Malaysia has taken a step towards developing a carbon capture, utilisation and storage (CCUS) industry with the recent passage of its first CCUS-specific legislation. The move is part of a broader regional trend as countries in southeast Asia look to carbon management technologies to help meet their climate targets.
The bill, passed in early March, establishes a legal framework for carbon storage activities and sets the stage for Malaysia to become a regional storage hub. Supporters of the law say it offers long-overdue clarity to investors and project developers, helping to unlock finance and advance decarbonisation in sectors where emissions are difficult to eliminate.
Economy Minister Rafizi Ramli described CCUS as key to Malaysia’s goal of reaching Net Zero by 2050, particularly for industries such as cement, steel and refining. Several international oil and gas companies are already involved in early-stage CCUS plans in the country, and the government has said it will introduce further regulations to ensure safe and permanent carbon dioxide storage.
But while the policy is broadly aligned with international Net Zero roadmaps that include large-scale CCUS deployment, some lawmakers and environmental groups have voiced concern over how it is being implemented in practice.
Environmental pressure group RimbaWatch claims that nine out of 10 planned CCUS projects in Malaysia are primarily linked to enhanced oil recovery – a process in which captured CO2 is injected into depleted oil reservoirs to extract more oil.
Although the CO2 can remain sequestered underground, the process results in additional fossil fuel production and related emissions.
According to the group’s analysis, these projects, by boosting oil production, could enable the release of more than 1.3 billion tonnes of CO2, while the carbon removal efforts involved might only offset about 10% of that total. It argues that the current focus on CCUS for oil and gas development risks locking in long-term fossil fuel use.
This fits with global concerns around CCUS underperformance. A 2022 report by renewables-leaning think tank the Institute for Energy Economics and Financial Analysis reviewed 13 large CCS projects that together account for over half of global CCS capacity. Of these, seven failed to meet their targets, two failed completely and one was abandoned.
The study concluded that none had reached their stated capture targets, with actual performance often closer to 50% than the 95% often cited by project backers.
RimbaWatch has also pointed to the opportunity cost of misdirected public investment. It estimates that equivalent funding directed at solar development could avoid 14.5 million tonnes of CO2 emissions annually, exceeding the potential savings from CCUS projects by more than two million tonnes.
Still, renewable energy comes with its own limitations. Solar and wind projects require land, grid upgrades and storage solutions to manage intermittency, and some industrial sectors are not yet ready to run on clean electricity alone. For emissions-intensive processes such as cement production, carbon capture remains one of the few technically viable options today.
The Malaysian government has stressed that the bill prohibits the use of imported CO2 for enhanced oil recovery and maintains that CCUS is a necessary part of the energy transition.
