because Malaysia is trying to juggle growing the economy with being responsible about the climate. Steel is key to Malaysia's industry, but if it doesn't clean up, it could become a problem in a world that wants green everything. A phased carbon pricing system is a way to cut pollution, protect exports, and get the industry ready for a future where being green is a must.

At the end of the day, it's up to the politicians to decide. They need to weigh the short-term pain against the long-term gain. If they do it right, carbon pricing could become a key part of Malaysia's green plan, aligning the steel industry with international standards while bringing in money to fund other economic and environmental goals. As the world goes green, moves like this are vital for Malaysia to stay in the game.